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The need-to-know takeaways from VidCon 2019

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VidCon, the annual summit in Anaheim, CA for social media stars and their fans to meet each other drew over 75,000 attendees over last week and this past weekend. A small subset of those where entertainment and tech executives convening to share best practices and strike deals.

Of the wide range of topics discussed in the industry-only sessions and casual conversation, five trends stuck out to me as takeaways for Extra Crunch members: the prominence of TikTok, the strong presence of Chinese tech companies in general, the contemplation of deep fakes, curiosity around virtual influencers, and the widespread interest in developing consumer product startups around top content creators.

Newer platforms take center stage

GettyImages 1161447217

Photo by Jerod Harris/Getty Images

TikTok, the Chinese social video app (owned by Bytedance) that exploded onto the US market this past year, was the biggest conversation topic. Executives and talent managers were curious to see where it will go over the next year more than they were convinced that it is changing the industry in any fundamental way.

TikTok influencers were a major presence on the stages and taking selfies with fans on the conference floor. I overheard tweens saying “there are so many TikTokers here” throughout the conference. Meanwhile, TikTok’s US GM Vanessa Pappas held a session where she argued the app’s focus on building community among people who don’t already know each other (rather than being centered on your existing friendships) is a fundamental differentiator.

Kathleen Grace, CEO of production company New Form, noted that Tik Tok’s emphasis on visuals and music instead of spoken or written word makes it distinctly democratic in convening users across countries on equal footing.

Esports was also a big presence across the conference floor with teens lined up to compete at numerous simultaneous competitions. Twitch’s Mike Aragon and Jana Werner outlined Twitch’s expansion in content verticals adjacent to gaming like anime, sports, news, and “creative content’ as the first chapter in expanding the format of interactive live-streams across all verticals. They also emphasized the diversity of revenue streams Twitch enables creators to leverage: ads, tipping, monthly patronage, Twitch Prime, and Bounty Board (which connects brands and live streamers).

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App revenue tops $39 billion in first half of 2019, up 15% from first half of last year

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App store spending is continuing to grow, although not as quickly as in years past. According to a new report from Sensor Tower, the iOS App Store and Google Play combined brought in $39.7 billion in worldwide app revenue in the first half of 2019 — that’s up 15.4% over the $34.4 billion seen during the first half of last year. However, at that time, the $34.4 billion was a 27.8% increase from 2017’s numbers, then a combined $26.9 billion across both stores.

Apple’s App Store continues to massively outpace Google Play on consumer spending, the report also found.

In the first half of 2019, global consumers spent $25.5 billion on the iOS App Store, up 13.2% year-over-year from the $22.6 billion spent in the first half of 2018. Last year, the growth in consumer spending was 26.8%, for comparison’s sake.

Still, Apple’s estimated $25.5 billion in the first half of 2019 is 80% higher than Google Play’s estimated gross revenue of $14.2 billion — the latter a 19.6% increase from the first half of 2018.

The major factor in the slowing growth is iOS in China, which contributed to the slowdown in total growth. However, Sensor Tower expects to see China returning to positive growth over the next 12 months, we’re told.

To a smaller extent, the downturn could be attributed to changes with one of the top-earning apps across both app stores: Netflix.

Last year, Netflix dropped in-app subscription sign-ups for Android users. Then, at the end of December 2018, it did so for iOS users, too. That doesn’t immediately drop its revenue to zero, of course — it will continue to generate revenue from existing subscribers. But the number will decline, especially as Netflix expands globally without an in-app purchase option, and as lapsed subscribers return to renew online with Netflix directly.

In the first half of 2019, Netflix was the second highest earning non-game app with consumer spending of $339 million, Sensor Tower estimates, down from $459 million in the first half of 2018. (We should point out the firm bases its estimates on a 70/30 split between Netflix and Apple’s App Store that drops to 85/15 after the first year. To account for the mix of old and new subscribers, Sensor Tower factors in a 25% cut. But Daring Fireball’s John Gruber claims Netflix had a special relationship with Apple where it had an 85/15 cut from year one.)

In any event, Netflix’s contribution to the app stores’ revenue is on the decline.

In the first half of last year, Netflix had been the No. 1 non-game app for revenue. This year, that spot went to Tinder, which pulled in an estimated $497 million across the iOS App Store and Google Play, combined. That’s up 32% over the first half of 2018.

1h 2019 app revenue worldwide

But Tinder’s dominance could be a trend that doesn’t last.

According to recent data from eMarketer, dating app audiences have been growing slower than expected, causing the analyst firm to revise its user estimates downward. It now expects that 25.1 million U.S. adults will use a dating app monthly this year, down from its previous forecast of 25.4 million. It also expects that only 21% of U.S. single adults will use a dating app at all in 2019, and that will only grow to 23% by 2023.

That means Tinder’s time at the top could be overrun by newcomers in later months, especially as new streaming services get off the ground (assuming they offer in-app subscriptions); if TikTok starts taking monetization seriously; or if any other large apps from China find global audiences outside of China’s third-party app stores.

For example, Tencent Video grossed $278 million globally in the first half of 2019, outside of the third-party Chinese Android app stores. That made it the third-largest non-game app by revenue. And Chinese video platform iQIYI and YouTube were the No. 4 and No. 5 top-grossing apps, respectively.

Meanwhile, iOS app installs actually declined in the first half of the year, following the first quarter that saw a decline in downloads, Q1 2019, attributed to the downturn in China.

The App Store in the first half of 2019 accounted for 14.8 billion of the total 56.7 billion app installs.

Google Play installs in the first half of the year grew 16.4% to 41.9 billion, or about 2.8 times greater than the iOS volume.

1h 2019 app downloads worldwide

The most downloaded apps in the first half of 2019 were the same as before: WhatsApp, Messenger and Facebook led the top charts. But TikTok inched ahead of Instagram for the No. 4 spot, and it saw its installs grow around 28% to nearly 344 million worldwide.

In terms of mobile gaming specifically, spending was up 11.3% year-over-year in the first half of 2019, reaching $29.6 billion across the iOS App Store and Google Play. Thanks to the fallout of the game licensing freeze in China, App Store revenue growth for games was at $17.6 billion, or 7.8% year-over-year growth. Google Play game spending grew by 16.8% to $12 billion.

The top-grossing games, in order, were Tencent’s Honor of Kings, Fate/Grand Order, Monster Strike, Candy Crush Saga and PUBG Mobile.

1h 2019 game revenue worldwide

Meanwhile, the most downloaded games were Color Bump 3D, Garena Free Fire and PUBG Mobile.

Image credits: Sensor Tower

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Northzone’s Paul Murphy goes deep on the next era of gaming

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As the gaming market continues to boom, billions of dollars are being invested in new games and new streaming platforms vying to own a piece of the action. Most of the value is accruing to the large incumbents in a space, however, and the entrance of Google and other big tech companies makes it difficult to identify where there are compelling opportunities for entrepreneurs to build new empires.

TechCrunch media analyst Eric Peckham recently sat down with Paul Murphy, Partner at European venture firm Northzone, to discuss Paul’s view of the market and where he is focusing his dollars. Below is the transcript of the conversation (edited for length and clarity):


Eric Peckham: You co-founded the hit mobile game Dots before moving to London and joining Northzone last year. Are you still bullish on investment opportunities in mobile gaming or do you think the market has changed?

Paul Murphy: I’m bullish on mobile gaming–the market is bigger than it has ever been. There’s a whole generation of people that have been trained to play games on mobile phones. So those are things that are very positive.

The challenge is you don’t really have a rising tide moment anymore. The winners have won. And so it’s very, very difficult for someone to enter with new content and build a business that’s as big as Supercell or King, regardless of how good their content is. So while the prize for winning in mobile gaming content big, the likelihood is smaller.

Where I’m spending most of my time is not on content, it’s on components within mobile gaming. We’re looking at infrastructure: different platforms that enable mobile gaming, like Bunch which we invested in.

Their product allows you to do live video and audio on top of mobile games. So we don’t have to take any content risk. We’re betting that this great product will fit into a large inventory ecosystem.

Peckham: New mobile game studios that are launching all seem to fall under the sphere of influence of these bigger companies. They get a strategic investment from Supercell or another company. To your point, it’s tough for a small startup to compete entirely on its own.

Murphy: It’s possible in mobile gaming still but it’s really, really hard now. At the same time, what you’ve seen is the odds of winning are lower. It is hard to reach the same scale when it costs you $5.00 to acquire a user today, whereas when Candy Crush launched, it was $0.05 per user. So it’s almost impossible to achieve King-like scale today.

Therefore, you’re looking at similar content risk with reduced upside, which makes that equation less attractive for venture capital. But it might be perfectly fine for an established company because they don’t need to do the marketing, they have the audience already.

The big gaming companies all struggle with the challenge of how to create the next hit IP. They have this machine that can bring any great game to market efficiently, with a large audience they can cross promote from and capital they can invest to build a big brand quickly. For them, the biggest challenge is getting the best content.

So it’s natural to me that the pendulum has swung towards strategic investors in mobile gaming content. Epic has a fund that they set up with Improbable, Supercell is making direct investments, Tencent has been making investments for years. Even from a content perspective, you’re probably going to see Apple, Google, and Amazon making more content investments in mobile gaming.

Image via Getty Images / aurielaki

Peckham: Does this same market dynamic apply to PC games and console games? Do you see a certain area within gaming where there’s still opportunity for independent startups to create the game itself and find success at a venture scale?

Murphy: The reason we made our investment in Klang Games, which is building an MMO called Seed that people will primarily play through PC, is that while there is content risk–you’re never going to get rid of the possibility that the IP doesn’t fly–if it works, it will be massive…an Earth-shattering level of success. If their vision comes to life, it will be very, very big.

So that one has all the risks that you’d have in any other game studio but the upside is exponentially larger, so the bet makes sense to us. And it so happens that it’s going to be on PC first, where there’s certainly a lot of competition but it’s not as saturated and the monetization methods are healthier than in mobile gaming. In PC, you don’t have to do free-to-play tactics that interfere with the gameplay.

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China to lose top spot to US in 2019 gaming market

Posted by | Activision Blizzard, Apple, China, Entertainment, Facebook, Gaming, Microsoft, mobile game, Nintendo, Sony, Tencent, WeChat | No Comments

China is losing its global lead in games. By the end of 2019, the U.S. will replace China as the world’s largest gaming market, with an estimated revenue of $36.9 billion, says a new report from research firm Newzoo.

This will mark the first time since 2015 that the U.S. will top the global gaming market, thanks to healthy domestic growth in consoles. Globally, Xbox, PlayStation, Nintendo and other console games are on track to rise 13.4% in revenue this year. Driving the growth is the continued shift toward the games-as-a-service model, Newzoo points out, on top of a solid installed base across the current console generation and spending from new model releases.

China, on the other hand, suffered from a nine-month freeze on game licenses last year that significantly shrank the stream of new titles. Though applications have resumed, industry experts warn of a slower and stricter approval process that will continue to put the squeeze on new titles. Time limits imposed on underage players will also hurt earnings in the sector.

As a result of China’s slowdown, Asia-Pacific is no longer the fastest-growing region. Taking the crown is Latin America, which is enjoying a 10.4% compound annual growth.

Despite China’s licensing blackout, Tencent remained as the largest publicly listed gaming firm in 2018, pocketing $19.73 billion in revenue. Growth slowed to 9% compared to 51% from 2016 to 2017 at Tencent’s gaming division, but the Shenzhen-based company is back on track with new blockbuster Game for Peace (和平精英), a regulator-friendly version of PlayerUnknown’s Battleground, ready to monetize.

Trailing behind Tencent in the global ranking is Sony, Microsoft, Apple and Activision Blizzard.

Other key trends of the year:

Rise of instant games: Mini games played inside WeChat without installing another app are becoming mainstream in China. These games, which tend to have strong social elements and are easy to play, have attracted followers including Douyin (TikTok’s Chinese version) to create with their own offerings.

Facebook’s Instant Games have also come a long way since opening to outside developers in 2018. The platform now sees more than 30 billion game sessions played across over 7,000 titles. WeChat doesn’t use the same metrics, but for some context, the Chinese company boasted 400 million monthly players on mini games as of January.

Mobile momentum carries on: Mobile games will continue to outpace growth on PC and console in the coming years. As expected, emerging markets that are mobile-first and mobile-only will drive most of the boom in mobile gaming, which is on course to account for almost half (49%) of the entire sector by 2022. Part of the growth is driven by improved hardware and internet infrastructure, as well as a growing number of cross-platform titles.

Games in the cloud are here: It was a distant dream just a few years ago — being able to play some of the most demanding titles regardless of the hardware one owns. But the technology is closer than ever to coming true with faster internet speed and the imminent rollout of 5G networks. A few giants have already showcased their cloud gaming services over the last few months, with the likes of Google’s Stadia, Microsoft’s xCloud and Tencent’s Start slated to test the market.

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Eyeing an entry into China, Roblox enters strategic partnership with Tencent

Posted by | children, China, Education, games, Gaming, kids, Roblox, STEM, Tencent | No Comments

Kids gaming platform Roblox has its sights set on China with today’s news that it has entered into a strategic relationship with Chinese tech giant Tencent. The companies announced a strategic partnership that will initially focus on education — specifically, coding fundamentals, game design, digital citizenship and entrepreneurial skills.

The joint venture — still unnamed — will be based in Shenzhen, Roblox says. And its eventual goal is to bring Roblox to China. This is something Roblox has been steadily working toward ahead of today, most recently by adding support for Chinese languages and making its coding curriculum available for free in Chinese.

The first initiative from the new JV will be a scholarship fund that sponsors 15 young developers, who will fly to the U.S. to attend a week-long creator camp at Stanford University. The camp, taught by iD Tech, will teach the students game design, including how to create 3D worlds, along with programming fundamentals using Roblox’s developer tools and Lua code.

Roblox and Tencent, together with the China Association for Educational Technology (CAET), are calling for applications from creators ages 10 through 15. Teachers will be encouraged to nominate their students, who can apply online on Roblox’s website. The submissions close on June 14, and scholarship recipients will be notified on June 28.

The first camp will run the week of July 23, and a second session will run the week of August 18. During camp, students will work, eat and stay at Stanford.

“I’m extremely excited to partner with Roblox,” said Steven Ma, senior vice president of Tencent, in a statement. “We believe technological advancement will help Chinese students learn by fueling their creativity and imagination. Our partnership with Roblox provides an engaging way to reach children of all ages across China to develop skills like coding, design, and entrepreneurship.”

“Tencent is the perfect partner for Roblox in China,” added Roblox founder and CEO Dave Baszucki. “They have a deep understanding of the Chinese market and share our belief of the power of digital creation and our vision to bring the world together through play.”

The multi-year JV will continue to invest in educational initiatives, including local coding camps, training programs for instructors to build custom courses and more.

Unlike other gaming companies, Roblox has to do more than just finding a way into China with the help of a local partner — it also has to create an active community of game creators in the region. That’s because Roblox is a gaming platform, not a game maker itself. Instead, third-party creators build their own games on Roblox for others to play.

Roblox gets a share of the revenue the games make through sales of virtual goods.

In 2017, Roblox said it paid out $30 million to its creator community, and noted that number would more than double in 2018. In April, Roblox noted that game players and creators now spend more than a billion hours per month on its platform. Now valued at more than $2.5 billion, Roblox claims more than 90 million monthly active users — a number that could dramatically increase if Roblox launched in China.

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India’s most popular services are becoming super apps

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Truecaller, an app that helps users screen strangers and robocallers, will soon allow users in India, its largest market, to borrow up to a few hundred dollars.

The crediting option will be the fourth feature the nine-year-old app adds to its service in the last two years. So far it has added to the service the ability to text, record phone calls and mobile payment features, some of which are only available to users in India. Of the 140 million daily active users of Truecaller, 100 million live in India.

The story of the ever-growing ambition of Truecaller illustrates an interesting phase in India’s internet market that is seeing a number of companies mold their single-functioning app into multi-functioning so-called super apps.

Inspired by China

This may sound familiar. Truecaller and others are trying to replicate Tencent’s playbook. The Chinese tech giant’s WeChat, an app that began life as a messaging service, has become a one-stop solution for a range of features — gaming, payments, social commerce and publishing platform — in recent years.

WeChat has become such a dominant player in the Chinese internet ecosystem that it is effectively serving as an operating system and getting away with it. The service maintains its own “app store” that hosts mini apps. This has put it at odds with Apple, though the iPhone-maker has little choice but to make peace with it.

For all its dominance in China, WeChat has struggled to gain traction in India and elsewhere. But its model today is prominently on display in other markets. Grab and Go-Jek in Southeast Asian markets are best known for their ride-hailing services, but have begun to offer a range of other features, including food delivery, entertainment, digital payments, financial services and healthcare.

The proliferation of low-cost smartphones and mobile data in India, thanks in part to Google and Facebook, has helped tens of millions of Indians come online in recent years, with mobile the dominant platform. The number of internet users has already exceeded 500 million in India, up from some 350 million in mid-2015. According to some estimates, India may have north of 625 million users by year-end.

This has fueled the global image of India, which is both the fastest growing internet and smartphone market. Naturally, local apps in India, and those from international firms that operate here, are beginning to replicate WeChat’s model.

Founder and chief executive officer (CEO) of Paytm Vijay Shekhar Sharma speaks during the launch of Paytm payments Bank at a function in New Delhi on November 28, 2017 (AFP PHOTO / SAJJAD HUSSAIN)

Leading that pack is Paytm, the popular homegrown mobile wallet service that’s valued at $18 billion and has been heavily backed by Alibaba, the e-commerce giant that rivals Tencent and crucially missed the mobile messaging wave in China.

Commanding attention

In recent years, the Paytm app has taken a leaf from China with additions that include the ability to text merchants; book movie, flight and train tickets; and buy shoes, books and just about anything from its e-commerce arm Paytm Mall . It also has added a number of mini games to the app. The company said earlier this month that more than 30 million users are engaging with its games.

Why bother with diversifying your app’s offering? Well, for Vijay Shekhar Sharma, founder and CEO of Paytm, the question is why shouldn’t you? If your app serves a certain number of transactions (or engagements) in a day, you have a good shot at disrupting many businesses that generate fewer transactions, he told TechCrunch in an interview.

At the end of the day, companies want to garner as much attention of a user as they can, said Jayanth Kolla, founder and partner of research and advisory firm Convergence Catalyst.

“This is similar to how cable networks such as Fox and Star have built various channels with a wide range of programming to create enough hooks for users to stick around,” Kolla said.

“The agenda for these apps is to hold people’s attention and monopolize a user’s activities on their mobile devices,” he added, explaining that higher engagement in an app translates to higher revenue from advertising.

Paytm’s Sharma agrees. “Payment is the moat. You can offer a range of things including content, entertainment, lifestyle, commerce and financial services around it,” he told TechCrunch. “Now that’s a business model… payment itself can’t make you money.”

Big companies follow suit

Other businesses have taken note. Flipkart -owned payment app PhonePe, which claims to have 150 million active users, today hosts a number of mini apps. Some of those include services for ride-hailing service Ola, hotel booking service Oyo and travel booking service MakeMyTrip.

Paytm (the first two images from left) and PhonePe offer a range of services that are integrated into their payments apps

What works for PhonePe is that its core business — payments — has amassed enough users, Himanshu Gupta, former associate director of marketing and growth for WeChat in India, told TechCrunch. He added that unlike e-commerce giant Snapdeal, which attempted to offer similar offerings back in the day, PhonePe has tighter integration with other services, and is built using modern architecture that gives users almost native app experiences inside mini apps.

When you talk about strategy for Flipkart, the homegrown e-commerce giant acquired by Walmart last year for a cool $16 billion, chances are arch rival Amazon is also hatching similar plans, and that’s indeed the case for super apps.

In India, Amazon offers its customers a range of payment features such as the ability to pay phone bills and cable subscription through its Amazon Pay service. The company last year acquired Indian startup Tapzo, an app that offers integration with popular services such as Uber, Ola, Swiggy and Zomato, to boost Pay’s business in the nation.

Another U.S. giant, Microsoft, is also aboard the super train. The Redmond-based company has added a slew of new features to SMS Organizer, an app born out of its Microsoft Garage initiative in India. What began as a texting app that can screen spam messages and help users keep track of important SMSs recently partnered with education board CBSE in India to deliver exam results of 10th and 12th grade students.

This year, the SMS Organizer app added an option to track live train schedules through a partnership with Indian Railways, and there’s support for speech-to-text. It also offers personalized discount coupons from a range of companies, giving users an incentive to check the app more often.

Like in other markets, Google and Facebook hold a dominant position in India. More than 95% of smartphones sold in India run the Android operating system. There is no viable local — or otherwise — alternative to Search, Gmail and YouTube, which counts India as its fastest growing market. But Google hasn’t necessarily made any push to significantly expand the scope of any of its offerings in India.

India is the biggest market for WhatsApp, and Facebook’s marquee app too has more than 250 million users in the nation. WhatsApp launched a pilot payments program in India in early 2018, but is yet to get clearance from the government for a nationwide rollout. (It isn’t happening for at least another two months, a person familiar with the matter said.) In the meanwhile, Facebook appears to be hatching a WeChatization of Messenger, albeit that app is not so big in India.

Ride-hailing service Ola too, like Grab and Go-Jek, plans to add financial services such as credit to the platform this year, a source familiar with the company’s plans told TechCrunch.

“We have an abundance of data about our users. We know how much money they spend on rides, how often they frequent the city and how often they order from restaurants. It makes perfect sense to give them these valued-added features,” the person said. Ola has already branched out of transport after it acquired food delivery startup Foodpanda in late 2017, but it hasn’t yet made major waves in financial services despite giving its Ola Money service its own dedicated app.

The company positioned Ola Money as a super app, expanded its features through acquisition and tie ups with other players and offered discounts and cashbacks. But it remains behind Paytm, PhonePe and Google Pay, all of which are also offering discounts to customers.

Integrated entertainment

Super apps indeed come in all shapes and sizes, beyond core services like payment and transportation — the strategy is showing up in apps and services that entertain India’s internet population.

MX Player, a video playback app with more than 175 million users in India that was acquired by Times Internet for some $140 million last year, has big ambitions. Last year, it introduced a video streaming service to bolster its app to grow beyond merely being a repository. It has already commissioned the production of several original shows.

In recent months, it has also integrated Gaana, the largest local music streaming app that is also owned by Times Internet. Now its parent company, which rivals Google and Facebook on some fronts, is planning to add mini games to MX Player, a person familiar with the matter said, to give it additional reach and appeal.

Some of these apps, especially those that have amassed tens of millions of users, have a real shot at diversifying their offerings, analyst Kolla said. There is a bar of entry, though. A huge user base that engages with a product on a daily basis is a must for any company if it is to explore chasing the super app status, he added.

Indeed, there are examples of companies that had the vision to see the benefits of super apps but simply couldn’t muster the requisite user base. As mentioned, Snapdeal tried and failed at expanding its app’s offerings. Messaging service Hike, which was valued at more than $1 billion two years ago and includes WeChat parent Tencent among its investors, added games and other features to its app, but ultimately saw poor engagement. Its new strategy is the reverse: to break its app into multiple pieces.

“In 2019, we continue to double down on both social and content but we’re going to do it with an evolved approach. We’re going to do it across multiple apps. That means, in 2019 we’re going to go from building a super app that encompasses everything, to Multiple Apps solving one thing really well. Yes, we’re unbundling Hike,” Kavin Mittal, founder and CEO of Hike, wrote in an update published earlier this year.

It remains unclear how users are responding to the new features on their favorite apps. Some signs suggest, however, that at least some users are embracing the additional features. Truecaller said it is seeing tens of thousands of users try the payment feature for the first time each day. It’s also being used to send 3 billion texts a month.

And Reliance Jio, of course

Regardless, the race is still on, and there are big horses waiting to enter to add further competition.

Reliance Jio, a subsidiary of conglomerate Reliance Industry that is owned by India’s richest man, Mukesh Ambani, is planning to introduce a super app that will host more than 100 features, according to a person familiar with the matter. Local media first reported the development.

It will be fascinating to see how that works out. Reliance Jio, which almost single-handedly disrupted the telecom industry in India with its low-cost data plans and free voice calls, has amassed tens of millions of users on the bouquet of apps that it offers at no additional cost to Jio subscribers.

Beyond that diverse selection of homespun apps, Reliance has also taken an M&A-based approach to assemble the pieces of its super app strategy.

It bought music streaming service Saavn last year and quickly integrated it with its own music app JioMusic. Last month, it acquired Haptik, a startup that develops “conversational” platforms and virtual assistants, in a deal worth more than $100 million. It already has the user bases required. JioTV, an app that offers access to over 500 TV channels; and JioNews, an app that additionally offers hundreds of magazines and newspapers, routinely appear among the top apps in Google Play Store.

India’s super app revolution is in its early days, but the trend is surely one to keep an eye on as the country moves into its next chapter of internet usage.

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Tencent’s new alternative to PUBG is already topping the revenue chart

Posted by | Asia, Beijing, bluehole, China, communist party, game design, games publisher, Gaming, Government, quora, sensor tower, shenzhen, south korea, Tencent, video gaming | No Comments

In a move clearly driven by economic interests and an urgency to meet stringent regulations, the world’s largest games publisher Tencent pulled its mobile version of PlayerUnknown’s Battlegrounds on Wednesday and launched a new title called Game for Peace (the literal translation of its Chinese name 和平精英 is ‘peace elites’) on the same day.

As of this writing, Game for Peace is the most downloaded free game and top-grossing game in Apple’s China App Store, according to data from Sensor Tower data. That’s early evidence that the new title is on course to stimulate Tencent’s softening gaming revenues following a prolonged licensing freeze in China. Indeed, analysts at China Renaissance estimated that Game for Peace could generate up to $1.48 billion in annual revenue for Tencent.

Tencent licensed PUBG from South Korea’s Krafton, previously known as Bluehole, in 2017 and subsequently released a test version of the game for China’s mobile users.

Game for Peace is available only to users above the age of 16, a decision that came amid society’s growing concerns over video games’ impact on children’s mental and physical health. Tencent has recently pledged to do more ‘good’ with its technology, and the new game release appears to be a practice of that.

Tencent told Reuters the two titles are from “very different genres.” Well, many signs attest to the fact that Game for Peace is intended as a substitute for PUBG Mobile, which never received the green light from Beijing to monetize because it’s deemed too gory. Game for Peace received the license to sell in-game items on April 9.

For one, PUBG users were directed to download Game for Peace in a notice announcing its closure. People’s gaming history and achievement were transferred to the new game, and players and industry analysts have pointed out the striking resemblance between the two.

“It’s basically the same game with some tweaks,” said a Guangzhou-based PUBG player who has been playing the title since its launching, adding that the adjustment to tone down violence “doesn’t really harm the gamer experience.”

“Just ignore those details,” suggested the user.

For instance, characters who are shot don’t bleed in Game for Peace. A muzzle flash replaces gore as bloody scenes no longer pass the muster. And when people are dying, they kneel, surrender their loot box, and wave goodbye. Very civil. Very friendly.

“It’s what we call changing skin [for a game],” a Shenzhen-based mobile game studio founder said to TechCrunch. “The gameplay stays largely intact.”

Other PUBG users are less sanguine about the transition. “I don’t think this is the correct decision from the regulators. Getting oversensitive in the approval process will prevent Chinese games from growing big and strong,” wrote one contributor with more than 135 thousand followers on Zhihu, the Chinese equivalent of Quora.

But such compromise is increasingly inevitable as Chinese authorities reinforce rules around what people can consume online, not just in games but also through news readers, video platforms, and even music streaming services. Content creators must be able to decipher regulators’ directives, some of which are straightforward as “the name of the game should not contain words other than simplified Chinese.” Others requirements are more obscure, like “no violation of core socialist’s values,” a set of 12 moral principles — including prosperity, democracy, civility, and harmony — that are propagated by the Chinese Communist Party in recent years.

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Tencent replaces hit mobile game PUBG with a Chinese government-friendly alternative

Posted by | Apps, Asia, bluehole, China, cloud computing, epic games, game design, Gaming, korea, sensor tower, TC, Tencent, video gaming, Weibo | No Comments

China’s new rules on video games, introduced last month, are having an effect on the country’s gamers. Today, Tencent replaced hugely popular battle royale shooter game PUBG with a more government-friendly alternative that seems primed to pull in significant revenue.

The company introduced “Game for Peace” in a Weibo post at the same time as PUBG — which stands for Player Unknown Battlegrounds — was delisted from China. The title had been in wide testing but without revenue, and now it seems Tencent gave up on securing a license to monetize the title.

In its place, Game for Peace is very much the type of game that will pass the demands of China’s game censorship body. Last month, the country’s State Administration of Press and Publication released a series of demands for new titles, including bans on corpses and blood, references of imperial history and gambling. The new Tencent title bears a striking resemblance to PUBG, but there are no dead bodies, while it plays up to a nationalist theme with a focus on China’s air force — or, per the Weibo message, “the blue sky warriors that guard our country’s airspace” — and their battle against terrorists.

Game for Peace was developed by Krafton, the Korea-based publisher formerly known as BlueHole which made PUBG. Beyond visual similarities, Reuters reported that the games are twinned since some player found that their progress and achievements on PUBG had transferred over to the new game.

Tencent representatives declined to comment on the new game or the end of PUBG’s “beta testing” period in China when contacted by TechCrunch. But a company rep apparently told Reuters that “they are very different genres of games.”

Tencent’s new “Game for Peace” title is almost exactly the same as its popular PUBG game, which it is replacing [Image via Weibo]

Fortnite may have grabbed the attention for its explosive growth — we previously reported that the game helped publisher Epic Games bank a profit of $3 billion last year — but PUBG has more quietly become a fixture among mobile gamers, particularly in Asia.

At the end of last year, Krafton told The Verge that it was past 200 million registered gamers, with 30 million players each day. According to app analytics company Sensor Tower, PUBG grossed more than $65 million from mobile players in March thanks to 83 percent growth, which saw it even beat Fortnite. There is also a desktop version.

PUBG made more money than Fortnite on mobile in March 2019, according to data from Sensor Tower

That is really the point of Tencent’s switcheroo: to make money.

The company suffered at the hands of China’s gaming license freeze last year, and a regulatory-compliant title like Game for Peace has a good shot at getting the green light for monetization — through the sale of virtual items and seasonal memberships.

Indeed, analysts at China Renaissance believe the new title could rake in as much as $1.5 billion in annual revenue, according to the Reuters report. That’s a lot to get excited about and resuscitating gaming will be an important part of Tencent’s strategy this year — which has already seen it restructure its business to focus emerging units like cloud computing, and pledge to use its technology to “do good.”

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The Switch has now outsold the N64, but Nintendo sees growth slowing

Posted by | Asia, China, Gaming, hardware, n64, Nintendo, Nintendo Switch, satoru iwata, super smash bros, Tencent, Wii | No Comments

Nintendo’s Switch has now outsold its N64 console on lifetime sales, but prospects for the portable gaming system look mixed for the next year following a conservative sales forecast.

Nintendo just announced its end of year financials, and in doing so revealed that it sold 16.95 million Switch consoles in the last year, taking it to 34.7 million sales to date and therein surpassing the N64. That annual sales figure is about on par with Nintendo’s target of 17 million — which was revised from an initial (and very ambitious) 20 million — but what happens over the next 12-month period is less clear.

The Japanese company is predicting that it will shift 18 million Switch units over the next financial year, and there are positive and less positive signals to back that up. It would be hard to imagine that demand for the same device continuing for another year without changes.

Will there be new things?

That seems likely, we just don’t know exactly what and when.

“As a general rule, we’re always working on new hardware and we will announce it when we are able to sell it,” Nintendo CEO Shuntaro Furukawa told Bloomberg, although he refused reports that a new, lower-priced model will be unveiled at the E3 show in June.

Beyond new models, there will also be new markets. Nintendo is poised to enter China after it last week secured a key approval to sell the Switch in the country in partnership with Tencent.

Gaming in China is currently in flux — last year was a dismal one for companies like Tencent, but new regulations are incoming — but Nintendo’s catalog of family-friend and cute titles are likely to fare better than more edgy content in terms of approval. Even though the Switch is over two years old, opening China as a market will create a lot of new demand if it is marketed right.

Meanwhile, on the software side, the Switch is performing well, with more than 23 titles now at one million sales or more, while Super Smash Bros. Ultimate and Pokémon: Let’s Go have generated 13.81 million and 10.63 million sales, respectively.

More broadly, Nintendo’s general financial update disappointed investors.

Annual operating profit of 250 billion yen ($2.2 billion) rose by 41 percent, but revenue grew just 14 percent to 1.2 trillion yen ($10.7 billion). For the fourth quarter, operating profit came in at 29.7 billion JPY ($266 million) which was below the 36 billion JPY average for analysts polled by Bloomberg.

Nintendo’s annual forecast was also seen by many as tepid, perhaps because the company was burned by those aggressive Switch sales targets set last year.

“Nintendo is being extra cautious as it wouldn’t want to miss its target again,” games consultant and former TechCruncher Serkan Toto told The Wall Street Journal in a statement.

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China’s new gaming rules to ban poker, blood and imperial schemes

Posted by | Asia, China, Gaming, Government, iQiyi, netease, Netflix, online poker, Tencent, video gaming | No Comments

Lots of news has surfaced from China’s gaming industry in recent weeks as the government hastens to approve a massive backlog of titles in the world’s largest market for video games.

Last Friday, On April 10th, the country’s State Administration of Press and Publication, the freshly minted gaming authority born from a months-long reshuffle last year that led to an approval blackout, held a gaming conference and enshrined a new set of guidelines for publication that are set to move some to joy and others to sorrow. TechCrunch confirmed with an attendee present at the conference and a source close to the SAPP that the event took place.

On April 22, China finally resumed the approval process to license new games for monetization. Licensing got back on track in December, but Reuters reported in February that the government stopped accepting new submissions due to a mounting pile of applications.

The bad news: The number of games allowed onto the market annually will be capped, and some genres of games will no longer be eligible, according to information communicated at the gaming conference. Mahjong and poker games are taken off the approval list following a wave of earlier government crackdowns over concerns that such titles may channel illegal gambling. These digital forms of traditional leisure activities are immensely popular for studios because they are relatively cheap to make and bear lucrative fruit. According to video game researcher Niko Partners, 37 percent of the 8,561 games approved in 2017 were poker and mahjong titles.

While the new rule is set to wipe out hundreds of small developers focused on the genre, it may only have a limited impact on the entrenched players as the restriction applies only to new applicants.

“It won’t affect us much because we are early to the market and have accumulated a big collection of licenses,” a marketing manager at one of China’s biggest online poker and mahjong games publishers told TechCrunch.

China will also stop approving certain games inspired by its imperial past, including “gongdou,” which directly translates to harem scheming, as well as “guandou,” the word for palace official competition. The life inside palaces has inspired blockbuster TV series such as the Story of Yanxi Palace, an in-house production from China’s Netflix equivalent iQiyi . But these plots also touch a nerve with Chinese officials who worry about “obscene contents and the risk of political metaphors,” Daniel Ahmad, senior analyst at Nikos Partners, suggested to TechCrunch.

china games

Screenshots of Xi Fei Zhuan, a mobile game that lets users play the role of harems to win love from the emperor. Image source: Superjoy Interactive Games

Games that contain images of corpses and blood will also be rejected. Developers previously modified blood color to green to circumvent restrictions, but the renewed guidelines have effectively ruled out any color variations of blood.

“Chinese games developers are used to arbitrary regulations. They are quick at devising methods to circumvent requirements,” a Guangzhou-based indie games developer told TechCrunch.

That may only work out for companies armed with sufficient developing capabilities and resources to counter new policies. For instance, Tencent was quick to implement an anti-addiction system for underage users before the practice became an industry-wide norm as of late.

“Many smaller publishers will have a harder time under this new set of regulations, which will require them to spend extra time and money to ensure games are up to code,” suggested Ahmad. “We’ve already seen that many smaller publishers were unable to survive the temporary game license approval freeze last year and we expect to see further consolidation of the market this year.”

China has over the past year taken aim at the gaming industry over concerns related to gaming addiction among minors and illegal content, such as those that promote violence or deviate from the government’s ideologies. To enforce the growing list of requirements, an Online Game Ethics Committee launched in December under the guidance of the Publicity Department of the Chinese Communist Party to help the new gaming regulator in vetting title submissions.

More than 1,000 games have been approved since China ended the gaming freeze in December, though Tencent, the dominant player in the market, has yet to receive the coveted license required for monetizing its hugely popular mobile title PlayerUnknown’s Battlegrounds.

Uncertain waters in the gaming industry have wiped billions of dollars off the giant’s market cap and prompted it to initiate a bigger push in such non-game segments as cloud computing and financial technologies. NetEase, the runner-up in China’s gaming market, reacted by trimming its staff to cut costs.

The article was updated to correct the date for the gaming conference and clarify that the new guidelines were announced at the conference.

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