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For mobile gaming and apps in China, 2019 has been a year of surges, surprises, and setbacks.
Our company, AppInChina, has been publishing mobile apps and games in China for foreign companies since 2013. As such, we have unique insight into what’s in store for the coming year. Here are our observations and predictions:
Games Are The Biggest Moneymakers In The Chinese Mobile App Market
With current market revenues at approximately $21.4 billion, China surpasses all other countries when it comes to mobile games.
Of the 2.3 billion mobile gamers worldwide, more than 544 million of them are in China. That’s almost one half of the entire population. This figure is expected to grow by another 55 million in two years.
As always, Android continues to dominate the Chinese market, with nearly 80% market share, and Chinese users spend an average of 99 minutes per day on smartphones.
After the halt of new game licenses that paused the industry in late 2018, new licenses finally resumed in 2019, although at a slower pace than before. This slowdown in the industry allowed the Chinese market, previously the largest and fastest growing in the world, to slip back into slot #2 going into 2020. However, we believe the industry will quickly make up for lost time, due to the sheer size of the market and the players involved.
The most popular mobile game last year was Tencent’s Honor of Kings – a MOBA (multiplayer online battle arena) game. While it will be tough – from both a practical and regulatory standpoint – for a Western company to compete with similar massive, resource-intensive network games, MOBAs in general are dropping in popularity anyway.
First-person shooters and simulation games are growing more popular, especially among females. Casual and puzzle games remain highly popular with the general public, as they are over the rest of the world. This means that smaller developers still have the chance to make a big splash with smaller but addictive games.
From our clients, we have seen impressive growth for those games and apps that have already proven themselves on Google Play and the Apple App Store. When you drop an already successful product into a massive, hungry market like China, games publishers can expect high returns with little additional effort, making it worth the additional cost and time involved in the registration process.
Chinese Developers Will Continue To Penetrate The Global Mobile Apps / Games Market in 2020
Competition with homegrown Chinese apps remains fierce, and they has never been more apparent than with the sudden success of a few prominent non-gaming Chinese apps on the global market.
Douyin – known to the rest of the world as TikTok – took advantage of its 2017 acquisition of musical.ly to become the fastest growing social media app worldwide last year, which allows users to make short videos set to song. This was not without controversy, as Western governments quickly accused the app of applying the same censorship it applies in its home country, despite its repeated denials. TikTok is entering 2020 with this public relations challenge to get ahead of potential US government regulation of its operations.
Chinese-born app Zao made headlines for its impressive and controversial use of AI to almost seamlessly swap users’ faces with images of celebrities in videos. The impressive functionality of this app demonstrates the power of Chinese companies to innovate at a pace that now poses serious competition to its Western competitors.
The trade war between the USA and China has shone a spotlight on China’s growing penetration of Western markets. As one level of defense against pushback, some Chinese companies have been trying to subtly hide their origins to avoid alarming skittish foreign consumers – from the simple rebranding of Douyin to TikTok, to company names that do not seem overtly Chinese. For example, many consumers in the West are just now learning that DJI – the most popular drone producer in the world – is a Chinese company.
The biggest challenge facing Chinese companies in 2020 will be convincing the world that, although they may be ruled by tough regulations at home, they will respect and maintain the different standards imposed by Western societies. This level of trust will be key to getting their apps adopted in foreign markets.
By contrast, foreign companies will have an easier time getting into the app market. Government regulation remains challenging, but new laws are providing much needed clarity, so the process is becoming more straightforward. Chinese consumers do not have the same level of bias against apps from foreign companies, as long as they find the apps useful and catering to their sensibilities.
The Chinese Government Is Tightening, Not Loosening, Regulations on Gaming and Mobile Apps.
At the same time, government is focusing more on the seemingly unstoppable spread and influence of social media apps and games and trying to catch up with laws that match.
It has historically been a more time-consuming for foreign companies to get set up in the Chinese app market. Licensing and approval processes are still more cumbersome, and China’s many Android app stores remain closed to developers who are unwilling or unable to establish a Chinese business entity on the Mainland, establish a partnership with a Chinese company, or secure an agency like ours to publish the apps on their behalf.
Even the Apple App Store, which has previously been loose about requiring proof of Software Copyright Certificates and ICP licenses, will likely be forced to close this loophole soon.
During the last two years, the Chinese government has been increasing its efforts to regain control. Authorities have promised to release a more comprehensive law that will consolidate and clarify this patchwork of regulations in 2020. This will bring much-needed clarity for developers – as well as the app stores that support them and share liability for those apps they host.
As mobile games have exploded in popularity, app stores are increasingly looking to games to shore up their bottom lines, demanding an ever increasing chunk of the revenues they generate, up from the 50% revenue-share that has by and large held until now – which was already significantly higher than the 30% currently demanded by Google Play and the Apple App Store.
Whether the Chinese app stores can convince developers that exposure to the larger market is worth the additional cut in revenue remains to be seen. The silver lining on this is that most Android app stores continue to allow non-gaming apps on their platforms their own choice of advertising partners and monetization platforms.
In our view, based on current trends, 2020 is going to be China’s year in the global mobile app scene. Chinese companies will continue to grow and innovate, increasing pressure on long-established Western brands and companies to innovate to catch up. And many Western developers will recognize the need to overcome their reluctance or uncertainty about entering the Chinese market.
Western Companies Can Compete – If They Are Smart About It
At 1.4 billion people, China remains a fairly closed ecosystem, with its own rules, consumer behaviors and expectations.
But the power of this giant sandbox cannot be ignored, as Chinese companies have the advantage of rapid innovation with the most massive, enthusiastic, and rapidly growing mobile market in the world. Releasing their apps into this hungry space, Chinese companies have the advantage of honing and perfecting their business models before unleashing them to surprised world.
Massive, homegrown companies naturally continue to dominate this space. Tencent (maker of WeChat) currently produces 6 of the top 10 highest-grossing mobile games in China, and Netease has 6 in the top 20.
For Western mobile apps and games to succeed in 2020, they must recognize and appreciate this growing level of competition, both in size and innovation, and take the Chinese market seriously. Those companies that are willing to jump over the hurdles to come and compete in the Chinese app marketplace will find themselves much better positioned to compete – not only in Mainland China, but across the rest of the world.
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