Tencent and ByteDance are also discussing business now.

Author | Huang Yu

For many years, most of the Chinese internet giants have had little interaction with each other, each competing and investing within their own systems, even forming barriers such as the Alibaba system, Tencent system, and ByteDance system.

But now, this invisible wall is being torn down. After further deepening cooperation between Alibaba's Ali Mama and Tencent's advertising, Tencent and ByteDance are also getting closer.

On January 8th, market news revealed that ByteDance's gaming division, Chaoxi Guangnian, is in negotiations with Tencent to sell multiple games, with the teams involved in the sale located in Shanghai, Shenzhen, and other places.

Tencent has not yet responded to whether they will take over. However, the person in charge of Chaoxi Guangnian stated to Wall Street News that the team is still in discussions with multiple buyers regarding the sale of the projects, and no deal with Tencent has been finalized so far.

In fact, since November last year, after ByteDance decided to significantly scale back its gaming business, its core gaming businesses, Chaoxi Guangnian and Mutong Technology, have been in negotiation for sale, and there have been rumors of potential buyers in the market.

Industry insiders pointed out that there are many potential buyers, but very few have actually entered into negotiations.

However, in the current market environment, there are not many buyers with the capability to acquire ByteDance's gaming business.

As the world's largest gaming company, Tencent is undoubtedly not absent from the negotiation table with ByteDance and is seen as the most likely company to take over.

Internet analyst Zhang Shule pointed out to Wall Street News that on one hand, in terms of operational capabilities and financial strength, Tencent is the best choice among domestic gaming giants; on the other hand, Tencent has a great interest in acquiring high-quality resources, and ByteDance's "Jinghe" can also help Tencent make breakthroughs in the second-dimensional gaming sector.

Tencent can become the "white knight" for ByteDance's gaming business, a harmonious scene that was unimaginable a few years ago.

As a rising star in the internet industry, ByteDance once regarded gaming as a strategic focus. Four years ago, it established Chaoxi Guangnian and successively acquired more than 20 gaming-related companies, including well-known ones such as Shanghai Mokun, Mutong Technology, and Youai Huyu. This posed a direct threat to Tencent, whose main focus is on gaming.

According to incomplete statistics, from 2019 to 2022, ByteDance's investment in the gaming field amounted to approximately 30 billion yuan.

During the four years when ByteDance aggressively entered Tencent's territory, it was also a period of escalating conflicts between the two sides, engaging in all-round confrontations in gaming, social, music, online novels, and other businesses.TENCENT once built a high "Berlin Wall" for ByteDance. Since 2018, links to ByteDance's apps such as Douyin and Xigua Video cannot be shared on WeChat and QQ.

In May 2018, when Douyin became the most downloaded app on the App Store in the first quarter globally, ByteDance founder Zhang Yiming wrote, "WeChat's excuse for blocking, Weishi's plagiarism and copying cannot stop the pace of Douyin."

TENCENT founder Ma Huateng responded, "This can be understood as defamation."

By 2021, the conflict between the two parties escalated and became public. ByteDance sued TENCENT for restricting users from sharing Douyin content on WeChat and QQ, citing anti-monopoly laws. In the same year, TENCENT sued ByteDance for copyright infringement for broadcasting games and film and television content such as "Honor of Kings" and "Douluo Continent" on its platform.

The link ban between giants has been one of the most controversial topics in the internet industry over the past decade. Not only TENCENT and ByteDance, but also TENCENT and Alibaba have erected walls and cut off communication with each other to restrict their competitors.

An impressive and iconic scene was the "Dongxing Dinner" during the 2017 Wuzhen Internet Conference. Ma Huateng sat in the center, while the organizers Liu Qiangdong and Wang Xing sat on the left and right. The table was mostly filled with companies invested in or closely related to TENCENT.

The key turning point came in April 2021 when the State Administration for Market Regulation first proposed "strictly preventing system closure and ensuring open and shared ecosystems." According to the requirements of the Ministry of Industry and Information Technology, all internet platforms must lift the ban according to the standards by September 17 of that year.

Following this, there have been more and more "break-the-ice actions," not just in lifting link bans.

In April of last year, TENCENT and ByteDance staged a "century reconciliation." TENCENT Video and Douyin Group announced cooperation, focusing on promoting the linkage between short and long videos and short video derivative creations.

In addition to video content, the two parties have also started more collaborations in the gaming field.

For example, on December 15th last year, TENCENT launched the party game "Star of Eternity" with a large investment. In order to promote the new game, TENCENT allocated a high level of marketing investment and further bought traffic on ByteDance.

According to a report released by data tracking company DataEye on December 18th, in the past month, 38% of the advertising for "Star of Eternity" was placed on ByteDance's online advertising platform "TikTok Ads," making it the advertising channel where TENCENT invested the most for this game, even more than on its own platform.

In addition, TENCENT leveraged the popularity of former Huya's top streamer and "King of Glory" famous anchor Zhang Daxian after joining Douyin to promote "Star of Eternity" on Douyin. It attracted over 60 million viewers and had a peak online audience of over 2 million that night.As of January 9th this year, there are market rumors that the ban on "King of Glory" live streaming on Douyin is expected to be lifted, and TiMi Studios has internally confirmed that they will allow Zhang Daxian to live stream "King of Glory" on Douyin.

Various signs indicate that the ice between Tencent and ByteDance is gradually breaking.

Zhang Shule expressed that in the past, Tencent and ByteDance had direct and fierce competition in the gaming field, especially in gaming short video live streaming. However, Tencent's Huya and Douyu, which are part of the Tencent ecosystem, have fallen out of favor, and ByteDance has also stepped out of the gaming circle. The two sides are no longer in conflict.

The negotiations between Tencent and ByteDance for the acquisition of gaming projects indicate that the era of intense warfare between the two parties has long passed. If successful, it will undoubtedly be another win-win cooperation event.

Gao Dongxu, Chief Analyst of the China Entertainment Think Tank, stated to Wall Street News that the two parties are continuously getting closer. If the acquisition is realized, it will provide strong support for Tencent Games to obtain traffic promotion.

With over 600 million daily active users, Douyin has long been one of the most important channels for content promotion and user acquisition in the gaming industry. Tencent Games, which is eager to seek further breakthroughs, cannot ignore its value.

From Douyin's perspective, its growth in recent years has entered a stable period. Deepening cooperation with Tencent will allow Tencent Games to obtain top IP on the platform, not only enriching the platform's content and bringing in new users, but also helping to increase its revenue from game advertising and game live streaming business.

In fact, when both Tencent and ByteDance realized that "no one can dominate everything," the irreconcilable contradictions between the two parties had already ended.

For the past decade, regardless of how aggressively ByteDance has emerged, Tencent has remained firmly in control of domestic social traffic and the gaming throne. Similarly, no matter how Tencent has targeted ByteDance, Douyin has become the most popular short video platform, with daily active users second only to WeChat, firmly grasping the trend of live-streaming e-commerce.

No one can eliminate each other, so it is better to think about how to coexist and profit together.

Zhang Shule believes that the internet industry has entered an era of vertical cultivation, rather than the previous era of blind expansion wherever is popular. The benefits brought by cooperation outweigh competition.

Openness, equality, and sharing are the inherent genes of the internet. The era of internet companies fighting alone has long passed, and returning to the original intention of openness is only natural. Interconnection and intercommunication between giants have become a trend.

Nowadays, the landscape of the internet is undergoing intense reshaping. Besides the two giants Alibaba and Tencent, ByteDance and Pinduoduo have risen strongly, and some specialized platforms can also survive in between, such as Xiaohongshu, etc.

Four years ago, no one would have thought that Alibaba and Tencent, Tencent and ByteDance would shake hands and make peace. Today, the big players have personally brought down the "Berlin Wall."

The internet ecosystem is truly evolving to another stage.