Tencent Games in recent years: Many layouts, few victories.

Tencent Games sought transformation in 2023.

This strategic shift was clearly articulated by Ma Xiaoyi, Senior Vice President of Tencent, during the company's annual gaming conference: "Tencent Games is transitioning from a platform-based company to a product-centric one."

From Tencent's product lineup and market strategies over the past two years, several key transformations have emerged.

First,Tencent Games has significantly heightened its sensitivity to market competition dynamics.

Known for its "learning-based catch-up" strategy, Tencent, after missing the early opportunities in the anime-style game market in 2020, has clearly intensified its monitoring and response to competitor movements, especially in high-potential niche markets.

Take NetEase's "Eggy Party" as an example. Initially rated only "U-level," this game quickly caught Tencent's attention after attracting a large number of Gen Z players and demonstrating strong social potential. Tencent swiftly mobilized resources and launched its core product "DreamStar" by the end of 2023.

"Eggy Party" saw a significant revenue surge starting October 2022, achieving a qualitative leap by Q1 2023.If this period is considered the discovery phase of market opportunities, Tencent's timeline—from decision-making to development and final launch—demonstrates exceptional execution and market acuity.

Second,Tencent Games has diversified and intensified its game portfolio.

This all-encompassing genre coverage strategy differs from its previous reliance on broad agency businesses that diversified game distribution.

Now,Tencent Games focuses more on filling gaps in its game genres, even experimenting with niche markets, adopting a wide-net strategy.

This approach has yielded unexpected successes. For instance, "Dark Zone Breakout," a game akin to "Escape from Tarkov," launched in July 2022. Initially niche due to its high difficulty and unique "loot-and-extract" gameplay, it gained traction through livestreaming in 2023, amassing 80 million registered users.

Third,Tencent Games has adopted a more cautious commercialization strategy.

Especially when entering fiercely competitive new markets,Tencent prioritizes securing market share over short-term profits.

For example, "Taris World," an MMO launched on June 12, neither charges subscription fees nor sells in-game power items. Tencent even subsidized guild leaders to foster social interactions and familiarize players with dungeon mechanics.

In July, Tencent's Aurora Studio's "World Awakening" disrupted the SLG market's pricing. Building on Bilibili's "Three Kingdoms: Strategic Edition" price cuts, it intensified the price war with even more aggressive pricing.

Official data shows "World Awakening" offers a 5-draw for 388 gold (≈¥38.8), with a 6.66% 5-star drop rate and a 20-draw pity system. In contrast, top SLG games typically charge ¥95 for 5-draws, with 5-6% 5-star rates and 30-40-draw pities.

The transformation has shown results. In overseas markets, where long-termism prevails,Tencent's international gaming revenue grew 14% to ¥53.2 billion in 2023, accounting for 30% of total gaming revenue and becoming a new growth driver. This growth continued into 2024, with consecutive quarterly increases.

Domestically, however, performance lagged. Without "DNF Mobile's" surprise success in 2024, domestic gaming revenue might have declined. Many of Tencent's other games faced challenges.

Reviewing Tencent's 2023-24 lineup:

In February 2023, Tencent released "Undawn," a post-apocalyptic SOC game by Lightspeed Studio. Developed by a 300-person team over years, it targeted the niche dominated by NetEase's "LifeAfter" (2018). Despite the genre's longevity ("LifeAfter" remained top-50 in revenue after 5 years), "Undawn" peaked in March post-launch before declining, trailing competitors by June.

In theanime-style segment, Tencent's titles like "Alchemy Stars," "Wuthering Waves," and "Reverse: 1999" launched consecutively.

"Alchemy Stars" adopted a ¥2-per-draw model, topping iOS free charts and trending on TapTap/Bilibili at launch but soon plateaued. "Reverse: 1999," initially criticized for its "Genshin-like" monetization, stabilized at ¥100M monthly revenue by May 2024. However, it wasn't until Kuro Games' "Wuthering Waves" arrived that Tencent gained footing.

Late 2023's "DreamStar" clashed with "Eggy Party" in theparty game arena. Despite heavy marketing, Tencent failed to capture the Gen Z-dominated social gaming market, where first-mover advantage in building player networks proved decisive.

In 2024, Tencent'sMMO and SLG performances remain uncertain. "Taris World" (MMO) and "World Awakening" (SLG) adopted restrained monetization but underperformed. "Taris World," positioned against NetEase's "Justice Online" post-Blizzard-NetEase split, faced timing issues with Blizzard's return. "World Awakening," though aggressively priced, was overshadowed by Bilibili's "Three Kingdoms: Strategic Edition."

The underperformance stems from multiple factors. Historically, Tencent excelled by:

1) Identifying emerging gameplay trends and leveraging execution to outpace competitors;

2) Using its massive traffic to amplify niche genres into hits.

This worked best where innovative gameplay met untapped markets, as seen with "Teamfight Tactics" (a "League of Legends" auto-battler), which hit 15M DAU in 2023.

Now, challenges arise from:

1) Shrinking mobile gaming growth (global spending fell 2% to $107.3B in 2023);

2) Players relying less on platform recommendations, opting for reviews/ratings;

3) Tencent's brand stigma reducing traffic conversion;

4) Diminishing returns on gameplay innovation—only breakthroughs like "Justice Online" (MMO) or "Three Kingdoms" (SLG) now capture markets.

For Tencent, true innovation requires systemic changes across targets, incentives, and timelines. In China's cutthroat market, the waiting game continues.