There are major momentum shifts happening in mobile games distribution around the world: Apple vs Epic, app store fee reductions, Genshin Impact bypassing major Chinese app stores at launch, etc. It’s clear that as anticompetitive pressures rise, content providers in certain regions are beginning to gain leverage in an evolving ecosystem with new models of user acquisition. This is most striking in China, where developers are increasingly questioning the legacy app store distribution and business model.
Shanghai-based X.D Network is in the center of the action, and the company just welcomed two new prominent investors to its roster. Bilibili recently announced it will invest $123M for a 4.72% stake while Alibaba bought 0.76% for $20M. While X.D Network has many successes as a game developer, its mobile game platform TapTap plays a more important role in China’s gaming ecosystem and is likely the key to investor interest.
For the uninitiated, TapTap is a community-focused mobile game platform that allows studios to distribute their games at 0% revenue share. While TapTap is available on both Android and iOS, only the Android version allows players to download games directly (the iOS version serves only as the community hub). Devs can now direct their Android user acquisition efforts towards TapTap, which creates a win-win-win situation: TapTap gets more users, the players get an amazing gamer hub, and devs don’t pay any store fees. XD’s Interim Report 2020 shows that TapTap’s advertising revenue sits at $38M, a 20% increase from the previous year.
Back to X.D Networks’ investors: Bilibili’s investment signals a closer collaboration between China’s most popular long-form video network and China’s most popular gamer hub. This powerful combo is already proven — miHoYo launched Genshin Impact in China primarily through a collaboration between Bilibili and TapTap, skipping the traditional Android app stores. It will fascinating to see how others follow suit.
Things get more interesting when you look at who owns a stake in Bilibili. Tencent increased its position to 18% in 2020, Alibaba took a 10.8% stake back in 2019, and Sony bought in at $400M for 4.98% in 2020. The obvious name missing is Bytedance; therefore, it wouldn’t be surprising to see Bytedance launch a self-developed gaming hub to counter TapTap with TikTok as its primary means of driving user acquisition. In other words, the combination of video platform and games platform could grow more competitive — YouTube + Google Play, Bilibili + TapTap, TikTok + new Bytedance platform — and might ultimately make 0% revenue share the norm. This may be limited to China, but as app stores receive more regulatory scrutiny worldwide, similar dynamics may eventually gain traction elsewhere (or even in new forms like cloud gaming via browsers or instant games).
