Tencent Game "Second Half": What is the impact of the Personal Protection Law and Apple's new privacy regulations on the promotion of the game?

Reporters Chen Yibo and Wu Kezhong reported in Beijing

On the evening of November 10, Tencent revealed at the third quarter of 2021 earnings performance conference that it will increase investment in AAA games from 2022 to 2023. Moreover, Tencent believes that the Personal Information Protection Law (hereinafter referred to as the "Personal Insurance Law") and Apple's new IDFA (Advertiser Identifier) privacy regulations have a relatively small impact on advertising in industries such as games.

Professionals interviewed by the reporter of China Business Daily agreed with this and said that strengthening privacy protection is the trend of the times, which requires that in the future, game companies must reduce their dependence on personalized advertising and enhance the attractiveness of product content and brands by continuously strengthening product research and development. However, there are also views that the new IDFA privacy regulations have a great impact on the game buying market.

It is worth noting that Tencent also disclosed the effect of the implementation of the anti-addiction policy for minors in the third quarter of the financial report: in September 2021, the proportion of minors' game time in Tencent's local market dropped from 6.4% in the same period last year to 0.7%; the proportion of flowing water decreased from 4.8% to 1.1%. Tencent said that since September 1, 2021, it has taken new measures to implement new regulations on the prevention of addiction in minors' games, and cracked down on the problem of minors fraudulently using adult accounts by upgrading the cruise system to identify fraudulent use of accounts.

Increase AAA game investment next year

According to the data disclosed by Tencent, as of the end of September 2021, Tencent Holdings' unaudited revenue was 415.930 billion yuan, an increase of 19% year-on-year; net profit was 129.864 billion yuan, an increase of 29% year-on-year; and net profit under non-IFRS was 98.908 billion yuan, an increase of 10% year-on-year.

In a single quarter, Tencent Holdings' unaudited revenue in the third quarter of 2021 was 142.368 billion yuan, an increase of 13% year-on-year and 3% month-on-month; net profit was 39.510 billion yuan, an increase of 3% year-on-year, down 7% sequentially; and net profit under non-IFRS was 31.751 billion yuan, down 2% year-on-year and 7% month-on-month.

By business, in the third quarter of 2021, the revenue of Tencent's value-added service business was 75.2 billion yuan, an increase of 8% year-on-year, and the revenue cost of this business increased by 7% year-on-year to 35.3 billion yuan. Tencent said that it was mainly due to the increase in the cost of channels and content of the game and the content cost of the live broadcast service, resulting in an increase in the cost of the business in the current period.

Tencent said in its earnings report that driven by games such as "Glory of kings", "Call of Duty mobile game", "Tianya Mingyue Knife Mobile Game", "Peace Elite" and other games, the local market game revenue increased by 5% year-on-year to 33.6 billion yuan.

For the performance of the local game market, Tencent said that in October 2021, "League of Legends Mobile Game" is the second mobile game in China in terms of the number of daily active accounts. In addition, "Battle of the Golden Shovel" is the second most active game in the number of daily active accounts in the new game launched in China year-to-date, after the "League of Legends Mobile Game".

From the perspective of different game hosting platforms, in the third quarter of this year, the total revenue of mobile game value-added services (including mobile game revenue attributable to its social networking business) increased by 9% year-on-year to 42.5 billion yuan, while the revenue of personal computer client games increased by 1% year-on-year to 11.7 billion yuan.

In the international game market, Tencent said it is increasing investment in global game development, including expanding game studios in China and mature international studios with a number of blockbuster games. Due to the strong performance of games such as Valorant and Clash of Clans, game revenue in the international market increased by 20% to $11.3 billion (28% at constant exchange rates).

It is worth noting that at the above-mentioned conference call, Tencent said that it will increase investment in AAA games from 2022 to 2023.

What is the impact of the personal insurance law and Apple's new privacy regulations on game promotion?

At the above-mentioned conference call, a number of analysts mentioned the impact of the implementation of the personal insurance law. It is reported that the personal insurance law, which has been in force since November this year, clearly mentions that APP must not force personalized advertising.

According to the minutes of the call after the brokerage meeting, Tencent said that the impact of the personal insurance law and the new IDFA privacy regulations on advertising, including games, is relatively small. Tencent completed the implementation of the personal insurance law on November 1, but users who choose to turn off personalized recommendations will still see ads, but the relevance will decline. The percentage of users who chose to turn off personalized recommendations was less than 5%. The impact of the new IDFA privacy regulations on the European and American markets is mainly focused on advertising efficiency and distribution efficiency, but in the Chinese market, the proportion of Apple users is relatively low.

According to media reports, in June 2020, Apple revealed at the Global Developers Conference (WWDC) that it will release the ATT (AppTrackingTransparency, App tracking transparency) policy to make changes to the IDFA - the IDFA sharing function will be turned off by default, and developers who want to obtain the IDFA of consumers need to clearly signal to the consumer pop-up window and request permission, otherwise the developer will only get a string of invalid 0 values. Later, Apple announced that it would postpone the release of new privacy rules for IDFA until early 2021 to help developers reserve more time to deal with IDFA changes.

However, game media person Roski said in an interview with the China Business Daily reporter that the impact of the new IDFA privacy regulations is actually very large. After apple iOS 14.5 system update this year (in the early morning of April 27, Apple pushed the iOS14.5 system that tested for two months, after the user updated the system, all apps must be separately pop-up prompts and user consent when collecting user data and using it for cross-App delivery), the game's iOS purchase volume actually has a great impact, and the eCPM (the abbreviation of effective cost per mile, by default, eCPM). Refers to the advertising revenue that can be obtained per thousand page impressions, it is only used to reflect the parameters of the profitability of the website, not representing the income) waist cut, the platform does not know which traffic advertising value is high, can not make a more detailed distinction, can not accurately deliver, it increases the delivery budget, but the cost increases, the income does not necessarily grow.

Roski also added that although the number of Apple users in China is relatively low, the user value of Apple users is greater than that of Android users, so from the perspective of game recharge revenue that can be obtained from game promotion, Apple users who are restricted by new privacy regulations may contribute revenue, in fact, there is a certain scale, compared with the income obtained from Android users, it is not necessarily a lot different.

Moreover, for the future decline in advertising prices and the increase in ROI (roi) mentioned by Tencent Holdings on the same day, Roski told reporters, "The price of advertising space, we see more and more expensive, we do not see the decline", "Globally, we see the game buying data, the purchase price is getting more and more expensive, user retention is getting worse and worse, ROI is decreasing, this has been the case in recent years."

For the above views, Tencent did not evaluate to reporters, the company said that the relevant content of the financial report is subject to public information, and the company will not reply for the time being.

It is precisely because the purchase price is getting more expensive and the ROI is declining, Roski believes: "In addition to buying to promote the game, there are more ways to get the amount in the industry." For example, targeted to make better products, do the theme and screen more attractive to the user of the game. This may have an impact on game companies that are not highly competitive or rely on old-fashioned gaming companies. ”

But Roski also mentioned: "Only through the way of buying, can users continue to come in, the way of buying and delivering, through the user's click rate, conversion rate, payment rate, retention rate and other data indicators, clearly track and analyze user data, other ways to obtain it is not stable." ”

Liao Xuhua, an analyst at Analysys, told reporters that the push of personalized advertising has a limited impact on game promotion, which is because: "The proportion of users is small, and the supervision in the actual implementation process is also more complicated, such as which department verifies whether the advertisement is personalized through what method, and what are the follow-up penalties." However, the strengthening of privacy protection on a global scale is an inevitable trend, and in the future, governments and large enterprises will certainly have stricter and more specific regulatory requirements, and game companies must reduce their dependence on personalized advertising and enhance the attractiveness of product content and brands by continuously strengthening product research and development. ”

However, Roski believes that brand marketing may only be suitable for publishers with a certain brand influence, and generally cultivate a brand with greater influence, and the cost of time and other aspects is relatively high. In the future, if consumers' privacy awareness is further enhanced and the requirements of the personal insurance law are further implemented, the promotion method of the game is likely to be "buying volume + channel + content marketing (such as on the Little Red Book, through the way of planting grass, on Douyin, by releasing some promotion tasks, celebrities doing videos to promote, etc.)".

At the same time, there are also unnamed analysts familiar with the game industry who said that in addition to the promotion of purchase volume, some methods such as short videos, celebrity endorsements, offline promotion, and live broadcasting can also be taken in the future.

Previously, some professionals familiar with game promotion mentioned in an interview with this newspaper reporter: "Advertisers need to adapt to changes in the industry, for example, in most scenarios, they may not be able to obtain the unique identifier of the user." As a result, advertisers need to look for new ways to optimize, such as how to optimize based on aggregated data. The same goes for SAAS companies that serve advertisers, looking for new ways to optimize. This is precisely an opportunity. If the enterprise has a strong enough ability to innovate, it can often find a breakthrough here and form its own competitive advantage. ”

Roski also said that in the future, there will be higher requirements for the company's data application and analysis capabilities.

(Editor: Dong Shuguang Proofreader: Yan Jingning)