Image source @ Visual China
Text| DataEye
The game overlord Tencent has finally handed in the papers, and this report card is mixed.
The annual revenue was 560.1 billion yuan, an increase of 16% year-on-year, and the net profit was 224.82 billion yuan, a slight increase of 1% year-on-year, which was the lowest increase in net profit in 10 years.
It is worth noting that for the first time, tob business revenue (financial technology and enterprise services) surpassed game revenue and became a new growth engine, while the proportion of game revenue that used to support half the sky continued to decline to about 30%.
Some people can't help but ask, is Tencent's game growth stalling?
01, Tencent games "growth stall": the domestic market growth is weak, overseas markets into a new growth point
Data source @wind; DataEye Institute cartography
Game overlord Tencent finally released the 2021 Q4 and annual financial report: the total revenue of the game business for the whole year was 174.3 billion yuan, an increase of 12% year-on-year.
In terms of absolute amount, Tencent's game business revenue exceeds Sony's (PlayStation revenue of about 24.87 billion US dollars, equivalent to 158.32 billion yuan), nearly three times that of NetEase, and is the highest-revenue game company in the world.
From the perspective of revenue growth, under the background of the high base caused by the epidemic last year, Tencent's game business revenue continued to maintain positive year-on-year growth, but the growth rate slowed down, and the growth rate was slightly lower than that of NetEase's game business (15%).
This growth rate can only be regarded as just passing, not particularly brilliant. Is Tencent's game growth stalling?
Let's start with a set of data:
From the total point of view, Tencent's overseas game revenue has accounted for more than 1/4. In 2021, Tencent's domestic game revenue was 128.8 billion yuan, and overseas game revenue was 45.5 billion yuan, accounting for 26% of overseas revenue. In terms of quarterly, in Q4 2021, Tencent's domestic game revenue was 29.6 billion yuan, overseas game revenue was 13.2 billion yuan, and overseas revenue accounted for 31%.
From the perspective of growth rate, tencent's overseas market revenue growth rate far exceeds that of the domestic market. In 2021, Tencent's domestic game revenue increased by 6% year-on-year, overseas game revenue increased by 31% year-on-year, and the overseas market was 5 times that of the domestic market.
It is not difficult to find that the real reason behind Tencent's game "growth stall" is that the domestic game business has pulled its hind legs, and the overseas game business has not "stalled", but has grown rapidly and become a new growth point.
Why is the growth of Tencent's domestic game business slowing down?
DataEye Research Institute believes that on the product side, in addition to the high base caused by the epidemic last year, the income of old games such as "Dungeons and Warriors" and "Peace Elite" has declined, the popular new games "League of Legends Mobile Game" and "Battle of the Golden Shovel" have been launched late, and there is a certain lag in revenue recognition, which has affected domestic revenue.
On the regulatory side, the restrictions on domestic game version numbers and the implementation of anti-addiction policies for minors have also had a certain impact on Tencent's domestic game revenue.
Compared with Peers such as NetEase, Century Huatong, and Youzu, Tencent's underage user consumption flow accounts for a relatively high proportion. In Q4 2020, Tencent's minors accounted for 6%, and by Q4 2021, Tencent's proportion of minors' turnover fell to 1.5%, a year-on-year decrease of 73%.
With the tightening of industry supervision, the protection policy for minors is bound to have a certain impact on Tencent's domestic game revenue, but Tencent expects this impact to be digested in the second half of 2022.
A summary of one sentence: Affected by the anti-addiction policy for minors, the growth of Tencent's domestic game business has slowed down, pulling the hind legs of the entire game business, and the growth rate of overseas game business has been rapid, becoming the main source of growth.
02, "PUBG" sucked up 19 billion yuan, Supercell contributed more than half of the flow, overseas income mainly rely on banknote capacity?
Based on the analysis above, we found that overseas revenue is a new engine for the growth of Tencent's game business.
According to the financial report, the substantial growth in Tencent's overseas market game revenue in 21 years was mainly due to the strong performance of games such as PUBG Mobile, Valorant, Wild Brawl and Clash of Clans.
From the perspective of game categories, Tencent continues to maintain the advantages of shooting and MOBA, four main games 2 shooting (TPS/FPS), 1 MOBA, 1 SLG.
It is worth noting that none of the above four main games are 100% independently developed by Tencent, and all come from Tencent's investment or merger and acquisition targets.
The developers of the two games "Red Dead Redemption" and "Clash of Clans" are the Finnish game company Supercell, "Valorant" is developed by the fist company, and the adaptation rights of the globally popular "PUBG Mobile" come from the Korean company Blue Hole.
In recent years, Tencent has been investing in large-scale foreign investment, with a total investment in hundreds of game studios, and Fist Games, Blue Hole and Supercell can be called Tencent's most important investments.
Data source @ publicly available; dataEye institute mapping
The acquisition of Fist Games gave Tencent the super IP of League of Legends, and Tencent subsequently launched a number of popular games such as "League of Legends Mobile Game" and "Battle of the Golden Shovel". Investing in the Blue Hole enabled Tencent to obtain the adaptation rights of the "PUBG" mobile game, and "PUBGMobile" not only helped Tencent's game business to successfully go to sea, but also became the most profitable game in Tencent's overseas market.
According to Sensor Data, as of Q3 of 21, PUBG Mobile (combined with "Peace Elite" revenue) global APP Store and Google Play cumulative revenue of more than 7 billion US dollars (about 44.73 billion yuan), of which overseas markets contributed 43% of the total revenue, that is to say, Tencent relied on "PUBG Mobile" to absorb more than 19 billion yuan overseas.
In addition to fist games and blue holes, Finnish mobile gaming giant Supercell is also worth paying attention to. In 2016, Tencent led the consortium to spend $8.6 billion to acquire 84.3% of Supercell's shares, and in Q4 2019, Supercell's revenue was consolidated.
Founded in 2010, Supercell is the developer of popular games such as Clash of Clans, Island Raiders, Cartoon Farm, Clash Royale, and Brawl of the Wilds. From 2019 to 2021, Supercell's revenue was US$1.56 billion (about 9.92 billion yuan), US$1.48 billion (about 9.41 billion yuan) and US$2.24 billion (about 14.26 billion yuan), respectively, which can be called "cash cows".
Source @ Company Announcement; DataEye Institute Mapping
According to Sensor Tower, from January to November 2021, Supercell's overseas net income and Tencent's overseas self-issued net income accounted for about 55:45, that is to say, Supercell contributed more than half of Tencent's overseas market turnover.
September 2017 - November 2021 Ratio of Tencent's Overseas Self-Issued Offering to Supercell's Net Revenue Source @SensorTower, Debon Research Institute
Note: Net income is a 30% channel share deducted from the turnover
As can be seen from the above, Tencent's overseas game revenue mainly relies on foreign investment and acquisition, not from endogenous research and development.
Building a huge game ecosystem through foreign investment is Tencent's strategy to go global. According to incomplete statistics, since 2010, Tencent's overseas investment has totaled 66 cases.
Through investment and mergers and acquisitions, Tencent can obtain stable flow on the one hand, such as 19Q4 parallel table Supercell, 21Q4 and DigitalExtremes; on the other hand, it will also pocket a large number of classic game IP, in addition to taking the national service agency rights, the follow-up can also achieve reverse output through "end change".
Tencent has high hopes for overseas markets, as early as 19 years, it has put forward the small goal of "domestic and overseas revenue compared to 55", and Tencent's overseas game market revenue accounts for about 25%.
According to the information revealed in the earnings report, Tencent is working towards this small goal.
On the R&D side, Tencent is increasing investment in global game development, including expanding game studios in China and mature international studios with a number of blockbuster games. In addition, Tencent will strengthen its global IP portfolio by developing its own IP and partnering with companies with well-known IP. For example, in 21 years, Tencent acquired Klei Entertainment, the developer of the "Famine" series of games.
On the issuance side, Tencent is building localized issuance and operational capabilities to support the company's business development in multiple regions. In December 2021, Tencent Games launched a new international business brand, Level Infinite, which will be responsible for the release of game masterpieces produced by Tencent Games' studios and other third-party studios.
A summary of a sentence: At present, Tencent's overseas game business, which has strong financial strength, mainly relies on "banknote capabilities", which can help Tencent quickly enter overseas markets.
03, Tencent, which has always been Buddhist, has also increased its purchase volume, and the overseas version of "The King" has become a "new favorite"
From the perspective of total delivery: the intensity of investment in 21 years has increased significantly, and the overseas version of "Glory of the King" has become a "new favorite"
In general, In 21 years, Tencent and Supercell have significantly increased their investment efforts, and the two companies have placed 11168 and 4704 sets of materials in overseas markets respectively, up 157% and 85% year-on-year.
Over the past 22 years, Tencent's investment efforts have not decreased, and the amount of materials released since 2022 has reached nearly 40% in 21 years, approaching the whole year of 2020.
Specifically:
Tencent:
Note: Call of Duty: Mobile is run by Actor Publishing, and League of Legends: Wild Rift is run by Riot Games, so it is not included in the statistics.
From the perspective of material concentration, in 21 years, Tencent's investment focused on two major ace products, eating chicken and kings accounted for 80% of the total amount of materials, and "PUBG Mobile" won the first place in the purchase volume list.
In 21 years, Tencent has increased its efforts to invest in self-developed games, the top 3 of the game purchase list are self-developed games, and the top 3 of the 20-year purchase list only has 1 self-developed "PUBG Mobile", and the other two are agents.
Another important trend is that in the second half of 21 years, Tencent's investment in the overseas version of "Arena of Valor" of "Glory of Kings" has increased significantly, which is especially obvious in 22 years.
Arena of Valor has released a total of 3477 sets of material in 21 years, far more than the 45 sets in 2020, and a total of 3072 sets of materials in 22 years, while PUBG MOBILE has only released 906 sets of materials in the same period.
The reason is that the DataEye Research Institute speculates that the overseas turnover of PUBGMobile has accounted for more than 40%, and the future growth space is limited, while the "Arena of Valor" (overseas revenue in 2020 is at the level of 100 million US dollars) with a low proportion of overseas turnover has more room for future growth.
Supercell：
Supercell also focuses on the head product, and the top 3 of the buying list accounts for 80% of the total amount of material.
In 21 years, Supercell's TOP3 "Wild Wild Fight", "Clash of Clans" and "Clash Royale" put 2205, 1166 and 384 sets of materials respectively, and these three games are also an important source of Tencent's overseas income. Compared with Tencent's chicken and king, Supercell's head products are lower.
From the perspective of delivery trends: "Ace" games continue to be delivered
We selected two companies' 21-year focus products to observe their launch trends.
Tencent's two "trump cards" have implemented a continuous delivery strategy, and the launch volume of PUBG MOBILE is relatively stable. Both games have significantly increased their delivery efforts in the second half of the year, Arenaof Valor has been more pronounced and has continued this trend into 2022, while PUBG MOBILE has dropped significantly below 100 sets of material in a single day since 22 years.
If you compare the single-day peak, the 21-year single-day peak of Arena of Valor exceeded 640 groups, far exceeding the 466 groups of PUBG MOBILE.
It can be seen that the previous rumors that "the overseas version of "Arena of Valor" of "Glory of Kings" has been upgraded to a strategic project of the company, and the investment budget has also doubled" is not unfounded.
Supercell's three key games also implement a continuous delivery strategy. In general, the average daily amount of materials for the three games is not high, even the highest total amount of "Wild Wild Fight", the average daily amount of materials is only 100-200 groups, and the average daily amount of materials in Clash Royale is less than 75 groups.
From the perspective of delivery channels: Facebook has more than half of the delivery resources
Tencent's two ace delivery channels are dominated by Facebook (Facebook + Instagram + Messenger + FacebookAudience), which accounts for more than half of the resources, and the video platform YouTube and TikTok account for a negligible proportion.
Specifically, the first major delivery channel of "PUBG MOBILE" is Google's AdMob, which accounts for more than 1/3 of the single channel, but the entire Facebook system accounts for more than 1/2; the first major delivery channel of "Arena of Valor" is Facebook, which accounts for nearly 90% of the investment resources.
Supercell's three game delivery channels are also dominated by the Facebook department, which covers more than 60% of the investment resources.
Specifically, the first major delivery channel for "Brawl" and "Clash of Clans" is Facebook, accounting for more than 60% of the entire Facebook series, and the first largest delivery channel for Clash Royale is AdMob, but Facebook has more than 70% of the resources.
From the perspective of the launch country/region: the United States is the largest market to be placed
Source@DataEye-ADX Overseas Edition; DataEye Institute Cartography
Source@DataEye-ADX Overseas Edition, DataEye Research Institute
"PUBG MOBILE" targets the Middle East local tycoons, and the Middle East market (4.56% in the United Arab Emirates, 4.53% in Saudi Arabia, 4.5% in Kuwait, 4.43% in Oman) accounts for more than 25% of the total, far exceeding the largest overseas revenue market - the United States.
Arena of Valor focuses on the American market, with North America (19.61% in the U.S.) and South America (11.64% in Brazil and 5.35% in Mexico) combined to account for more than 1/3. In addition, the Middle East region (Turkey 3.13%, UAE 2.73%, Oman 2.69%) is the third largest market, accounting for more than 9% of the total.
Other game companies are mainly in Europe, America, Japan, South Korea and Southeast Asia, why does Tencent focus on the Middle East in addition to the United States?
The DataEye Research Institute speculates that the reasons are as follows: (1) the per capita GDP of Middle Eastern countries is higher, the willingness of players to pay is stronger, and public information shows that ARPU is expected to reach $38; (2) the research and development strength of local manufacturers in the Middle East is weak, and the current mobile game market is basically occupied by Chinese and European and American games, and the market competition is relatively weak; (3) Tencent's internal control of ROI is more stringent, and the ROI in the Middle East is higher, which is in line with the company's internal regulations.
In addition, the two games are not high in the Southeast Asian market, why did Tencent "abandon" this market?
The DataEye Research Institute speculates that although shooting and MOBA are the most popular game categories in Southeast Asia, there are many players on the market, and Tencent has lost in the competition with other players, so it chooses to "strategically give up".
In terms of revenue rankings, PUBG Mobile is inferior to Garena Free Fire, and Glory of Kings is inferior to Mobile Legends: Bang Bang.
From the perspective of market distribution, the first largest market for Supercell's three games is the United States, with a single market material accounting for more than 10%, and the United States is also the largest market for the above three games.
"Brawl" and "Clash of Clans" are mainly invested in the American market and the European market, and the TOP3 market is the United States, France and Germany. In addition to the European and American markets, Clash Royale's investment in the Asian market (Taiwan, Hong Kong, Malaysia, Singapore, etc.) is significantly greater than the first two products.
A word summary: traffic competition tends to be white-hot, even Tencent, which has always been a Buddhist system, has also begun to increase its purchase volume, since the second half of 21 years, Tencent has increased its investment in "Arena of Valor", can the purchase volume help "AOV" usher in the second spring?
04. Summary
Overall, tencent's leading edge in the game business is still obvious. In terms of total game revenue, Tencent has surpassed Sony and is the highest-revenue game company in the world.
From the perspective of revenue composition, Tencent's game products have a certain degree of "class solidification" phenomenon, and core games such as chicken eating and king continue to dominate the income list, and it is difficult for new games to stand out. But from another point of view, these long-term operation of the head products can contribute a lot of flowing water, become the company's performance ballast stone.
Tencent's domestic game business growth has slowed down, and overseas game business has grown rapidly, where will Tencent's game business go?
Under the strong domestic regulatory policy, Tencent's domestic game business may become more and more conservative, more and more pursuit of no mistakes, good stock may be Tencent's biggest goal in 2022 and even the future, and the rapid growth of overseas game business, urgently need to become the main pillar of Tencent's revenue growth.