Online games, one of the most profitable Internet businesses in China, will continue to roar in the year of Tiger. Games will be great, but many older, popular games and reached a peak more new hits are rare, said experts in the industry.
The only new game is expected to hit this year is “Green ZT” Shanghai-based Giant Interactive, which launched this month. “Green ZT good. Reached a peak concurrent users was already 400 000, “said the private equity firm based in Shanghai.
But observers are cautious. “Many of the games that people had high hopes, proved a disappointment,” said an analyst based in Beijing. For example, when the success of Fantasy Westward Journey and Westward Journey II, Netease, a leading online company based in Guangzhou, developed by Datang and Tian Xia. But both were flops.
While advertising and e-commerce are the key drivers for the Internet in the US, in China, online games, such as World of Warcraft, are the major wealth generators. JP Morgan estimated that online games revenues will reach $4.69 billion in 2010, up from about $3.55 billion last year. Revenue from online advertising, despite its high growth, will be only about $2.81 billion this year, up from about $2.08 billion last year.
But social games have become a gold mine for some Chinese Internet companies. After the success of Kaixin001, Hong Kong listed Tencent, the largest Internet company in China (by revenue, profit and market value) introduced many games to Qzone, its social network service. This led to a rise in the number of Qzone users from 183 million in the fourth quarter of 2008 to 305 million yuan in third quarter of 2009. Qzone revenues increased to 429 million yuan ($62, 840, 00) in the third quarter of 2009, up 56.2 percent from just three months ago.
Recently, mirroring overseas development, social games, such as Happy Farm are gaining popularity fast. In fact, Kaixin001, one of the most popular social network sites in China, has built its popularity on social games since it began in March 2008. The site currently is the 11th most popular site, according to Alexa, a web traffic monitor service provided by Amazon. Other players, such as Renren and Tencent, also caught up with the trend quickly and launched their own social games.
“We estimate daily active users on Chinese social network sites playing social games to be comparable to the number of active users on Facebook, i.e., about 60 million daily active users,” said Dick Wei, China Internet analyst at JP Morgan. Most of the popular Chinese social games such as farm and aquarium games have been adapted from Facebook and other English-based social networking websites. However, Chinese social games are supposed to be more competitive and have some added features like stealing, said Wei.
“We believe the social gaming trend will continue to pick up in China because community features add traction to the social games,” said Wei. “People can play with their friends and they can track the progress of their friends through the social networking platforms. This gives them a sense of competitiveness and therefore keeps them playing.” Also, the games attract new types of users who were traditionally non-gamers or did not have time for more sophisticated games, such as housewives, said Wei.
However, China’s most profitable online games are still Massive Multiplayer Online Role Playing Games or MMORPG. Last year, 84 percent of online game revenue came from MMORPG. The most popular game in China, Fantasy Westward Journey from Netease, attracted 2.5 million users playing together during peak hours in the third quarter of 2009. Global blockbuster, World of Warcraft, had about 1.06 million peak concurrent users in China, according to figures released in the second quarter of 2009.
But, many of the most popular games are peaking and some are beginning a slow decline. World of Warcraft has maintained the same level of peak concurrent users, i.e. about 1 million, since the fourth quarter of 2007. After reaching 2.3 million in the third quarter of 2008, peak concurrent users of Fantasy Westward Journey, first introduced in January 2004, dropped as low as 1.7 million until it rebounded to 2.5 million in the third quarter of 2009.
Westward Journey II, another hit from Netease, saw its peak concurrent users decrease to about 547,000 in the third quarter of 2009 since reaching a climax of 897,000 in the fourth quarter of 2008. Even recent hits, such as Dungeon and Fighter and Cross Fire from Tencent, are experiencing slowing growth. “Dungeon and Fighter and Cross Fire have been introduced to the market for a year and a half. They have reached the mature stage – that means their users growth will be gradual from now on. No more rapid growth in average concurrent users, peak concurrent, etc,” said an executive from Tencent under anonymity.
Dungeon Fighter and recorded 2.2 million peak concurrent users in November 2009, an increase of 1.9 million in May, according to Tencent. Crossfire had 1.6 million users playing simultaneously at peak hours in November 2009. “But income (both games) may still grow 40-50 percent this year that users are increasingly paying for weapons or weapons more expensive. This can be achieved through the promotion and design game, in other words, no more cheap and simple weapons, but better and more expensive,” said Tencent executive.
MMOPRG popular games tend to peak about three years, said Wei, JP Morgan. Prolong the life of their games, game developers and operators create new weapons and to carry out specific, virtual events. In general, operators have a new release every month and a major update once a year.
Ultimately, the development of new hits, the only way a game company can increase its revenues. Apart from internal development, game companies now invest in many of the studios of others. Shanghai-based Shanda created “18 Fund” in July 2007, investing in the third game studios. In January 2009, it invested $ 40 million in 30 games online.
