Tik Tok Onslaught Game

The author of this article talks about the prospects and retention rate of mini-games. Interested readers can take a look.

Mini games, which emerged in 2017, entered a stage of fierce competition in 2024. On April 1, Douyin fully upgraded its mini game incentive policy and launched an unprecedented "90% to 100%" profit sharing ratio, directly targeting WeChat's "40% to 60%" profit sharing ratio, and its "ambition" for mini games was obvious.

For WeChat, which has a first-mover advantage, mini games are "new sprouts brewing on WeChat." Since 2017, mini-program games have gradually become part of WeChat's atomized ecosystem and are becoming increasingly difficult to ignore. In 2023, the mini-game business will explode, and the popularity of the mini-game "King of Salted Fish" has brought more commercial monetization possibilities to the mini-game market.

According to incomplete statistics from DataEye Research Institute, more than 10 gaming stocks mentioned "mini games" in their earnings reports or post-earnings conference calls. China Merchants Securities estimates that mini games will grow at an average annual rate of 30%, and the market size will exceed 50 billion yuan in 2025...

By 2024, the mini-game business has grown to a point that TikTok cannot ignore.

1. 9:1 profit sharing, Douyin shows its cards

To understand Douyin’s incentive policy in depth, we need to first understand the main monetization methods of current mini-games. It is reported that there are three main modes of mini-games: IAA (In App Advertisement/advertising monetization), IAP (In App Purchase/in-app purchase) and IAP+IAA (mixed monetization).

In the early days, since mini games were mainly light products, represented by "Jump Jump", users were less willing to pay, and commercialization was mainly based on advertising monetization. As mini games continue to develop, more and more game manufacturers and users are beginning to join the game market. Tencent Advertising shows that in 2022, the revenue of mini games through in-app purchases and advertising monetization increased by more than 100% and 40% respectively. The mixed monetization model has also been widely adopted, and the mini game business model has gradually become diversified.

The Douyin revenue policy this time focuses on the settlement of in-app purchase revenue. The announcement shows that starting from April 1, the in-app purchase revenue of Douyin mini-games will be divided into two types: "general in-app purchase revenue policy" and "reduced in-app purchase revenue policy". Specifically, "90% share" is the content of the "reduced in-app purchase revenue policy". When developers meet the conditions, they can get 90% of the total Android consumption and advertising incentives equivalent to 5% of the total Android consumption.

Image source: TikTok Open Platform

These requirements are essentially aimed at increasing the number of scenarios where mini-games can reach users. Douyin aims to create a platform environment for users to play mini-games frequently, thereby cultivating users' habit of playing mini-games more frequently, thereby improving the user stickiness of the entire Douyin mini-game platform, and screening high-stickiness mini-games through this data.

Compared with WeChat, Douyin’s revenue policy can be said to be very radical. In March, in order to encourage small game manufacturers to place advertisements, WeChat allocated advertising funds to a portion of the Android in-app purchase revenue in proportion, aiming to encourage manufacturers to increase their advertising and keep the advertising budget mainly within the Tencent system, which accounts for only 40%.

2. Small games, big market

Small games are not a small business.

Tencent launched "Jump Jump" in 2017, which became an instant hit. Fragmented time and integrated gameplay led to the rapid development of the mini-game market in a few years. With the opening of external traffic entrances by WeChat, "Sheep and Sheep" became popular in 2022, and "King of Salted Fish" became popular in 2023.

Catch the Goose game (Photo source: WeChat)

Today, the number of mini-game users has increased significantly, with the penetration rate even exceeding that of mobile game app users. The "2024 Mobile Game Industry and Key Population Insight Report" released by QuestMobile shows that in February 2024, the penetration rate of WeChat mini-games in the mobile game industry's panoramic traffic reached 80.3%, higher than the proportion of mobile game apps.

In February 2024, the user scales of Sanqi Interactive Entertainment's "Xundao Daqian" and Haoteng Chuangxiang's "King of Salted Fish" reached 160 million and 117 million respectively, becoming representatives of works with over 100 million users.

At the same time, as the mini-game market is still in a rapid development stage, the gross profit level at this time is very reasonable. Tencent President Martin Lau once revealed that the marginal gross profit margin of mini-game related revenue is as high as about 95%, which is much higher than the company's overall gross profit level of 60%.

More importantly, the rapid growth of mini games has not squeezed the user usage time and spending of other Tencent games. Liu Chih-ping once said in a financial report conference call that the user overlap between WeChat mini games and Tencent App games is less than 50%.

Image source network

This means that when App games are booming, a group of manufacturers are targeting the incremental users of the game industry. These users are often not the target users of traditional games, and they lack experience with more complex App games. However, the "open and play" format of Mini Programs just meets the "light demand" of these users for games.

It is understood that since the user group of mini-games is different from traditional game players, and the purchase price of mini-games in the early days was low, the ROI of mini-game launches was very high in the early stages.

After several years of development, small games have now formed a considerable market.

3. Retention is key

Not everyone can have a piece of the mini-program game pie.

In fact, the mini-program game model was not proposed today. Overseas, platforms such as Facebook and Youtube have also tried mini-program games in the early days, but they did not make a big splash. WeChat mini-program games also received many doubts in the early days.

One of the reasons is that mini-program games are often lighter in weight, and after attracting users, it is often difficult to retain users. Mini-program games with low retention rates are difficult to attract users to pay like App games.

Image source network

Until now, IAA games that monetize through advertising are still the main contributors to the growth of the market's users. According to public information, in the WeChat Open Class IAA Mini Games Special Session on April 24, the WeChat Mini Games team stated that in the first quarter of 2024, the daily active users of mini games increased by 20% year-on-year, and the monthly active users of IAA mini games reached 500 million. With the continued growth of IAA mini games, the total commercial volume of IAA mini games is expected to exceed 10 billion in 24 years.

Objectively speaking, the playability of current mini-program games still needs to be improved, and their appeal to core mobile game users is limited.

However, WeChat Mini Games is also working hard to improve the quality and playability of Mini Program games and attract core mobile game users. As developers’ technology matures, medium and heavy game categories such as RPG, MOBA, and FPS are also beginning to appear in Mini Program games.

In addition, WeChat has launched a hybrid monetization method of in-app purchases + advertising (IAA + IAP). Under the hybrid monetization model, fewer pop-up ads are pushed to users who purchase in-app purchases to improve the user's gaming experience. The popular "King of Salted Fish" in 2023 is a hybrid monetization model.

According to data disclosed by Tencent Advertising at the 2023 Game Advertising Ecosystem Conference, since Q1 2022, as of June 2023, the revenue of related hybrid mini-game products has increased by as much as 200%.

4. Being a platform is the future that Douyin wants

Douyin's revenue policy for mini-games is reminiscent of the massive contraction of Chaoxi Guangnian's business at the end of 2023. Compared with Chaoxi Guangnian's tens of billions of dollars of investment, mini-game platforms seem to be Douyin's favorite business. Douyin sets the stage, rather than playing the game itself.

For Tencent, which has been laying out mini-games for a long time, this also seems very restrained. In terms of advertising traffic, WeChat Mini Games allows and encourages developers to buy traffic on external platforms. In June 2022, WeChat Mini Games and Douyin were connected - Douyin ads can jump to WeChat Mini Games with one click, thereby further broadening the traffic source of WeChat Mini Games.

According to WeChat, Video Account has now become an important traffic entrance for WeChat mini-games.

With the opening of buying traffic, the current competition in WeChat mini games is becoming increasingly fierce. It is understood that the top 100 best-selling WeChat mini games in 2024 has changed frequently, and the top 30 has been reshuffled frequently and quickly replaced.

The competition among game manufacturers is becoming increasingly fierce. Users can get a better gaming experience to a certain extent, and the platform can better maintain its position.

Top 100 best-selling mini games in April (Source: GameLook)

Although WeChat has the first-mover advantage, the explosion of mini-games in the past two years is also inseparable from Douyin, which has a huge number of users. During the promotion of the APP games "Egg Party" and "Dream Star", Douyin also demonstrated its amazing game promotion capabilities.

At present, WeChat mini games show a thirst for traffic, while Douyin is focusing on creating an in-site game scene, aiming to let users play mini games on Douyin instead of diverting traffic to others. WeChat, which has a first-mover advantage, and Douyin, which has a huge amount of traffic, are fighting in the mini game battlefield. No matter what the outcome is, at least the players of the mini games can get some better gaming experience.

Author: Guangye; Source public account: Clour (ID: 1093227)