TikTok’s parent company ByteDance stepped up its game with a big move into gaming this week -- spending a reported $4 billion to buy Moonton, a Shanghai-based game developer founded by a former Tencent employee.
The deal gives ByteDance a stake in the franchise Mobile Legends.
Relying on advertising to monetize platforms could become passé within the coming year as governments worldwide put laws in place that restrict the ways brands and companies target ads to users across the internet.
ByteDance began buying up small gaming companies in 2017, and “trying to poach developers from rivals,” raising their salary between 30% and 50% if they come on board.
The Financial Times cites three game developers at Tencent and NetEase who said many of their colleagues had been approached by headhunters for ByteDance during the past two years.
Similar to Yahoo’s announcement on Tuesday, ByteDance’s push into gaming will diversify its business model away from advertising and toward ecommerce and other forms of monetization.
Through Douyin -- the Chinese version of TikTok -- and its other apps, ByteDance has already won 27% of China’s advertising market, according to the Financial Times, citing Founder Securities, which estimates earnings of $17.7 billion in ad revenue in 2019, second only to Alibaba.
The trend of moving companies away from a sole reliance on advertising continues to pick up momentum. Yahoo announced on Tuesday that the company is taking a major step to reimagine its web and mobile experiences.
The redesign ranges from ecommerce and email to search, purchases and news, in an effort to become a major platform by personalizing and monetizing its properties at a time when Google, Facebook and others are pulling back.
Yahoo will facilitate ecommerce transactions for major brands like Rebecca Minkoff and retailers such as Walmart.
While tests are being conducted to serve premium display ads, the strategy shifts to integrating ways to monetize Yahoo’s platforms through other means such as content and services rather than relying on native and display advertising, as well search content and ads through its partnership with Microsoft Advertising.
The world of online gaming, however, is filled with highly sophisticated competitors, from Amazon’s Twitch to Microsoft’s Xbox Game Pass, as well as the Facebook Gaming app and Google’s Stadia.
Another challenge in the U.S. is that consumer spending on video games slowed last week as government stimulus checks began arriving in bank accounts.
Colin Sebastian, senior research analyst at R.W. Baird, wrote in a research note published Wednesday that video-game spending fell 10% last year, year-over-year, pulling back from an 18% jump in the prior year. Last year, spending rose 82% compared with 2019 totals.