Research Summary
ByteDance, the parent company of TikTok, is reportedly planning to close its gaming division, Nuverse, impacting hundreds of employees. This comes after several years of aggressive investment in Nuverse and its subsidiaries, including the acquisition of game developers Moonton Technologies and C4 Games. Despite these efforts, Nuverse’s games have not generated the expected revenue, leading ByteDance to reconsider its gaming ambitions.
Key Takeaways
ByteDance’s Sudden Retreat from Gaming
- Unexpected Closure: ByteDance is reportedly planning to close its gaming division, Nuverse, impacting hundreds of employees. This comes as a surprise given the company’s aggressive investment in the gaming sector over the past few years.
- Previous Investments: ByteDance had acquired game developers Moonton Technologies and C4 Games as part of its strategy to compete with rivals Tencent and NetEase in the gaming market. The company had also restructured in 2021, naming Nuverse as one of its core business units.
Underperformance of Nuverse’s Games
- Revenue Shortfall: Despite ByteDance’s investments, Nuverse’s games have not generated the expected revenue. Over the last three years, Nuverse’s mobile games have aggregated just over $1B in total revenue, with nearly half of that coming from Moonton’s Mobile Legends: Bang Bang. This is a small fraction of ByteDance’s reported $29B revenue in Q2 of 2023 alone.
- Future of Nuverse’s Assets: With the closure of Nuverse, ByteDance is reportedly seeking ways to divest from titles already launched. This could potentially include Marvel Snap, a game published by Nuverse and developed by US-based Second Dinner.
ByteDance’s Future in the Gaming Industry
- Continued Presence in Gaming: Despite the closure of Nuverse, gaming is expected to continue having a major presence on TikTok due to its popularity among Gen Z and Gen Alpha demographics. TikTok and Douyin, TikTok’s Chinese sister-app, are valuable marketing and user acquisition channels for game publishers.
- ByteDance’s Other Gaming Ventures: ByteDance also owns Ohayoo, a casual gaming brand that operates games on Douyin, Danjuan Games, a mobile-only game store, and Pixmain, an indie game publisher. These ventures are not expected to be impacted by the closure of Nuverse.
Actionable Insights
- Understanding the Gaming Market: ByteDance’s retreat from gaming underscores the importance of understanding the market dynamics before making significant investments. Companies should conduct thorough market research and feasibility studies before venturing into new sectors.
- Revenue Generation in Gaming: The underperformance of Nuverse’s games highlights the challenges of generating substantial revenue in the gaming industry. Companies should focus on creating engaging and innovative games that can attract and retain a large user base.
- Utilizing Social Media for User Acquisition: The popularity of TikTok among younger demographics presents opportunities for game publishers to leverage the platform for marketing and user acquisition. Companies should explore innovative ways to engage with users on social media platforms to promote their games.
