Date
17 August 2017

Alibaba’s Jack Ma eats his words on mobile gaming

“Before, the first thing you touch after waking up is your wife, but now, it’s your mobile phone.”

The statement, attributed to Alibaba founder Jack Ma {馬雲}, best describes the extensive influence of technology in our lives in the internet era.

Alibaba and Tencent (00700.HK), the two biggest internet firms in China, are locked in fierce rivalry in almost every aspect of the business, including e-commerce, instant messaging and even mobile taxi-hiring services. The latest arena is mobile gaming.

Alibaba has shown its formidable strength in e-commerce, but is a latecomer in the other internet businesses.

In fact, its entry into mobile gaming has caught many by surprise. This is so because Ma himself once said that his company would never set foot in the business. He even asserted, after observing his son spend what looked like an inordinate amount of time on mobile games, that it served nothing good for country’s youth.

“It would be better to starve and die than to do mobile gaming business,” Ma sneered. That was back in 2008.

But it’s not beyond Ma to eat his words. At the annual gaming industry summit in Beijing on Wednesday, he dropped the bombshell that Alibaba would launch a mobile gaming platform, and, characteristically enough, accused Tencent of monopolizing the business.

The industry was abuzz with Alibaba’s surprise announcement. Has Ma finally come to his senses and realized the enormous profit that can be derived from mobile gaming? Was he under intense peer pressure to venture into the business? Or did he detest the fact that Alibaba’s chief rival, Tencent, could control 90 percent of the market without facing any challenge?

It is not an easy war to fight. In the first place, Alibaba’s user base is basically different from that of Tencent. Most of Alibaba’s clients have something to do with its e-commerce platforms such as Taobao.com and Tmall.com, while Tencent derives much of its business from the mass consumers.

In internet gaming, the most important factor is the number of players. China’s mobile game developers make money from value-added services like selling additional tools, rather than selling advertisement.

“If Alibaba can’t gather enough players on their platforms, it is hard for them to succeed,” Yicai.com quoted an industry analyst as saying.

In order to attract developers to launch games on its platform, Alibaba rolled out a generous revenue sharing scheme: 70 percent will go to the game developer, 20 percent to Alibaba, and the remaining 10 percent will be donated to a rural education fund.

By comparison, rival Tencent keeps 90 percent of the revenue and the rest goes to the developers.

It’s an attractive proposition, given the current gaming ecosystem. However, with lots of details in Alibaba’s gameplan still undefined, it’s still a big question mark if Alibaba is ready to challenge Tencent’s dominant position in the business at this time.

– Contact the writer at [email protected]

CG

 

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