Video games are big business. For those who are curious, there was an estimate that video game revenue would reach $179.7 billion in 2020, which would be more than film and North American sports put together. Granted, video games received a huge boost from the COVID-19 crisis. However, it is important to note that this was an intensification of an existing trend rather than something 100 percent new, as shown by how it was seeing single-digit percentage growth even before the double-digit percentage growth of 2020. As such, it is no wonder that numerous companies are showing interest in the video game industry.
Why Is ByteDance Interested in Video Games?
One excellent example would be ByteDance, which tends to be best-known because of TikTok. Some people might be surprised by this because of how well said video app has been doing in recent times. However, diversification is something that a wide range of companies in a wide range of industries are interested in. After all, if they concentrate 100 percent of their resources in a single segment, they can expect to take serious losses if that single segment ever sees a downswing for whatever reason. By spreading out into multiple segments, companies can prevent themselves from being gutted by the failure of a single segment while also positioning themselves to capitalize upon the opportunities presented by multiple segments. Something that can make them much healthier in the long run.
There are some companies out there that have either no or next-to-no for diversification. For instance, there are companies that have high-value contracts with very well-established clients that extend decades and decades into the future. However, the tech industry can’t claim that kind of stability over that kind of time frame, particularly since a lot of its most notable segments haven’t even existed for decades and decades. Social media is no exception to the rule, as shown by how there are very few social media sites that have managed to reach a position of prominence before remaining there. Under those circumstances, it makes sense that ByteDance would seek to diversify itself, with video games being one of the paths to diversification that it is interested in.
How Does ByteDance Plan to Break Into Video Games?
Of course, there are a number of reasons why ByteDance has chosen video games rather than, say, something like bottled water as one of its paths to diversification. For starters, it is a tech company, so it is easier for it to jump into something else that happens to be tech-related. Yes, there are enormous differences between video games and either video apps or news aggregators. However, there are still competencies that can be used to make bridging the gap that much more manageable, particularly since ByteDance’s strategy is a bit more varied than just attempting to do everything on its own from the ground up.
Moving on, video games are also a good choice because of ByteDance’s position in the Chinese market. Simply put, Chinese consumers of video games are both numerous and wide-ranging in nature. Thanks to that, a tech company that can break into the Chinese market stand to reap a great deal of benefit in exchange for its investment. Simultaneously, there isn’t a single tech company that has been able to monopolize the Chinese market, meaning that there is room for new players to establish footholds from which to build up. This is particularly true because video games themselves are very difficult to monopolize in these times. After all, they are a kind of content, meaning that it is comparatively easy for a video game company to turn out a product that has no perfect substitutes. Something that provides a way for interested parties to enter whatever their better-established counterparts might think about it.
On top of this, it should be noted that video games are one of those products for which there are real advantages for both those who enter early and those who enter late. Interested individuals should remember that modern forms of video games are relatively new, meaning that those who entered early had to write a lot of rules on their own using their sometimes painful experiences. Latecomers have no such need. Instead, they see what has worked and what hasn’t worked for their predecessors, which should provide them with an easier time navigating the potential complications. In any case, interested individuals should know that ByteDance’s exact approach to diversifying by getting involved in video games is actually quite conventional in a lot of respects. For example, they have spent an enormous amount of money starting up their own segment, which has seen them hiring a lot of people with relevant expertise and experience. However, ByteDance is also just straight-up buying or investing in established video game companies, thus providing them with already functional segments. If this seems familiar, it should. After all, it is very common for the bigger video game companies to not just create their own content but also act as a publisher for other video game companies’ content.
Similarly, ByteDance is seeking to earn revenue through video games through well-established channels. The classic image of a video game company making money off of video games would be selling them to interested individuals. However, video game companies have long since adopted other business models. One excellent example would be the insertion of advertisements in relatively casual games, which are visible enough for advertisers to show interest but not so visible that it will actually drive away most players. Another excellent example would be the inclusion of in-game purchases, though those are reliant on a much greater degree of player investment. Something that requires much more sophisticated means of building player engagement as well as maintaining player engagement.
So far, ByteDance’s efforts have already paid off to some extent. This can be seen in how it has had some licensed titles hit the list of top 10 free games for the iOS in the Chinese market, which is no mean achievement. However, time will tell whether ByteDance will be capable of turning itself into a true titan of the video game industry. It has a huge war chest with which to fund its campaign, but it is worth mentioning that the same can be said about many of its rivals as well. Indeed, ByteDance is far from being the first tech company to become a major player in the Chinese market for video games, as shown by both Tencent and NetEase.