China is one of the most populous countries in the world, with the number of people within the country surpassing one billion. With such a large volume of users, it is expected that China will become the world’s largest cloud gaming market. The rollout of 5G across the country helps to facilitate this task, allowing all users to access high-speed connections for their mobiles. The fallout of this increased access to mobile users is the competition between two of China’s major cloud gaming companies, Alibaba and Tencent.
Mobile Gaming the Way of the Future
Both Alibaba and Tencent have invested significant amounts of money into the development of mobile games for the consumer market. Their example has led to several western companies exploring the option of creating and marketing mobile-first games. While the majority of gamers in the US and Japan prefer PCs or consoles for their gaming, the vast majority of Chinese users utilize a smartphone for their day-to-day tasks, including playing games. 5G connections offer options to users for getting into cloud gaming and rewards companies that decide to follow this path.
Monetizing Games a Challenge
Even though the userbase for these mobile games is vast, the ability of companies to monetize this content is limited. Connecting a user to a cloud game costs a company less than the average user spends on those games, so businesses will need to be more creative in making money from their applications. Companies such as Tencent have found a workaround to the problem of monetization. By offering ad space within their games as well as data sales to game developers, the company has leveraged its userbase to deliver secondary income when in-app purchases aren’t sufficient to cover operating costs.
Subscription Method May Not Work in China
Google’s methodology for rolling out its cloud gaming service, Stadia, relies on subscriptions, but Chinese users aren’t used to a subscription-based model. Since these users tend to download their games for free, Google and other Western companies may need to look at other options for monetizing their cloud gaming services within China.