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Picture: ALY SONG/REUTERS
Picture: ALY SONG/REUTERS

Hong Kong — Tencent Holdings is relying on one-time bitter rival ByteDance to promote its most important video game release in years, in a sign of warming relations as well as intensifying competition as China’s gaming industry returns to growth.

Tencent on Friday released mobile party game DreamStar, which it hopes will challenge Eggy Party — a similar offering from NetEase which has become a surprise hit in 2023 with 100-million monthly active users.

Analysts expect DreamStar to earn up to 6-billion yuan ($842m) in its first year, while they forecast Eggy Party, which owes much of its success to advertising on ByteDance platforms, to earn 8-billion yuan for NetEase in 2023.

In a battle to defend its status as China’s biggest gaming firm, Tencent has chosen to promote DreamStar on ByteDance’s popular advertising platforms despite a rancorous history in barring one another from their platforms.

About 38% of Tencent ads for DreamStar were put on ByteDance’s online ad service, Pangolin, in the past 30 days, making it the top ad service Tencent has spent on for the game, according to data tracking firm DataEye.

Its decision to rely heavily on Pangolin is remarkable considering that Tencent has its own ad network and various promotion channels within its product ecosystem. Tencent has put only 12% of DreamStar ads on its own ad network, Youlianghui, according to DataEye.

The advertising layout is part of Tencent’s plans for a 1.4-billion yuan investment to build out the ecosystem of DreamStar to ensure its success. That strategy has also seen Tencent begin to let video gamers live-stream on ByteDance platforms.

Zhang Daxian, China’s top live-streamer — who became famous playing Tencent’s Honor of Kings game — started his channel on a ByteDance platform earlier in December and previewed DreamStar — a scenario unthinkable to many fans just a year ago.

For years, Tencent and ByteDance were locked in a series of lawsuits against each other. In 2021, ByteDance sued Tencent for restricting users from sharing content from Douyin — TikTok’s sister app in China — on Tencent’s apps, citing an anti-monopoly law. In the same year, Tencent sued ByteDance for featuring footage of Honor of Kings on a ByteDance platform, citing copyright infringement.

The apparent thaw in their relationship comes as ByteDance recently decided to wind down its gaming business to focus on its core platform operations, marking a retreat from its competition with Tencent and NetEase in gaming.

China’s video game market returned to growth in 2023 as domestic revenue rose 13% to 303-billion yuan, putting Beijing’s eight-month industry crackdown two years ago in the rear-view mirror.

Reuters

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