Why do mobile game companies spend so much money at ChinaJoy?

On the road from Hongqiao Airport to Pudong International Convention and Exhibition Center, a large number of high-rise apartments are dotted on both sides of the road. On the road in the same direction, you can see Lamborghinis with game promotional posters whizzing by, and you can also see cheap trucks loaded with agricultural and sideline products moving slowly forward.

A few days ago, Chinajoy, China's largest game exhibition, was being held here. The popularity of smart terminals such as mobile phones and tablets, the large number of showgrils, players queuing for hours to enter, and the huge demographic dividend all show that mobile games have become a rising force in China.

So, is the truth as thriving as what was shown at the exhibition? We try to restore the real status of the mobile game industry for you from both internal and external perspectives.

Appearance: Mobile games are booming, while PC game companies are relegated to the back burner

The report from the research organization makes people more convinced that mobile games are the future.

The latest "China Game Industry Report" revealed that the revenue of mobile games in China has exceeded that of web games from January to June 2014. Mobile games contributed 12.52 billion yuan in revenue, a year-on-year increase of 394.9%, while web games only contributed 9.18 billion yuan. This is the first time in history that mobile games have surpassed web games in terms of revenue.

Chen Yang, CEO of Zhumi, predicts that the market size of mobile games will exceed 25 billion yuan by the end of this year, and this is a relatively conservative figure.

At Chinajoy, the largest game expo in China, companies that were once powerful in the PC game era, such as Shanda, NetEase, and 9you, have withdrawn from the core exhibition area, and have been replaced by emerging mobile game companies such as Tencent, Baidu 91, Chukong, Ledo, Wandoujia, and Muhe.

"PC games are in decline, mobile games are the future" has become the industry consensus at this conference, but what people overlook is that this consensus is only one side of the coin.

The truth behind the prosperity

“I bet that 80% of the companies that spent huge amounts of money at this exhibition will disappear by the end of this year or early next year,” said a head of a mobile game company.

"You should have noticed that many mobile game companies now announce their monthly revenue rather than their profitability. What does this indicate? As far as we know, the financial situation of many mobile game companies has deteriorated very seriously." According to the person in charge who wished to remain anonymous, the popularity of mobile games at this year's CJ is more of a flash in the pan.

The above person in charge told us that most mobile game companies spend a lot of money at the CJ exhibition mainly for two reasons: one is to increase exposure and create opportunities for acquisition, and the other is to attract the attention of the capital market. In addition, it has become a well-known secret in the industry that a mobile game company operates through the AB company model.

The so-called AB company refers to the same mobile game company with two registered entities, in which Company A is in the foreground, participating in various exhibitions, promoting various products, and announcing monthly turnover; while Company B is equivalent to a shadow company, and all operating costs of Company A are borne by the shadow company behind it.

"Why do we need shadow companies to cover these costs?" In response to our question, the person revealed that the fundamental reason for the prevalence of the AB company model is that there are too many CPs in this industry and the profits are mainly taken away by the channels.

Compared with traditional PC game companies, when developing mobile game business, even if 2 or 3 products fail, the business development will basically not be affected by the transfusion of PC game products. But in the mobile game industry, if 1-2 products fail, the company will basically face bankruptcy.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.