China has always been a challenging market for businesses. Many large companies, including Apple, Facebook and Twitter have been witnesses to this. Apple had problems with sales of its iconic iPhones, which had local competition from “copycats”, amid reports of mistreatment of employees at Foxconn, Apple’s assembler in China. Facebook and Twitter have their own Chinese versions and have minimal, if at all, presence there. Google also withdrew from the country in 2010 after failing to make headway into the market dominated by local player Baidu.
The more recent phenomenon, however, is that Chinese firms are luring Western talent to bring in their expertise to customise content for the Chinese market. Tencent, one of China’s internet behemoths, has been trying to bring more online and mobile games into China, despite the high rankings it enjoys in the app stores.
The rapid growth of mobile devices and proliferation of smartphones in China have resulted in a surge in mobile and online games. However, as the size of the pie increases, more players are vying for a larger share of the pie. Tencent faces stiff competition from internet giant Alibaba, which has its own local and global expansion plans. Its impending IPO in the US and its series of US start-up acquisitions lend credence to its strategy.
As more Western content flows in, however, localisation problems arise in China. Tencent faces its own battle with respect to the country’s localisation challenges.
1. Absence of gaming consoles: China had banned the use of gaming consoles in the country for 13 years, starting in 2000. It feared that the presence of gaming consoles would usher in an era of violent games which would cause mental harm to young kids who would be highly influenced by the games. When the ban was finally lifted in 2013, manufacturers of gaming consoles such as Microsoft and PlayStation heaved a sigh of relief.
The ban, however, has bred an entire generation of youngsters for whom the gaming consoles remain a novelty and the exposure to online games has been solely through the medium of PCs and/or mobile phones. This generation of youngsters has come to expect free-to-play games, which are typically not offered on the consoles. Tencent’s challenge lies in bringing Western games to China such that they are widely adopted by the Chinese consumers who are loath to pay for the games they play on their mobile phones.
2. Infrastructure: Infrastructure has several dimensions to it – wireless connectivity, network bandwidth, cheap internet access, etc. Bo Wang, Vice President of Business at Tencent, admitted that though the wireless connectivity in China has been rapidly growing, it still lags that in the US and Korea.
Unfortunately, getting the right infrastructure in place is not something Tencent or any private company can venture into. In a country with most of the resources under the purview of the State, establishing top-notch infrastructure would require assistance from state-owned enterprises. It will take time. Till then, game developers would have to consider factors such as data availability, bandwidth and other such limitations before plunging into developing a data-intensive game that might put users off because of factors not in the hands of the developer.
3. Distribution: The absence of Google Play in China makes distribution of online and mobile games a hindrance. Game developers such as Tencent have to work with numerous distributors to get the game to the masses. The problem gets magnified as the magnitude increases and the complexity just grows when there are several such games launched every month.
4. Payment: Even after all these issues are sorted out, there remains the main problem plaguing the country – online payments. The Chinese market has not yet moved largely to online payments, with low levels of internet banking in the country and less trust on the system. Android users have complained of bugs in the online payment platform, reducing the trust people place on mobile payments, ultimately affecting in-game purchases.
Hacking has also been prevalent in China, making consumers feel vulnerable to sharing their financial details online.
All these factors are making people wary of online payments and creating bottlenecks for Tencent to bring in more customised content to the world’s largest smartphone-using nation.