Online gaming operators pitch toys of simplicity

07:58, July 14, 2010      

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Tencent Holdings Ltd and Shanda Games Ltd, China's two biggest online game operators, are pitching the joys of simplicity.

Sales of games that can be played with just a Web browser and do not require specialized software are growing three times faster than traditional multiplayer role-playing titles in China because they appeal to a broader audience, said Eric Wen, head of Internet research at Mirae Asset Securities Co in Hong Kong.

Tencent's "QQ Farm," in which players grow pumpkins and radishes that can be sold or stolen, attracts 10 million users a day in the world's largest Internet market, according to Wen. Tencent, Asia's largest Internet company by market value, needs to find new customers to help reverse an 18 percent drop in its shares so far this year.

"Chinese online game companies need to diversify into other genres so that they can reduce the impact from the slowing growth in the market this year," said Don See, who covers Chinese Internet companies as an analyst at Standard Chartered Plc in Singapore. "One of the key genres is social networking games."

Wang Lei, a 22-year-old logistics management student in Hebei province, is a fan of QQ Farm. He used to slay monsters and goblins across the mazes of Inc's "Westward Journey Online" for two hours a day. Under pressure from his studies, he now tends his virtual farm instead.

Time to play

"I don't have much time to play," said Wang.

Sales growth for Internet games in China will probably slow to 29 percent in 2010 to 32.9 billion yuan ($4.9 billion) in 2010, according to Roth Capital Partners LLC. Shenzhen-based Tencent, whose most popular title mimics Zynga Game Network Inc's "FarmVille" on Facebook Inc, can market games to about 570 million users of its QQ instant instant-messaging service.

"Tencent has a community platform, where they can add entertainment and content," says Sylvie Sejournet, a fund manager at Pictet Asset Management in Geneva, which manages about $120 billion in assets, including Tencent shares. "Tencent may become like the Facebook of Asia."

Tencent will seek to maintain a mix of games of a casual nature and more intense role-playing ones, it said in an e-mail. Shanda agreed to buy US-based Mochi Media Inc, a move that the Shanghai-based operator said would enable it to offer a wider range of titles. Beijing-based NetEase will remain focused on multiplayer role-playing titles because simpler games are more difficult to generate sales from, spokeswoman Li Jia said.

'Farm' spinoffs

Shares of Tencent, Shanda and NetEase have fallen this year amid concern over slowing growth. Tencent's stock has dropped 18 percent in Hong Kong and Shanda's ADRs have plunged 41 percent on the Nasdaq. NetEase's ADR's have fallen 11 percent.

Tightening government regulations, shorter lifecycles for games and higher wages may continue to weigh on growth, Adam Krejcik, a Newport Beach, California-based analyst at Roth Capital, wrote in a May 25 report.

The popularity of games such as "QQ Farm" and spinoffs may not suffice to keep China's online games industry from slowing because they usually generate lower average customer spending than role-playing titles, said Zhao Xufeng, an analyst at research firm iResearch.

Source: China Daily/Bloomberg News


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