Alibaba Group Enters The Realm Of Mobile Games

Alibaba Group said on Wednesday it will launch a mobile gaming platform in a bid to grow the attractiveness of its mobile ecosystem that already includes mobile messaging and mobile shopping apps.

China’s mobile games market is booming, worth a cool RMB 11.2 billion in 2013, up almost 247 percent from a year ago, according to official statistics. The number of mobile gamers in China has also soared, up 248 percent to 310 million, representing 63 percent of the total online gamer base.

Alibaba’s foray into mobile games is part of a broader strategy to push into the mobile sector. In September, the company rolled out a mobile-messaging app called Laiwang to compete against Tencent Holding’s popular WeChat product. By November, Laiwang, which has features to enable greater social discovery, had over 10 million registered users. Laiwang, together with Mobile Taobao, Alibaba Group’s Taobao shopping mobile app and Alipay Wallet, a mobile e-payment app, form the core of Alibaba’s consumer facing mobile strategy.

 Alibaba said the mobile games platform will adopt a 7:2:1 revenue sharing model, with game developers pocketing 70 percent of sales, Alibaba taking 20 percent to cover costs of game distribution and marketing and the remaining 10 percent to be donated to charity. Alibaba’s Taobao Marketplace platform, China’s largest consumer-to-consumer e-commerce site, already has two gaming-related verticals that allow users to download games and buy virtual currency.

Tencent is the market leader in China’s online games industry.

In 2013, in order to strengthen its mobile lifestyle offerings, Alibaba took stakes in Sina Corp’s popular microblogging platform Weibo, music streaming site Xiami and top mobile browser UCWeb. The launch of a mobile games platform represents a fresh revenue stream for Alibaba in a highly competitive sector where its rivals are equally intent on gaining ground. Baidu, China’s top search engine, made the largest acquisition in Chinese Internet history last year by buying mobile apps distributer 91 Wireless for $1.9 billion.

Alibaba Digital Entertainment Group President Liu Chunning said the mobile gaming platform will provide of users and developers a unified platform where payment options, virtual currencies and game data can be secured stored. The mobile games platform will be linked to AliCloud, Alibaba’s cloud computing arm and Alipay, Alibaba Group’s e-payment affiliate.

Mobile games have soared in popularity in China because the business model is familiar to most Chinese gamers. Unlike the West, whose gamers are more used to a subscription-based model, Chinese gamers are used to games that are free-to-play but charge for in-game purchases. Many mobile games developers have since adopted this free-to-play model, opting instead to make money from in-game upgrades.

China is one of the world’s largest online gaming markets with over 490 million users and a market size of RMB 83 billion ($13.7 billion), according to official figures.