Can Alibaba compete with Tencent when it comes to games?

Yesterday, Alibaba revealed its latest move towards the gaming space: a new social mobile gaming platform called KTplay. Created together with Beijing-based mobile game startup Yodo1, KTplay is a bit like a more robust version of Apple’s Game Center. But that’s not the only move Alibaba has made recently in the gaming space. In August, the company poured $120 million into American game developer Kabam, and it has also experimented with using its ecommerce sites as a platform for game distribution.

All of this begs the question: how far can Alibaba go with games? It’s an entirely different market, after all, but Alibaba does have extremely deep pockets and a history of success. Could Alibaba, some have asked, even be the company that can finally challenge Tencent‘s gaming dominance in the Middle Kingdom?

The first time someone asked me that question, I laughed because I genuinely thought they were joking. Alibaba is a force to be reckoned with when it comes to ecommerce, but Alibaba overtake Tencent in games? That’s virtually impossible.

Total domination

To understand why Alibaba’s not overtaking Tencent, you need to understand the kind of stranglehold Tencent has on China’s games market. In PC games, Tencent publishes China’s three most popular PC games: League of Legends, Crossfire, and Dungeon & Fighter. It has plenty of other hit games, too, but Tencent has held those top three spots for years now. That’s a huge deal in a country where revenues from PC gaming are far and away the biggest piece of the overall gaming pie.

But even if we give Alibaba a free pass on PC games and assume the company is only interested in the much smaller Chinese mobile games market, it would still have a mountain to climb to beat Tencent. Android gaming data is hard to track because of the many different third-party app stores, but just yesterday Apple released its list of the top-grossing iOS apps in China in 2014, and guess what: 13 of the top 20 were Tencent games. Yes, nearly 75% of China’s top 20 top-grossing iOS apps were Tencent games. That’s crazy.

And even if Tencent didn’t have a massive lead in gaming, it has a massive lead in social, which makes promoting games far easier. When pushing a new game, it can easily turn to (for example) its hundreds of millions of WeChat users, who already expect access to games within the app. Alibaba has a large userbase through ecommerce markets Taobao and Tmall, but users don’t play games on any of those platforms, and Alibaba’s previous social efforts haven’t been particularly successful.

Plus, Alibaba would have to compete with console games! LOL, just kidding, no one in China plays console games.

Luck is not a factor

Of course, there are those who would argue that Alibaba could still beat Tencent with the help of a little luck. Invest in the right game that happens to go big and you can go from a bit player to a big shot virtually overnight, especially in mobile games. But as Tencent’s results indicate, the company has essentially figured out a way to account for luck, by either buying or copying success.

The company’s typical pattern is to identify an already-successful or highly promising game and acquire it, either by becoming its China publisher or by straight-up buying the development studio. If that doesn’t work, the company will just clone the game itself. It has the development talent to replicate almost anything, and the massive social platforms (WeChat, Tencent Weibo, QQ) to ensure that any game it wants to promote can be blasted out to hundreds of millions of gamers at the drop of a hat. In fact, even when it has acquired a game, Tencent will often also develop its own copycat version of the game – often adding some local Chinese flavor to it in the process – just to make sure that all its bases are covered.

Striking gold with a game, especially a mobile game, might be somewhat a matter of luck, but Tencent’s dominance of iOS gaming in China this year (and PC gaming almost every year) suggests otherwise. That’s not luck, that’s a system. And Tencent’s results in gaming over the past decade show that whatever you think of it – many have criticized the company’s monetization methods and its copycat tendencies – there’s no doubt that the system works.