On August 14, Tencent announced its financial results for the second quarter of 2024. According to the financial report, Tencent's Q2 value-added service revenue was 78.8 billion yuan, a year-on-year increase of 6%. Among them, the game revenue in the international market was 13.9 billion yuan, a year-on-year increase of 9%; local game revenue was 34.6 billion yuan, a year-on-year increase of 9%; Social network revenue was 30.3 billion yuan, a year-on-year increase of 2%.

It can be seen from the financial report data that Tencent Games performed well in the first half of the year. This is due to the steady performance of evergreen games such as "Honor of Kings" and "Peace Elite", while the explosion of new games such as "Dungeons & Warriors: Origins" and "Squad Busters" has achieved dual-core growth in both domestic and overseas markets.

However, in recent years, there are far more games mentioned in Tencent's financial reports, and new first-line games such as "Valorant" and "Golden Shovel Battle" have become "regulars" in financial reports and have the strength to become the next batch of evergreen games.

The rise of the new first-line echelon has carried the banner of growth

The biggest highlight of this financial report is that a number of Tencent's emerging games have come to the forefront, especially the performance of new products this year, which can be described as amazing.

The best-performing new product is undoubtedly Dungeons & Warriors: Origins, which launched on May 21. The game topped the best-selling chart within six hours of its launch, and then dominated the chart for 29 consecutive days, resulting in a 12% increase in Tencent Games' mobile revenue in May (Sensor Tower data).

Niko Partners, an overseas institution, expects the first week revenue of the "DNF" mobile game to exceed US$140 million (about 1 billion yuan), and predicts that the game will bring Tencent a total revenue of more than US$1 billion this year. According to the Q2 financial report released by NEXON, the parent company of DNF developers, in August, DNF generated 2 billion yuan in revenue for its parent company, and if calculated according to the 30% commission ratio, the monthly turnover of the national service may be in the order of 60-8 billion.

Tencent's financial report disclosed that the game's monthly active users are in the order of "millions", which partially confirms the prediction of third-party data. Facts have proved that DNF, as a big IP in the era of terminal games, has its own commercial value that transcends time cycles. The outstanding performance of the "DNF" mobile game also verifies Tencent's value judgment of evergreen games: since the once well-known IP can still achieve great commercial success after more than ten years, it is best to use this as the standard for the current flagship project.

In the new products launched by Tencent Games in the past two years, we can observe that more and more projects have begun to turn around and re-explore their self-worth. A number of new games such as "Battle of the Golden Shovel", "League of Legends Mobile Game" and "Dark Zone Breakout" have gradually found their positioning and are moving towards becoming evergreen games.

The performance of "The Battle of the Golden Shovel" in the past two years has been very impressive. As early as 2023, Tencent's financial report announced that the average number of daily active accounts of "The Battle of the Golden Shovel" has exceeded 10 million. Sensor Tower data also shows that the game's revenue in the first quarter of 2024 increased by 96% year-on-year, maintaining double-digit growth for four consecutive quarters. According to Quest Mobile data, the daily active users of "Golden Shovel Battle" in the first quarter of this year have approached 20 million, ranking among the top three in China.

In the context of the popularity of auto-chess has long receded and a large number of auto-chess products have been shut down, "The Battle of the Golden Shovel" can run such a performance, obviously because it has gotten rid of the shackles of category trends, independently created its own player ecology, and then achieved self-hematopoiesis.

Dark Zone Breakout has also succeeded with the same logic. After the success of "Chicken", tactical gambling (gold withdrawal) was seen as an opportunity for innovation in the FPS category, but there has been no product with sufficient market dominance for several years. "Dark Zone Breakout" seized this blank period in the market, spent a year polishing its products, and gradually made itself a representative of the category.

This year, the game announced that the number of registered users worldwide exceeded 100 million, and the national server ranking also soared repeatedly, reaching the 6th place on the iOS best-selling list at the peak. According to data from Quest Mobile, the iOS revenue of "Dark Zone Breakout" in the first quarter of this year increased by 104% year-on-year. Overseas, the PC side of "Dark Zone Breakout" was tested in May, attracting the attention of a large number of overseas players and streamers, and ranked first in the number of views on Twitch in May.

It can be said that "Dark Zone Breakout" is to build a category from scratch by itself, attract players with product quality and establish a player community with distinctive characteristics, cultivate their own IP fans, and give them the capital to become an evergreen game.

Many of Tencent Games' new products this year are built according to this logic. For example, "Need for Speed: The Assembly", which was launched in July, focuses on the open world racing category; "Ark of Destiny", which occupies the niche of MMO, ushered in its anniversary, and its activity increased again.

And "Valorant", which was named in the financial report this time, has also steadily exceeded 1 million online in a single day. According to the Internet café game hot list released by Shunwang Technology, "Valorant" has risen to fourth place in the hot list in the second quarter of this year. And as the relevant esports events unfold, Valorant's dominance in the hero shooting track will become stronger and stronger.

Evergreen games continue to recover, and the value of IP is emerging

In addition to the outstanding performance of the new first-line games, the stable performance of the evergreen games is another highlight.

Observing the market performance of Tencent Games in the first half of the year, the biggest feeling is that Tencent's dominance is back. In June this year, Tencent Games once occupied seven positions in the top ten of the iOS best-selling list, and it was a multi-point flowering domination of different categories and tracks.

In the revenue ranking of global mobile game companies in the first half of 2024 (January to June) according to App Magic's statistics, Tencent also led the way with a revenue of $3.2 billion, more than three times more than the second place.

Through these data, it can be seen that Tencent Evergreen Games has not only maintained a leading position, but also maintained a considerable revenue scale. Products such as "Honor of Kings" and "Peace Elite" have gotten rid of the life cycle of traditional game products and embarked on a path of sustainable development.

In the first half of the year, "Peace Elite" iterated multiple versions such as "Sky Island Gathering" and "Exciting Return", and launched the "Subway Escape" gameplay and the new mode "Exciting Battlefield", which successfully drove user activity. And "Honor of Kings" has occupied the top position of the best-selling list for a long time, and was only briefly surpassed by the newly launched "Dungeons and Warriors: Origins" in May.

In addition to its steady performance in China, this year's "Honor of Kings" international server Honor of Kings has also accelerated the pace of going overseas. In July, it was officially announced that the cumulative number of registered users of the game worldwide exceeded 50 million. Sensor Tower data also shows that the growth rate of game downloads in June surged to 6.6 times that of May, and the main growth point came from the explosion of the Southeast Asian market.

The rapid growth of overseas users of "Honor of Kings" is inseparable from its global e-sports layout. After becoming the main event of the Hangzhou Asian Games last year, this year's "Glory of Kings" has once again become the main event of the Saudi Arabian E-sports World Cup. In addition, the second season of the "Honor of Kings" Intercontinental Invitational Tournament was also recently held offline in Kuala Lumpur, Malaysia, which may be the reason for the growth of users in Southeast Asia.

As the game enters the long-term operation, the IP value of "Honor of Kings" continues to appear. The derivative game "Dawn of the Stars" opened a limited number without deletion test on July 18, and the derivative animation "Chapter of Glory Broken Moon" was also launched this year and received good reviews. The co-branded authorization and peripheral goods related to game IP have become a hot spot sought after by young people. This kind of IP spillover effect is exactly what can be brought about by national-level evergreen games.

There are many overseas highlights, and there are still tricks to go to sea

From the financial report data, it can be seen that Tencent Games not only achieved a rise against the market in the domestic market in the second quarter, but also maintained a growth of 9% in the overseas market, continuing the growth momentum in the first quarter. According to the analysis of the financial report, the overseas growth was mainly due to the new product launch of Tencent's subsidiary Supercell and the strong performance of PUBG MOBILE.

Supercell has made a comeback this year. According to official data, the new product "Burst Squad" earned $1.1 million on the first day of its launch, with a cumulative download of more than 30 million times. According to Sensor tower's statistics, the total revenue of "Burst Squad" has exceeded $50 million since its launch.

In addition, Supercell's Brawl Stars has also had a second life with positive improvements such as eliminating treasure chests. According to the financial report, the game's quarterly average daily active users in the second quarter hit a record high, and the turnover increased by 10 times year-on-year. According to Sensor Tower, Brawl Stars ranked third in the international market in terms of daily active users in the second quarter.

In addition, Tencent's self-developed games have not stopped going overseas. In addition to the above-mentioned "Dark Zone Breakout" PC overseas test attracted attention, "Operation Delta", which has a classic IP of 20 years and was reunited and developed by the original team of "Linlang Sky", also attracted onlookers overseas as soon as it was exposed.

These products that have attracted attention overseas have a common feature, that is, they drive game projects with top technology, combine the technology-first product concept with the commercialization model of service-oriented games, and bring overseas players an experience comparable to console games with better image quality, lower cost and more well-known IP.

For Tencent Games, the goal of going overseas now is to "compete with overseas manufacturers for players with industrialized high-quality products". Therefore, we can see that Tencent Games is investing more and more in its flagship projects, and it is also paying more and more attention to the reputation of its own label and the reputation of players. These changes may not be profitable in the short term, but they are inevitable given Tencent's strategic approach to incubating "evergreen games".

epilogue

This year's gaming industry is undoubtedly a year of reshuffling. In such a period of change, Tencent Games has shown sufficient strategic determination and tactical resilience, not only stabilizing the basic disk of Evergreen Games, but also achieving breakthrough growth of new products, running out of popular games such as "DNF" mobile games, and also gaining a lot in many vertical tracks such as shooting, racing, and simulation management, which is not easy.

As an industry driven by both content and industrialization, there is no eternal king in the game industry. There are still many challenges in the second half of the year, but there are more and more cards that Tencent Games can play. In the fierce competition, only by making continuous progress to adapt to the new situation can we be invincible.

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