20180706-招商证券_香港_-Proliferation_of_mini-program_games_to_benefit_WeChat_soverall_ecosystem_7页_1mb_1mb

Summary of China Internet and Mini-program Games Report

Core Content

This report discusses the growth and potential of mini-program games within the broader context of the China Internet ecosystem, with a focus on Tencent's strategic advantages and the monetization opportunities in the casual game sector.

Main Points

• Mini-program Games Growth:

  • The mini-program MAU (Monthly Active Users) has rapidly increased to over 400 million.
  • 4 out of 5 mini-program users engage in mini-program games, indicating a large user base.
  • The game "Jump" (跳一跳) consistently ranks as the top mini-program, demonstrating the popularity of mini-program games.

• Tencent's Strategic Position:

  • Tencent is leveraging the mini-program ecosystem to monetize from the increasing traffic and user engagement.
  • Mini-program games are light and casual due to size restrictions, making them accessible to a wide audience.
  • The mini-program platform offers a low entry barrier and fast development cycle, attracting many developers.

• Monetization Potential:

  • Casual games have lower monetization rates than traditional competitive games but offer broader user coverage.
  • Monetization channels include in-app purchases, e-sports, advertising, and IP-related products.
  • Mini-program games have strong advertising potential due to high user exposure and engagement.

• User Engagement and Social Attributes:

  • Mini-program games benefit from the social features of WeChat, such as user recommendations and real-time sharing.
  • These games can integrate multiplayer, score ranking, and real-time onlooker features, enhancing user interaction.

• Ecosystem Development:

  • WeChat has upgraded the mini-program size limit from 4MB to 8MB, increasing the complexity and functionality of mini-programs.
  • The platform is continuously evolving, which will further support the growth of mini-program games.

• Market Outlook:

  • The casual game market is expected to grow at a slower rate (8% YoY) compared to the overall mobile game market (31% YoY).
  • The mini-program ecosystem is seen as a fertile ground for future blockbusters due to its competitive nature and social integration.

Key Information

• Mini-program Game Users: Over 300 million monthly users, with a significant portion being new or casual gamers.
• Monetization Strategy: Tencent collects a 40% service fee on in-app purchase amounts, with a current threshold of RMB0.5 million per month.
• Game Development: Developers must focus on innovation due to the low entry barrier and fast development cycle.
• User Convenience: No app installation required, seamless integration with social features, and accessibility across platforms.
• Tencent's Dominance: As a leading developer and publisher, Tencent is well-positioned to benefit from the mini-program ecosystem's growth.

Financial Highlights

• Tencent's Revenue Projections:
  • Mobile and PC games are expected to account for 53% and 47% of Tencent's 2018 revenue respectively.
  • Mini-program games are expected to remain a minor contributor in 2018/2019 due to low ARPU and limited in-app purchase items.

Investment Outlook

• Sector Rating: OVERWEIGHT, indicating the sector is expected to outperform the market over the next 12 months.
• Company Rating: BUY for Tencent, suggesting a potential return of over 10% in the next 12 months.

Analyst and Regulatory Information

• Analysts: Richard KO and Leo LIU, CFA.
• Regulatory Disclosures:
  • The report is subject to important disclosures regarding the use and distribution of the document.
  • It is intended for investment professionals, high net worth entities, and relevant persons as defined by UK and Hong Kong regulations.
  • The report is not suitable for general public distribution in Japan, Canada, and mainland China (excluding Hong Kong, Macau, and Taiwan).

Conclusion

Mini-program games are playing a crucial role in expanding WeChat's ecosystem, offering a new and efficient channel for casual games. With Tencent's strong position and ongoing improvements to the platform, the mini-program game sector is expected to grow and provide significant monetization opportunities in the long run.