China's mobile games user growth slows dramatically

BI Intelligence

The growth of mobile gaming users in China showed a dramatic year-over-year (YoY) decline in the fist half of 2015, new data from China Internet Watch shows. Although the market continues to grow, it's previously rapid growth has proven unsustainable. Even as the market grew to surpass 365 million users, it looks like China's user growth boom has all but slowed to a halt.

In H1 of 2013, growth of mobile gaming users in China was up 120% from the same time period in 2012. This was likely due to an influx of app developers and investors vying for a foothold in the fast growing industry. That growth was resultant of the addition of 93 million mobile gaming users in the Chinese market. 

In H1 2014 there were 325 million users, marking a YoY growth of ~90%, 30 percentage points down from the same time in 2013.

That enormous growth slowed to just 12% in H1 2015, as the number of mobile gaming users picked up just 40 million new users from the year prior.

A slowdown in growth of smartphone shipments in China may be a factor in this decline. Smartphone shipments in China declined YoY for the first time in six years during 2015's opening quarter, according to the IDC. This contraction is a byproduct of China's high penetration rate. As the market continues to climb over the 50% penetration tipping point, the pool of first-time smartphone buyers shrinks, making the Chinese smartphone market more dependent upon smartphone upgrade cycles than the newfound interest of first-time buyers. Considering that new smartphone users account for a large portion of new downloads and many consumers who have been using smartphones for any length of time rely on the same set of apps for daily usage, it's unlikely that China will see another period of enormous growth of users in mobile gaming.

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Despite this dip in growth, estimates suggest that the Chinese mobile gaming industry's revenue is set to reach $5.5 billion in 2015. This means it will overtake the US as the largest mobile gaming industry, states a press release by Niko Partners. Looking forward to 2019, it's estimated that the mobile gaming market in China will increase to $11.1 billion in revenue. Interestingly, much of this revenue may be concentrated among several larger companies that are creating mobile messaging and gaming platforms under umbrella companies. For example, in 2014 Tencent, China's largest gaming company, held over 50% of the Chinese mobile gaming market.

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