TikTok parent Bytedance is getting serious about games

A turbulent 2018 for China’s gaming market hasn’t held back newcomers. Bytedance, the world’s most valuable startup behind a collection of rising new media apps including TikTok and Jinri Toutiao, is making a further push into video games after it took control of a mobile game developer through a roundabout deal.

According to a business registration filing, Shanghai Mokun has become wholly owned by Beijing Zhaoxi Guangnian, a second-tier subsidiary of Bytedance. Mokun is a mobile game developer previously owned by 37 Interactive Entertainment, a publicly listed games publisher that earmarked $791 million in revenue last year, which makes the Shanghai-based company about one-sixth the size of Activision Blizzard.

Zhang Lidong, a veteran journalist-turned senior vice president at Bytedance, has taken the helm as Mokun’s legal representative.

The price of the deal is undisclosed. A spokesperson from Bytedance declines to comment on the transaction. TechCrunch has reached out to 37 IE and will update the story if we hear back.

This isn’t the first time Bytedance has shown interest in the lucrative gaming market. Last month, TikTok’s Chinese version Douyin released its first in-app “mini-game” and Toutiao had already rolled out such lite games on its personalized news distribution platform in September.

These stripped-down forms of apps within a super app have been a sought-after way for Chinese tech giants to lock users in rather than sending them to download a stand-alone app. Bytedance’s foray into mini-games comes as a likely move to take on Tencent’s WeChat messenger, which had amassed 400 million MAUs on its own army of mini-games by January. On the other hand, Tencent is getting nervous about ByteDance’s rise and made inroads into short videos after trying its hand at several TikTok-like apps.

Though best-known for WeChat, Tencent has been generating the bulk of its income from video games for years and is the world’s largest games publisher by revenues, according to market researcher Newzoo. Tencent’s asset of more than 1 billion MAUs on WeChat and about 800 million MAUs on QQ, its legacy messenger from the PC era, allows the giant to conveniently convert social media users into gamers. Users can, for instance, easily log in and invite friends to play games via their WeChat or QQ accounts.

By comparison, 500 million users stream short-form videos on Douyin each month. Many of them may have already seen in-stream ads for games on the video app, which has become a popular marketing channel for small game developers, according to several media-buying agencies TechCrunch previously spoke to. Worldwide, TikTok has collected an estimated 1 billion downloads. This considerable global reach, which Tencent lacks, may eventually give Bytedance an edge in games distribution if the company decides to launch the effort overseas.