Tencent has publicly acknowledged for the first time that it is in discussions with Apple over revenue sharing for WeChat mini games, which is a growing market that has raised Apple's alarm.
According to the "Science and Technology Innovation Board Daily" on August 15th (Reporter Zhang Yangyang), after long-standing rumors, Tencent has publicly acknowledged for the first time during the Q2 earnings call that it is in discussions with Apple regarding revenue sharing for WeChat mini-games.
The revelation was made by Tencent's chief strategy officer, James Mitchell. He said that Tencent is considering providing in-app transaction services through Apple's iOS payment system, and if an agreement is reached in these negotiations, Apple will receive a certain percentage of the revenue.
Recently, Apple has increased pressure on Chinese tech giants Tencent and ByteDance to stop authors from circumventing its 30% fee for in-app transactions.
As a major global software distribution platform, Apple has implemented a policy of charging a 30% share of all in-app transactions in its App Store. While this regulation has been criticized by industry partners, Apple has maintained a strong position due to its robust ecosystem.
Small games are no longer just simple entertainment topics, but have grown into a market worth billions and are still growing.
According to the data in the "2024 H1 China Game Industry Report", the revenue of the domestic small game market has reached 16.603 billion yuan in the first half of this year, with a year-on-year increase of 60.5%, and the revenue of the small game market has maintained high-speed growth for three consecutive years.
In the WeChat ecosystem, small games have become a big cake. At the WeChat Small Game Developer Conference in July this year, WeChat officials revealed that the number of small game users has reached 1 billion, and the monthly activity is 0.5 billion. There are more than 240 games with quarterly revenue exceeding 10 million yuan. Top small games such as "Fisherman's Survival", and "Soul Land: Awaken Warsoul" can even generate billions in revenue. According to Tencent's Q2 financial report, the total revenue of small games increased by more than 30% year-on-year.
Obviously, Apple can no longer ignore the rapid development of small games. For a long time, Apple has been charging the highest "Apple tax" in the Chinese market, and the contribution rate of the Apple tax to the Chinese market in 2023 is close to 25%. Faced with the small game market, now worth billions and still rising, Apple will not give up such a huge profit gold mine.
However, under the current iOS ecosystem, the in-app purchase revenue generated by small games including WeChat and TikTok has not been integrated into Apple's own payment channel like downloading game apps in App Store.
As a result, vulnerabilities have emerged. Previously, creators of WeChat mini-games would use some system "loopholes" to steer users to external payment systems, thereby bypassing Apple's revenue sharing.
For example, when a WeChat mini-game player wants to recharge, the system will lead the user to a "customer service chat" interface. After the user sends a recharge command to the customer service, the customer service will return a payment link, and the user can then complete the recharge through WeChat payment.
This phenomenon has also occurred on Douyin. In June of this year, Apple informed ByteDance that it would not accept Douyin's new version update unless it also addressed similar payment vulnerabilities.
Apple previously even demanded that Tencent disable in-game chat functions between creators and players, as this feature could also be used to evade Apple's payment. However, Tencent has not yet agreed to this request, because it would affect user experience.
iOS ecosystem expert Deng Chun analyzed that in fact, when the WeChat mini-program platform was first launched, Apple had already begun to "hit and hint" at WeChat and Tencent behind it. However, considering WeChat's huge user base and Tencent's game business revenue contribution to the App Store, and especially the rapid development of mini-programs, especially small games, Apple has long maintained a watching position.
"At the beginning of the rise of small games, the pure IAA (in-app advertising monetization) model was used, and there were no payment gateways in the game. With the gradual development of the mini-program platform, the IAA + IAP (in-app purchase) hybrid monetization model emerged." Deng Chun believes that it is precisely the emergence of IAP small games that has aroused Apple's high alert.
"Apple used to turn a blind eye. If they don't intervene at this time and reach an agreement on the revenue sharing problem, there will be a greater negative impact when a large number of developers and game companies flood into the small game track in the future. Apple also fears that large game developers will create mini-programs to guide users to recharge outside the app in the future." Deng Chun told the "Science and Technology Innovation Board Daily" reporter.
A gaming industry insider analysis believes that for Tencent, discussing revenue sharing with Apple is not only a commercial negotiation, but also a strategic game. WeChat mini-games, as an important part of Tencent's ecosystem, have brought considerable revenue to the company. At this point, Tencent's choice to publicly acknowledge negotiations with Apple demonstrates its expectations for restructure of future revenue.
If Tencent chooses to conduct trades through Apple's payment system, it will face 30% commission pressure, which may affect their profit margin. However, this may also be a concession Tencent has to make, after all, Apple's market share and influence is huge globally. Another option is to continue to explore new payment channels and strategies, and minimize the impact of this commission.