Like the chaos land that heroes come to in the plot, domestic games are experiencing their own periods of chaos, growing with pains and transition. As an axe hacks, the patterns of different colors flow on each inch of the cross section of the boulder. In this huge market, Tencent and Netease still stand up, and small and medium-sized game manufacturers are also unstoppable to draw the sword.

 

Of the 278.687 billion yuan of China's game market revenue in 2020, Tencent and Netease took away 15.1 billion yuan, and 54.61 billion yuan respectively, and still almost monopolized the domestic market. But under the shadow of the two giants, the small and medium-sized forces with different styles such as miHoYo, Lilith, verycd, CMGE, Jiaxianghudong, and Firerock Holdings have made great achievements in breaking out of an encirclement.

 

The phenomenal Genshin Impact has pulled the "Honor of Kings" down the throne, and TapTap that declared war against the traditional distribution channels, as well as FunPlus, Firerock Holdings set sail to the markets abroad and fulfilled their potentials. Each unique play method makes the market new and refreshing, which also dilutes the control of the old brand game producers.

 

In nature, the bigger body type the animal has, the narrower its perspective will be. The bigger body type the animal has; the more blind spots are there for it. In the field of games, the blind spots of giants are opportunities for latecomers.

 

 

Last year, the Genshin Impact of independent game company miHoYo swept the global game market, bringing about $240 million in revenue in its first month of coming out. Global mobile game revenue ranking from the the competition between two giants of "Playerunknown's Battlegrounds" and "Honor of Kings" into "Competition of Three Kingdoms". Just a few months after it was launched, the revenue of "Genshin Impact" in the global multi-platform exceeded that of "Honor of Kings" in the same period of time.

 

From "Honor of Kings" to "Genshin Impact", it is not only about the rise and decline of the two games, but also the evolution of domestic games from the rough to the fine. The pace of the game industry towards the content-oriented era is irreversible. Under the polishing of refinement, even the segmented vertical track with limited attention from the mainstream market before also broke out an amazing volume. Similarly, the successful Rise of Kingdoms, AFK Arena, Strategic Edition of the Annals of the Three Kingdoms and Arknights have repeatedly confirmed this conclusion.

 

Driven by the high-quality vertical segmentation content, it is natural for independent game manufacturers to change the traditional traffic channel, and the vertical channel arises at the historic moment. The "zero share" mode of TapTap platform of verycd company provides the distribution channel with the highest CP gross profit rate for game developers. With its fair scoring and high-quality user ecology, verycd company breaks through the shackles of the past resource and flow distribution system, which is more attractive to both game developers and game users. It is inevitable to encroach on the marketing distribution system of old producers

 

In 2020, the average monthly active users of TapTap's Chinese version of mobile app are 25.7 million, with a year-on-year growth of 43.7%, the number of game downloads is 407.6 million, with a year-on-year growth of 15.8%, and the number of new postings is 5.8 million, with a year-on-year growth of 64.0%. Although there is still a big gap between the user volume and traditional channels, its vigorous community vitality and growth potential are incomparable for traditional channels. IGG, ByteDance, miHoYo, Lilith, Papergames, Bilibilitv and Alibaba, which think highly of the value of TapTap, have successively bought shares. With strange harmony, verycd has realized the deep binding from CPs, publishers to channel players, and obtained the market estimation of over HK $24.4 billion.

 

In the meantime, the overseas market became the highlight stage of domestic small and medium-sized game enterprises in 2020. According to the data of Qianzan Industry Research Institute, the foreign sales revenue of China's self-developed games in 2020, reached 15.45 billion US dollars for the first time, with a year-on-year growth of 33.2%, realizing a new scale breakthrough. In terms of volume, the further released overseas market has contributed billions of dollars to Lilith and FunPlus, making them surpass Tencent and Netease as "the Kings" in the overseas market. In terms of increment, small and medium-sized enterprises represented by Firerock Holdings have been deeply engaged in overseas market since the beginning. In 2020, ita revenue increases by 71.3% and its net profit increased by 65.9%, far exceeding the average level of the industry.

 

Compared with the top echelon of small and medium-sized companies, Firerock Holdings' breakthrough strategy may provide reference for the majority of small and medium-sized game manufacturers.

 

Established in 2011, Firerock Holdings is actually a senior veteran of the game industry, whose predecessor is Shenzhen Domain established in 1997.

 

Opening "Tencent Biography", the original chapter pertaining to Domain should be ignored. As the first batch of domestic game companies, the Domain occupied the south market, and the number of active users per day of the platform in 1997 can reach 280000 person-times.

 

Tencent has a close relationship with the Domain, which can be seen from a loan of RMB 73.1 million from Ma Huateng, person in charge of Tencent in 2008 to Zhang Yan, the former CEO of the Domain and now the Chairman of Firerock Holdings for helping him increase his shares in the Domain. In 2010, Tencent formally acquired 100% of the equity in the Domain and established Guangzi Studio (IEG) based on this, which has opened a grand journey of game empire.

 

It can be said that the Domain plays a cornerstone role in the creation of Tencent's game empire. Once contracted game memory of the generation after 1990 of the hot products "QQ Huaxia", "Island of Hero Online" are the works of the Domain, and also the most powerful cash printing machine in the realization process of Tencent flow.

 

As everything comes and goes, let's focus on the future. In 2014, the founding team of Domain, which left Tencent, founded Firerock Holdings, focusing on the development of web games and mobile device games, and was authorized game operations in overseas markets. With rich experience in game development and mature means of market expansion, Firerock Holdings has developed rapidly and successfully disembarked on the main board of Hong Kong in 2019. Throughout the performance since itslisting, Firerock Holdings' "making money" attribute has always been online.

 

According to the 2020 announcement issued by Firerock Holdings, the company recorded an annual revenue of 520 million yuan, with a year-on-year growth rate of 71.3%. The gross profit margin and scale net profit margin were 92.1% and 66.2% respectively. If the time is extended to five years, the compound annual growth rate of net profit of Firerock Holdings is nearly doubled. From 2016 to 2020, the annual compound growth rate of the company's revenue, gross profit and net profit returned to the parent company reaches 84.5%, 89.0% and 98.9%.

 

 

The key to maintain a long-term high profit margin of Firerock Holdings lies in two aspects: one is the strong long-term operation ability of the game, and the other is the high user adhesiveness of leisure game.

 

The characteristics of Firerock Holdings' game products are long life cycle. Through the continuous updating and optimization of the game content, the company realizes long-term operation. The representative "Kings and Legends Global", first commercialized in March 2012, is still contributing to revenue. "Snack Fight" and "Fishing Fight" were launched in May and December 2017 respectively, with the recorded revenue of 105 million Yuan (20.2%) and 236 million Yuan (45.3%) respectively in 2020.

 

With keen insight into the market and quick response ability, the company has continuously updated and optimized high-quality game content. This year, Firerock Holdings will develop 9 games to further improve player participation and game experience.

 

Leisure games naturally have the characteristics of high user loyalty, high stickiness and strong payment ability. According to the third-party survey data, leisure and chess and card games account for 60% of the total duration of Chinese mobile game users. The longer the proportion of validated user time is, the higher the loyalty of users is.

 

From the perspective of user depth, 90% of Chinese leisure game users have been in contact with leisure games for more than one year, 66.3% have been in contact with leisure games for more than three years, and more than 40% have spent more than one hour a day playing leisure games. The payment value of leisure game users is also considerable. According to the data of third-party organization, 46.1% of leisure users pay more than 100 Yuan annually.

 

According to its own characteristics, Firerock Holdings has been engaged in leisure game for many years and has a competitive advantage in enjoying the high- value dividends of leisure users. According to the survey data, there are 57 million leisure users in the six markets of the United States, the United Kingdom, Germany, Japan, South Korea and Indonesia, while the number of global daily users of Firerock Holdings is about 1 million, which means that the company has huge potential overseas customers. It is worth noting that, different from ordinary community users, one million users of Firerock Holdings are highly-adhesive paying users, which keeps quite a good level in the game industry.

 

According to the layout strategy of the company's continuous efforts in overseas business, Firerock Holdings is expected to further expand the market scale of overseas leisure games in the future and exploit the victory plus with the long-term accumulated experience in the development and operation of leisure games.

 

From the perspective of growth sustainability, the overseas business of Firerock Holdings will provide short-term business growth support, and the diversified income trend is the logic of long-term performance growth.

 

From the perspective of revenue structure, the proportion of overseas revenue in the revenue of Firerock Holdings has continued to rise in the recent years, which has become an important growth drive of the company. The proportion of overseas revenue of Firerock Holdings increased from 4.7% in 2019 to 12.7% in 2020, reaching about 66 million Yuan. At present, the majority of overseas revenue included in the consolidated statements comes from Southeast Asia.

 

In 2019, the company began to try to expand its self-developed game products to overseas markets for independent operation and formed a set of standardized promotion and penetration methods. By setting up an overseas localized operation team, Firerock Holdings ensured that the operation team fully understood the local culture, customs and environment, improved the operation efficiency of the game, and did not rely on traditional distribution channels to maximize revenue. As of October 2020, Royal Casino, Thai Leisure Hall operated in Southeast Asia, had 330000 downloads, contributing $1.1 million to the company's monthly average.

 

 

 

Up to now, four of the five games launched by the company for the first time and still in operation since 2019 are Thai versions. Among them, "Royal Tycoon", launched in July 2019, contributed 12.3% of the company's revenue in 2020, reaching 61.08 million Yuan, which is enough to prove the precise R & D operation strength of Firerock Holdings in specific overseas regional markets. At present, Firerock Holdings has gradually extended its successful experience in game design and promotion to European and American markets.

 

More new games line up to be carried forward. According to the plan, Firerock Holdings will launch South America Hall and Indonesia Hall in the second quarter of this year. With the disembarkation of game halls in more countries and regions, and in combination with the company's localization-oriented "game self-development + game self-operation" mode, Firerock Holdings' overseas market will provide more space for imagination.

 

In the direction of income generation diversification, Firerock Holdings has also launched a substantial layout. On the one hand, Firerock Holdings increased investment in the game industry chain. In February of this year, the company has completed the acquisition of 100% equity of Decheng International, and Decheng International has also lived up to the expectations of the public, and become the authorized operator with the largest contribution to the income of Firerock Holdings.

Specifically, the revenue of Decheng International from January to July 2020 is 490 million yuan, and the net profit attributable to the parent company is 87.43 million yuan. The acquisition will contribute to the revenue and profit of the consolidated statements of Decheng International in 2021, directly pull the company's revenue and profit scale, greatly enhance the company's game operation business level and elevate its comprehensive competitiveness.

 

On the other hand, Firerock Holdings is considering using blockchain technology and NFT to make the specific assets (skins or props, etc.) inside the game unique and non-reproducible, enabling players from different regions to overcome the barriers of language, currency and different games, realize cross platform transactions, and complete user assignment. This move breaks through the mode of directly generating value exchange between the company and the user by the traditional game company, which will realize the value exchange among users.

 

Huang Yong, the founder of the company, is in charge of the Firerock Holdings' blockchain game application team. At present, a blockchain game subsidiary with Hu Jifeng, the founder of the blockchain game "Dark Chain Wandering" has been established. It is worth mentioning that the "Dark Chain Wandering" developed by Hu Jifeng creates a game equipment set, which is a non-homogeneous digital collection of NFT tokens made with blockchain technology and uses decentralized transaction technology to help game players complete transactions through smart contracts so as to realize the sales and appreciation of game assets, and which provides a corresponding guarantee for the success rate of NFT products of Firerock Holdings.

 

In addition, Firerock Holdings has reached strategic cooperation with Youxituoluo, which will obtain potential customers who may apply the non-homogeneous token technology of Firerock Holdings through the Youxituoluo channel to realize commercialization and further broaden the company's income channel.

 

Obviously in the future planning, Firerock Holdings will not only be a single game company, but a diversified enabling platform, which will provide more fresh and dynamic content, link more users and traffic, and create greater value.

 

In order to adapt to the strategic adjustment, the company's management youth trend has gradually strengthened, and a round of executive director replacement has been completed. At present, Suyi, CEO of the company, is 36 years old, with more than 10 years of experience in Internet marketing and advertising; Chen Di, the 41-year-old executive director, has been working in financial investment for more than 10 years; Zhou Kun, the 32-year-old executive director, has been engaged in the field of game product planning and development for nearly 10 years.

 

Compared with the previous three executive directors with game development background, the management of Firerock Holdings is younger, and the industry background is more diversified. Under the leadership of the new management, it is not difficult to speculate that the company's strategic vision will be more abundant so as to promote the diversified development of the company's business and bring greater expectations for users and markets.

 

 

"There are only three game companies in China, Tencent, Netease and other", which is a vivid portrayal of the past. In the game market where the giant has become the leading role, the achievements of miHoYo, verycd and Firerock Holdings are in essence the epitome of the active opening up of small and medium-sized game manufacturers under the monopoly of the giant.

 

Even so, from the perspective of the whole market, both the industry space and the continuous subdivision of the game field give more and more opportunities for small and medium-sized manufacturers to stand out.

 

According to Frost & Sullivan, it is expected that the size of China's game market will increase to 397.6 billion yuan in 2024, the compound growth rate is 9.1% from 2019 to 2024, and the compound annual growth rate of global game market is expected to be 7.5% in the same period. A full and broad future market can support various competitive products at the same time, which means that there is a greater probability of the appearance of a competition pattern of one superpower and many powers and flowers of every kind  in bloom in domestic game industry for the future. Different types of manufacturers have the opportunity to change the storage capacity of completing the process of repetition and accumulation in this "big pool".

 

What the uprising game industry actually coordinates are the people's spiritual consumption demand, and a new carrier of entertainment, which strengthens the concept of "consumer sovereignty" era, makes user demand the starting point of all commercial value activities, and also grants players greater authority. This puts forward multi-level and comprehensive requirements for the interactive ability with the consumers, content development creativity, user habit capture, product distribution push force, new product iteration and update ability, etc. of game developers.

 

As for the comprehensive strength, the giant's deposits make it more advantageous, but the opportunities of small and medium-sized enterprises are also contained in it. Under the new round of technological and industrial changes, flexible architecture enables small and medium-sized enterprises to respond to the changes of market demand more quickly, focus more on the fine vertical field, and conduct channel reform without any burden. With a new world view and user ecosystem, the possibility of small and medium-sized enterprises incubating market hot products is greatly increased.

 

As Chen Di, Executive Director of Firerock Holdings, said, the key to the incubation of the hot game is the world outlook. The bigger the world outlook is, the more opportunities there are for the games to become popular. In his structural plan, the future game will not only be an entertainment product, but also the traffic entrance of the virtual world, which will take more and more time of people. After entering the virtual world, people can have new social roles, alternative socializing ways, consumption patterns, etc. to meet more diversified spiritual needs, and then affect the real world.

 

The era that game changes the world has been drawing near gradually.