ByteDance Retreating from Gaming is a Sign of New-Found Focus that will Reverberate Across the Industry in China, and Beyond

Gaming. Gaming never changes....

The news came in suddenly and unexpectedly for most: ByteDance (Tik Tok overlords) is severely disinvesting from gaming and expected to lay off hundreds of employees working in its gaming divisions. In particular (but not only) in the Nuverse brand, which is the publisher of Marvel Snap and other popular games.

While unexpected, this still may sound familiar. Back in 2022 similar announcements were made by ByteDance, but this time it seems to be more…final.

At the moment of this writing the exact extension of this “retreat” from gaming is still unclear, with a lot of the details probably becoming clearer soon. As tragic as it is to witness yet another cascade of layoffs in a year that has been plagued by them in the gaming industry, I want to take the opportunity to focus on another facet of this announcement.

During the COVID years, with the sudden booming in gaming revenue worldwide (people stuck at home will play videogames) gaming companies worldwide found new streams of revenue and founding, hired more (in excess?), and everything was going great! Gaming, more than ever, became a hot business trend!

In China in particular (but not necessarily exceptionally), whenever something becomes hot and trendy, companies tend to pivot towards it. Or at least, invest in it. I’m generalizing here of course, but I’m thinking mostly within the context of tech/internet/digital/gaming/online services, broadly.

To give a specific example, I always like to remember the VR craze that swept through China’s VCs, startups and everyone with an entrepreneurial mindset back in 2016/2017. At that particular moment in time, it felt as if every company and manufacturer in Shenzhen (China’s tech hub) were in one way or another investing in VR, either developing headsets, producing them OEM-style for other brands, creating accessories…you name it.

The point is, companies quickly pivoted towards the latest trend. Inevitably, most of those ventures succumbed to the lack of real demand and are no longer invested in VR nowadays.

Something somewhat similar happened with gaming in China in recent years, with many major tech/internet companies deciding that gaming was a worthy pursuit to expand their growth. This happened, of course, before COVID even. I’m not saying COVID was the catalyst for gaming companies in China. ByteDance was determined to go into gaming back in 2019 already.

We did see however a general and substantial investment in gaming from companies that you wouldn’t necessarily associate with gaming. In my opinion, ByteDance was/is one of those companies.

Sure, with Tik Tok/Douyin and other very profitable divisions, the company seemed poisoned to compete with the largest tech companies in China (and the world), and one way or another get entangled in gaming. So it did. The thing about gaming though, is that it’s very particular. Anyone working in the industry or paying attention to its History will reasonably know that throwing “money at it” is not enough to be “good” in the gaming industry. We have plenty of recent examples even, such as Google with Stadia, or even Amazon to some extent, but I digress.

From a purely pragmatic and detached perspective, ByteDance retreating from gaming comes as a sign of relief, I think. Relief that hopefully major corporations like this can begin to focus on what they do best, and not waste so many resources and human energy in ventures that are not necessarily their best fit.

Yes, I understand this sounds vague, but ultimately, I’m talking about the effect this will have across many smaller companies within China in particular that, following the example of the big ones, sought to also invest and/or pivot to gaming because it was the “hot trend”. ByteDance taking a step back on gaming is sends a signal. A strong signal. Hopefully, that signal will be interpreted as “Hey, are you sure you’re really into gaming and you get this industry? Do you really want to do this?”.

We’ll see….