ByteDance to Sell Moonton Gaming Studio in Strategic Retreat From Gaming

ByteDance is looking to sell its gaming studio, Shanghai Moonton Technology, to streamline operations and focus on its core businesses. This follows another strategic retreat from the metaverse, when the Chinese short video giant decided to cut its VR headset unit PICO.

ByteDance acquired Moonton Technology for US$4 billion in 2021.

According to reports citing informed sources, ByteDance is working with a consultant to assess potential buyers’ interest in Moonton Technology. Negotiations are still in the early stages, and the financial terms of the transaction remains unclear.

ByteDance’s acquisition of Moonton Technology two years ago occurred amidst the intense rivalry with Tencent. Both companies were attempting to penetrate each other’s core businesses. After Tencent introduced Weishi and WeChat Video Channels to counter ByteDance’s short video app Douyin, ByteDance launched the "Oasis Project" aimed directly at Tencent’s lucrative gaming business.

Moonton Technology is a "sworn enemy" of Tencent. Its founding team originated from Tencent’s former studio, with Moonton’s CEO, Xu Zhenhua, being a notable defector from Tencent. Xu was ordered to pay Tencent over RMB19.4 million yuan in 2018 for violating a non-compete clause in his contract, setting a record for the highest compensation in similar cases.

Furthermore, Moonton’s flagship game, "Mobile Legends: Bang Bang" (Endless Duel), is a clone of Tencent’s hit mobile game "Honor of Kings" and has outperformed it in overseas markets.

However, Moonton didn’t fulfill ByteDance’s expectations after the acquisition. There were no viral games and its gaming titles had mediocre performance. ByteDance’s gaming business overall had lackluster performance. There have been few highlights in ByteDance’s gaming endeavors over the past four years.

The reason why ByteDance has struggled in the gaming sector is perhaps similar to why Google couldn’t make Stadia a success and Amazon Games repeatedly faced setbacks.

Internet giants venturing into gaming often make the mistake of not understanding the unique characteristics of the gaming industry. For instance, ByteDance’s approach in gaming has been to imitate competitors, then try to outdo them with larger investments and more abundant traffic, hoping to create a product that surpasses the original. That hasn’t worked out as expected.

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