Why Chinese e-commerce giant is investing in gaming

JD.com’s booth at the China Joy gaming conference in Shanghai on July 30, 2021. The Chinese e-commerce giant is investing heavily in gaming.

Arjun Kharpal | CNBC

SHANGHAI – At China Joy, one of Asia’s largest gaming conferences in Shanghai, e-commerce giant JD.com built a booth with the giant version of its dog mascot Joy, where gamers would gather to compete against each other.

The display underscores JD.com’s ambitions in the gaming area. But it doesn’t try to take on Tencent and NetEase in developing games.

Instead, the Beijing-headquartered company wants to be the go-to place for young people to buy game-related goods, and sees esports and partnerships with device manufacturers as a way to do that. This could drive growth in other areas of the business as well.

“We have the skills to complete the entire ecosystem,” Daniel Tan, president of JD Mobile Devices, told CNBC.

What JD does in gaming

JD’s gaming business has a number of facets. First, millions of shoppers buy products from JD’s platform and provide feedback. JD can work with partners to share this feedback to help them improve their products.

Last year, JD announced plans to partner with companies like Chinese PC maker Lenovo and gaming giant Tencent to develop smartphones that are optimized for mobile gaming. This means that JD can also distribute these via its shopping app and address players.

Ultimately, in my opinion, we want to build a platform that you can go to JD on when you are thinking about games that you will need to play.

Daniel Tan

President, JD Mobile Devices

The second part of the strategy revolves around esports or competitive video games.

JD started its own esports team called JD Gaming in 2017. Last year it launched a mobile gaming team called JD Esports.

According to gaming analytics company Newzoo, global esports sales are projected to exceed $ 1 billion for the first time in 2021, growing 14.5% year over year. Although it is still a small part of the total global gaming market, strong growth is expected. JD is hoping for a piece of that cake.

But its involvement in esports is also part of a broader marketing offensive to bring the company into association with gaming. E-sports have helped “penetrate the mindset of consumers,” Tan said.

He added that the company is focused on raising player profiles “to help us promote products”.

“Ultimately, we want to build a platform that you go to JD on when you think about gaming, what you need to play.

JD is not involved in the production and manufacture of games like Tencent or NetEase. Tencent in particular has grown globally by acquiring or investing in gaming studios. Tan said that wasn’t JD’s main focus, but didn’t rule out the possibility of co-investing in gambling companies with a partner.

“I think if there is an opportunity, if it is a good opportunity, we will consider … we are very open,” said Tan.

JD sees “huge potential” in gaming

Tan said JD’s gaming efforts are still in the early stages and the company is not yet considering a business model.

“Ultimately, in my opinion, the entire industry is still in the incubation phase. So from our point of view it is an investment, ”said Tan.

“But we see huge potential … it’s not just about cell phone sales, it’s not about revenue sharing on games … I think that’s towards the end,” he said.

JD is trying to create value, Tan said. “We have to incubate the entire ecosystem before we think about … how to cash out.”

Tan also said there are many indirect benefits to investing in games.

“It’s about getting involved, getting in contact with young people, getting in touch with young people. And that’s the kind of consumers we want, you know … they’re going to use JD, ”he said.

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