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End Game, the startup behind Zombs Royale, raises $3M

End Game Interactive CEO Yang C. Liu has a refreshingly straightforward description of what he and his co-founder Luke Zbihlyj are up to: “We’re just building games. And to be honest, we don’t know what we’re doing.”

Despite this self-proclaimed ignorance, End Game has just raised $3 million in seed funding from an impressive group of investors: The round was led by the game-focused firm Makers Fund, with participation from Clash of Clans developer Supercell, Unity CEO David Helgason, Twitch COO Kevin Lin, Twitch VP Hubert Thieblot, Danny Epstien and Alexandre Cohen of Main Street Advisors, and music executive Scooter Braun.

Liu told me that he and Zbihlyj got their start by building websites tied to existing games, such as PokeVision, a site for finding Pokemon in Pokemon Go. However, they were inspired by the success of simple, browser-based multiplayer games like Slither.io to create games of their own — first Zombs.io, then Spinz.io, then Zombs Royale.

Altogether, End Game says its titles have attracted more than 160 million players, with 1 million people playing in a single day. Zombs Royale, in particular, seems to have been a hit — the battle royale game (where a single map can pit up to 100 players against each other) was one of 2018’s most Googled games in the United States.

Liu said the team’s success convinced them to focus their efforts on game development: “Do we want to make products that people simply use, or games that people think about out when they’re going to school, or going to work, or dream about?”

End Game founders

Zombs Royale was supposedly built in less than four weeks, but Liu said that after its launch in early 2018, the team spent most of the year maintaining and scaling the game. Then 2019 was all about building a team and creating the next game, Fate Arena, a title in the new Auto Chess genre that’s supposed to launch on PC, mobile and other platforms soon.

Liu noted that unlike End Game’s previous work, which featured simple 2D art (“On Zombs Royale and Spinz, I did the art, and it’s terrible”), Fate Arena will feature a “3D, high-fidelity art style.”

But even as the company’s games start looking a little less primitive, the goal is still to develop and iterate quickly. Liu said his goal to fund “many tries” at building other cross-platform, multiplayer games with this seed round.

“We pride ourselves on rapid experimentation,” he said, adding that the key is “not biting off more than we can chew. We design [our games] to scale from the beginning. We don’t necessarily need to be World of Warcraft, where you need to make 100 quests as the baseline. We’re focused on games with a small starting point that can scale into something much bigger.”

Supercell Developer Relations Lead Jaako Harlas made a similar point in a statement included in the funding announcement:

Many companies are quick to point out how fast-moving they are. Then you come across a team like this and realize what being lean and moving fast really means. Yang, Luke and the team have already shown that they can ship accessible games that showcase a real flair for fun, and we look forward to supporting them in their quest for the next big hit game.

 

Tencent to grow gaming empire with $148M acquisition of Conan publisher Funcom in Norway

Tencent, one of the world’s biggest videogaming companies by revenue, today made another move to help cement that position. The Chinese firm has made an offer to fully acquire Funcom, the games developer behind Conan Exiles (and others in the Conan franchise), Dune and some 28 other titles. The deal, when approved, would value the Oslo-based company at $148 million (NOK 1.33 billion) and give the company a much-needed cash injection to follow through on longer-term strategy around its next generation of games.

Funcom is traded publicly on the Oslo Stock Exchange, and the board has already recommended the offer, which is being made at NOK 17 per share, or around 27% higher than its closing share price the day before (Tuesday).

The news is being made with some interesting timing. Today, Tencent competes against the likes of Sony, Microsoft and Nintendo in terms of mass-market, gaming revenues. But just earlier this week, it was reported that ByteDance — the publisher behind breakout social media app TikTok — was readying its own foray into the world of gaming.

That would set up another level of rivalry between the two companies, since Tencent also has a massive interest in the social media space, specifically by way of its messaging app WeChat . While many consumers will have multiple apps, when it comes down to it, spending money in one represents a constraint on spending money in another.

Today, Tencent is one of the world’s biggest video game companies: in its last reported quarter (Q3 in November), Tencent said that it make RMB28.6 billion ($4.1 billion) in online gaming revenue, with smartphone games accounting for RMB24.3 billion of that.

Acquisitions and controlling stakes form a key part of the company’s growth strategy in gaming. Among its very biggest deals, Tencent paid $8.6 billion for a majority stake in Finland’s Supercell back in 2016. It also has a range of controlling stakes in Riot Games, Epic, Ubisoft, Paradox, Frontier and Miniclip. These companies, in turn, also are making deals: just earlier this month it was reported (and sources have also told us) that Miniclip acquired Israel’s Ilyon Games (of Bubble Shooter fame) for $100 million.

Turning back to Funcom, Tencent was already an investor in the company: it took a 29% stake in it in September 2019 in a secondary deal, buying out KGJ Capital (which had previously been the biggest shareholder).

“Tencent has a reputation for being a responsible long-term investor, and for its renowned operational capabilities in online games,” said Funcom CEO Rui Casais at the time. “The insight, experience, and knowledge that Tencent will bring is of great value to us and we look forward to working closely with them as we continue to develop great games and build a successful future for Funcom.”

In retrospect, this was laying the groundwork and relationships for a bigger deal just months down the line. 

“We have a great relationship with Tencent as our largest shareholder and we are very excited to be part of the Tencent team,” Casais said in a statement today. “We will continue to develop great games that people all over the world will play, and believe that the support of Tencent will take Funcom to the next level. Tencent will provide Funcom with operational leverage and insights from its vast knowledge as the leading company in the game space.”

The rationale for Funcom is that the company had already determined that it needed further investment in order to follow through on its longer-term strategy.

According to a statement issued before it recommended the offer, the company is continuing to build out the “Open World Survival segment” using the Games-as-a-Service business model (where you pay to fuel up with more credits); and is building an ambitious Dune project set to launch in two years.

“Such increased focus would require a redirection of resources from other initiatives, the most significant being the co-op shooter game, initially scheduled for release during 2020 that has been impacted by scope changes due to external/market pressures with increasingly strong competition and internal delays,” the board writes, and if it goes ahead with its strategy, “It is likely that the Company will need additional financing to supplement the revenue generated from current operations.”

China Roundup: WeChat’s new focus on monetization

Hello and welcome back to TechCrunch’s China Roundup, a digest of recent events shaping the Chinese tech landscape and what they mean to people in the rest of the world. At the beginning of each year, a large crowd of developers, content creators and digitally-savvy business owners gather in the southern Chinese city of Guangzhou for the WeChat conference, the messaging giant’s premier annual gathering. The event is meant to give clues to WeChat’s future and the rare occasion where its secretive founder Allen Zhang emerges in public view. But this year, much to the audience’s disappointment, Zhang was absent.

WeChat’s new era of money-making

The boss’s absence was not outright unexpected, an industry analyst told me, as WeChat shifts to focus more on monetization. With 1.1 billion active users, the app has been incredibly conservative with selling ads and pursuing other money-making strategies, an admirable decision from the user’s perspective but arguably frustrating for Tencent’s stakeholders. Part of the restrain is due to Zhang’s user-first design philosophy and minimalistic product aesthetics. When reflecting on why WeChat doesn’t support splash ads — ads that are displayed full-page every time an app is launched — the boss had this to say (in Chinese) at last year’s WeChat conference:

“If WeChat is a person, it must have been your closest friend to deserve so much time you spent on it. So how could I have the heart to plaster an ad on your best friend’s face and ask you to watch the ad before speaking to him?”

The emphasis on user experience now seems overshadowed by Tencent’s need to carve out more revenue streams. The giant’s cash cow — its gaming business — has taken a hit in recent years following a wave of new government policies on the online entertainment industry. Tencent’s imminent rival ByteDance, the creator of TikTok, is getting a larger slice of the digital advertising pie in China.

One way to step up monetization within WeChat is to stimulate more business transactions. The app mapped out at the conference what it has done and what it plans to do on this front.

WeChat founder Allen Zhang addressing the audience of WeChat’s annual conference through a pre-recorded video in January 2020 

Mini programs

The lite apps that skip app store downloads and run inside WeChat have surpassed 300 million daily active users. Practically every internet service in China — with the exception of a few that are at odds with Tencent, such as Alibaba’s ecommerce platforms — have built a WeChat mini program version of their full-fledged app. Without ever leaving WeChat, users can complete tasks from playing casual games, booking movie tickets to getting food delivered.

Consumers and businesses are indeed increasingly embracing WeChat as a platform for transactions, of which the default payment method is WeChat Pay. Users spent more than 800 billion yuan ($115 billion) through mini apps in 2019, up 160% year-over-year driven by the likes of ecommerce and other retail activities.

To further drive that spending momentum, WeChat announced it will make it easier for businesses to monetize through mini programs. For one, these apps will be better integrated into WeChat’s search results, giving businesses more exposure. The messenger will also broaden the variety of ads embedded in mini programs and provide logistics management tools to retail-focused developers.

These efforts signify WeChat’s shift from focusing on mass consumers to businesses, a strategy that goes in tandem with Tencent’s enterprise-driven roadmap for the next few years. It remains to be seen whether these changes will square with Zhang’s user-first philosophy.

Credit scoring

WeChat’s one-year-old “Payments Score” has picked up some 100 million users by far. The program came about amid China’s push to encourage the development of credit scoring across society and industries to both regulate citizen behavior and drive financial inclusion, although Tencent’s private effort should not be conflated with Beijing’s national scheme. Like Alibaba’s Sesame Credit, WeChat Payments Score is better understood as a user loyalty program. Participation is optional and scores factors in the likes of user identities, payment behavior and default history.

Such a trust-building vehicle holds the potential to bring more transactions to WeChat, which previously lacked a full-fledged ecommerce infrastructure a la Alibaba’s Taobao. Users with a high score receive perks like deposit-free hotel booking, while application of the program is not limited to transactions but has also been adapted for rewarding “good” behavior. For instance, those with high points can redeem recyclable trash bags for free.

Tencent’s gaming empire

Tencent snatched up another gaming studio to add to its portfolio after earmarking an undisclosed investment in PlatinumGames, the Japanese developer of the well-received action title Bayonetta said in a blog post.

Over the decade the Chinese gaming behemoth has extended its footprint to a raft of influential gaming studios worldwide, taking stakes in the likes of League of Legends maker Riot Games (full control), Clash of Clans’ Supercell (84%), Fornite developer Epic Games (40%), PlayerUnkonwn’s Battlegrounds’ Bluehold (rumored 10%), and World of Warcraft’s Activation Blizzard. It’s also Nintendo Switch’s publishing partner in China.

PlatinumGames noted that it will continue to operate independently under its existing corporate structure, a setup that’s in line with Tencent’s non-interference investment principle and a major appeal for companies desiring both the giant’s resources and a degree of autonomy. The corpus of cash will help strengthen PlatinumGames’ current business, expand from game developing into self-publishing and add a “wider global perspective.”

Tencent’s hands-off approach has led industry experts to call it an “investment vehicle” relying on external intellectual property but in recent times the company’s in-house development teams have been striving for more visibility. Its Shenzhen-based TiMi studio, for example, is notable for producing the mobile blockbuster Honor of Kings; its Lightspeed and Quantum studio, similarly, rose to fame for developing the popular mobile version of PUBG.