TikTok owner ByteDance boosts investment in Roblox-like video game platform in race with Tencent to create the metaverse

Josh Ye
·5-min read

ByteDance, owner of the short-video app TikTok, has increased its investment in Roblox competitor Reworld by nearly 100 million yuan (US$15.3 million), according to people familiar with the matter, as the company seeks its own so-called metaverse platform in its escalating rivalry with video game giant Tencent Holdings.

With the new investment, Reworld added ByteDance’s head of gaming Yan Shou to its board of directors, awarding him an undisclosed number of shares, according to Tianyancha and Qichacha, Chinese platforms that track public registrations of Chinese businesses. ByteDance had previously invested US$43 million in Reworld.

Like Roblox, Reworld is a platform for designing and playing games using the company’s own simulation engine. It was founded by serial entrepreneur Xing Shanhu in 2017, as Roblox’s fortunes were rising after a decade of low-key growth.

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Reworld, however, is primarily focused on China, where it wants to become the “best platform for user-generated content for teenagers”, according to its website.

Reworld is a Roblox-like platform that allows users to create their own games and play thousands of titles. Photo: Reworld
Reworld is a Roblox-like platform that allows users to create their own games and play thousands of titles. Photo: Reworld

The increased investment is ByteDance’s latest move to gain ground in an area dominated by rival Tencent, which has the rights to Roblox in China through joint venture firm Luobulesi, a Chinese transliteration of the name.

“Reworld has been receiving a lot of attention in China,” said Liao Xuhua, a gaming analyst at Analysys. “Xing Shanhu is also a very well-known producer in the industry.”

However, Liao noted that user-generated content (UCG) can be a minefield for companies in China, where the gaming industry faces strict regulations on content and minors have limits on how long they can spend playing games.

“UGC games actually need the unconstrained imagination of children,” he said.

ByteDance-Tencent feud a boon to small gaming studios

ByteDance declined to comment for this story. Reworld did not respond to requests for comment.

Amid an aggressive push into gaming, ByteDance has been seeking to take on Tencent across all genres, using both in-house development and investments. A resulting bidding war has pushed up the valuations of small, independent Chinese studios in China.

In March, ByteDance shelled out north of US$4 billion for Shanghai-based Moonton, the developer of the biggest mobile esports game in Southeast Asia, Mobile Legends: Bang Bang. Last week, the company also invested an undisclosed amount in C4 Games, another studio in Shanghai.

Unlike other gaming companies, though, Roblox and Reworld offer a platform in which many games exist. Roblox said it is on the path to creating a “metaverse”, a term borrowed from the 1992 cyberpunk novel Snow Crash by speculative science fiction author Neal Stephenson.

The term refers to the next iteration of the internet, depicting it as a simulated virtual world where users can play, socialise and interact with one another, not unlike a massively multiplayer online game.

Roblox saw usage rise during the Covid-19 pandemic, and it has been regarded as one of the more exciting gaming companies to explode in popularity in recent years.

That popularity was rewarded by Wall Street last month when it went public on the New York Stock Exchange, where it had a market capitalisation of more than US$38 billion at the time of publication.

The company’s global popularity has been driven primarily by children and teenagers drawn to its digital sandbox, where players can create their own characters, buildings, parks and even custom gaming modes. Demonstrating the power of the platform, some creators replicated classic games such as Pokémon, Super Mario 64 and Counter-Strike.

Tech entrepreneurs in Silicon Valley and China have been drawn to the metaverse concept, and it even became a widely referenced topic among Tencent executives. Roblox rival Epic Games, of which Tencent owns 40 per cent, recently made exploring the metaverse a core company mission.

Through its joint venture with Tencent, Roblox was granted a license in December to release its platform in the country. When it finally arrives, though, it is likely to differ from how it exists in other countries given China’s heavy restrictions on user-generated content.

Roblox is focusing on collaborations with schools and educators in the country, according to its Chinese website, where it promotes the platform as a tool for science, technology, engineering and mathematics (STEM) students.

Globally, Roblox’s platform has 20 million games and 8 million developers, according to its website. Its four-year-old Chinese competitor has a much smaller footprint.

Roblox looks to expand its tween empire to middle-aged workers

Reworld said its platform had more than 3,400 games and 1,800 creators last year. It also employs 150 people in offices across Beijing, Tianjin and Seattle, the company told Chinese media outlet Youxiputao last year.

The prospect of a home-grown Chinese Roblox competitor has attracted some big-name investors, including Joy Capital, Northern Light Venture Capital and ZhenFund. All three were involved in Series A and Series B fundraising rounds, investing 100 million yuan and 300 million yuan into Reworld, respectively, according to data provider Crunchbase.

The escalation of the rivalry between Tencent and ByteDance in gaming reflects the industry’s rapid growth in recent years. Nearly half of China’s population now plays video games, and the country is the world’s largest video game market in the world by revenue.

The number of gamers in China rose 3.7 per cent last year to 665 million, and domestic gaming revenues rose 20.7 per cent to 278.7 billion yuan, according to the government-backed China Audio-Video and Digital Publishing Association.

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