Gamification of Chinese consumer tech (Abridged version)
The reasons why every Chinese consumer app is a massive game
Premium members have received an unabridged version of this article earlier with more product pictures and content (including products that are suitable for gamification and types of gamification traits). Premium members also have access to this month’s Meituan Product Walkthrough in the Chinese Characteristics’ Circle community.
Going forward, I intend to post more extensively on Circle and via paid posts, esp since there’s interest in my personal stock portfolio and it’s a good topic to discuss among like-minded folks.
A finite game is played for the purpose of winning, an infinite game for the purpose of continuing the play. - Finite and Infinite Games by James Carse
Last October, a feline obsession was stalking the Chinese masses. Every time I glanced around in restaurants or on the underground, someone was playing with a digital, and frankly, obese cat (OK, stocky). In the fragmented off-hours, people fed the cat, amassed items for it, visited their friends' cats and lavished attention on their virtual companion. This was Taobao's Singles Day cat game, and in exchange for spending time in this virtual world, people received real-life coupons in return. People were into the cats, too; one virtual toxoplasmosis carrier ended up getting a billboard for his digital pet.1
This game wasn't an exception — looking around, every Chinese super-app has a mini-game or two tucked away in its offering. Taking a step back, gamification features like player status ranking and luck-of-the-draw mechanisms pervades the tech user experience. To engage with the Chinese metaverse is to play endless games. So why does Chinese tech love to imbue their offerings with games?
In China, every super-app plays an infinite game by getting its users to play finite games.
Long-time readers of my newsletter know that I view the Chinese tech world from a set of starting conditions. These are the rules of the game that then affect the actions of the players. In China, these were having mobile as the default installation base, a rich heritage of free-to-play (F2P) developers and a large time-rich but cash-poor population who want to consume entertainment.
For Chinese tech, much derives from the fact that the installation base for technology is mobile versus PC. Being mobile-first means that the user is more attentive as an app is a more immersive experience than a browser. There's also a rough cut off for the number of apps any sane person can have on their phone. A very general statistic notes that the average person has 40 apps installed on the phone. Out of that 40 apps, 89% of the time is split between 18 apps. We see similar metrics for Chinese users who, on average, open 26 apps a month. About 75% of their time is spent in the ecosystems of Tencent, Alibaba, Baidu, Bytedance and Kuaishou. There's a natural limit to mobile time, and attention is directed towards the top apps.
This drives a sense of urgency for owning the user — mobile mental real estate is scarce, and every app is looking for more time and attention. Gamifying the user experience in e-commerce platforms or social networking platforms means that, first and foremost, the app can compete for a broader range of the user's time. If a utility app is suddenly made entertaining, users will mentally switch viewing engagement from being a chore to leisure. App Annie shows the entertainment categories are by the largest after social and communication (which are also somewhat entertainment-related).
I think this framework generalises across numerous consumer tech areas when the product’s utility (or usefulness level) is not sufficient to justify continuous and sustained usage. Adding entertainment and status elements can help to increase its appeal.3 So from that perspective, gamification is a product longevity booster but is not a replacement for the app’s inherent utility.
As Wei mentioned on the NFX podcast, consumers seem to have an infinite appetite for entertainment. In the always-connected mobile phone era, all forms of entertainment are starting to be fungible. In a previous era, different forms of entertainment were more segregated markets with natural structural moats. Those mainly don't exist anymore. That means companies compete with the best qualities of any form of entertainment now, not just competitors’ strengths in their direct market.
This means that adding entertainment to a product brings it into competition with every other entertainment vice out there. Netflix's true competitor is Roblox. If you're in China, everyone's true competitor is Tencent’s Honour of Kings, aka the mobile version of League of Legend. If you’re Alibaba, rather than try to face-off Cao Cao with faster delivery, why not do it with a cat?
As a product booster, gamification features open up new dimensions for an app, specifically retention, acquisition, monetisation and user segmentation. Let's walk through each of those.
Retention - a recurring theme in this newsletter is owning the user through owning their time. If the app aims to maintain and increase user’s attention real-estate (aka increasing traffic at the top of the funnel), mini-games (especially in the waiting and collecting genre) encourages frequent app check-ins, increases usage frequency, DAUs and improves retention. After all, you wouldn't use all the functions if you're not in the app in the first place.
The one KPI that Chinese super-apps all adhere to is the frequency of use per user per day. First popularised by Amazon, the principle is that a company should start in a high-frequency usage category to encourage a user habit before leveraging the resultant organic traffic to move into subsequent categories. Meituan is the master of this move and has used this strategy to move beyond food deliveries to categories such as online travel booking, laundry services and attractions bookings (Meituan walkthroughs are the go-to this month in the CC circle community).
Games and gamification of apps are retention machines when done well; people check in on their progress and make sure their friends haven’t surpassed them. While they are there, they might also utilise other functions in the app too. Gamified features are often used to train users on certain usage behaviours (be it posting more content, using different features sets or inviting their friends), under the guise of points accumulation. This will also train the user to be more sticky to an offering once they grasp the tool’s full capabilities.
Acquisition - Cooperative games with their inherent social interactions are the perfect vehicle for getting new users. The walled garden of apps (and, by extension, Chinese tech) means CAC is ever-growing (we've covered how this has led to the rise of private traffic in Youzan and Perfect Diary). This means that Chinese tech firms are forever looking for new ways to acquire users cheaply and organically.
Getting that one avid super-promoter user who can bring on an entire friend group is ideal and was the rocket virality fuel that propelled Pinduoduo to spectacular growth at its inception. Games will often have in-build ceilings several levels in where players can’t progress without friends’ help. Once the user is hooked, they’ll happily do the acquisition on behalf of the tech company.
Another resource they are acquiring is data on the social graph and behaviour data between users. Mapping user’s interaction patterns allow for more sophisticated recommendation algorithms and can lead to higher LTVs from users.4
Monetisation - Games allows apps to open up new lines of monetisation. There are the traditional ways of getting people to pay up for in-game items and speed up achievement time, all standard gaming practices. 5
But there's also the potential for advertising inventory, as mobile real estate means that not much of the screen is available for advertising inventory.6 Getting served an ad is annoying, but being asked to play a game of spin the wheel and then told that your prize is a 30% discount off tooth whitening is more enticing. Loss aversion and gamification skillfully hide advertising in plain sight.
The Chinese Characteristics Circle Community has the full video walkthrough
User segmentation - How do you segment users into high capacity versus low capacity to spend? You get them to self-select by seeing who’s willing to trade time for coupons. In playing the games, the users reveal their preferences around time, capacity, and willingness to pay, allowing more accurate targeting. Mini-games and their real-world rewards in the form of coupons or red packets (cash subsidies) are shrewd price discrimination from the platforms. It allows them to sell the same item at different price points to diverse populations.
A tier-one city white-collar worker wouldn’t wait for a sale to get a reusable coffee cup at 50 RMB. Taobao can sell the same cup at 10 RMB to a tier-three city dweller after making the user jump the hoops to acquire the relevant coupons. It doesn’t all have to be price sensitively, Alipay’s tree planting or Meituan’s free lunches for kids appeals to people’s altruism. That also tells you about who is playing. There is utility in the entertainment with Chinese super-apps, just as there’s entertainment in the utility.
Games people play
Many of us will happily adhere to a set of strange rules for nothing but virtual points. As the Games Maker for the New York Times writes, “Games are a controlled form of freedom. Our brains grab onto them because they are structures that exist to be avoided.” Games are fun. It gives the user a sense of achievement, progress, and controlled capriciousness in a tight feedback loop.
Be it belonging, mastery or control over the unknown, we manifest our deepest desires in games. Do you know who knows this? The cat. The cat knows this very well. In the weeks leading up to October, people talked about their cats incessantly, and even now, it creeps into conversations. Like the best metaverse products, their effect doesn’t stop at the virtual. With games in Chinese tech, when it’s done well, the user gets joy from playing and leave with an emotional connection to the app. In the future, everything will be games, and all we’ll want to do is to keep playing.
If I sound dismissive, this is only because I didn't start in time to get the good coupons. Also, my cat didn't like me.
As is the case with most of my interesting China tech observations, Wei said some variant of it first
The older set of Chinese tech ecosystem all had extensive exposure to the gaming industry, it was the only industry that made money on mobile. This rich gaming DNA means that Chinese tech approach topics with a gaming-first mentality.
One of the key reasons advertising didn't get that big in China.