Tencent collaborates with ByteDance in gaming face-off against NetEase

China's gaming company Tencent is collaborating with former rival ByteDance to promote its latest mobile party game, "DreamStar," in a bid to compete with NetEase's successful game, "Eggy Party." 

Despite a history of disputes and mutual platform restrictions, Tencent is leveraging ByteDance's popular advertising platforms, such as Pangolin, to boost DreamStar's visibility.

Analysts anticipate that DreamStar could generate up to 6 billion yuan ($842 million) in its first year, while NetEase's Eggy Party, buoyed by advertising on ByteDance platforms, is expected to earn 8 billion yuan this year with 100 million monthly active users.

Tencent's decision to heavily rely on ByteDance's advertising platforms, particularly Pangolin, is notable given Tencent's own robust ad network and promotion channels. Approximately 38 per cent of DreamStar ads were placed on Pangolin in the last month, surpassing Tencent's own ad network, Youlianghui, which accounted for only 12 per cent of the ads.

The strategic move is part of Tencent's 1.4 billion yuan investment plan to establish DreamStar's ecosystem and ensure its success. As part of the collaboration, Tencent is allowing video game live-streamers, including notable figures like Zhang Daxian, known for playing Tencent's "Honor of Kings," to stream on ByteDance platforms, signalling a shift in their relationship.

The thaw in Tencent and ByteDance's historically contentious relationship is evident as ByteDance recently decided to scale down its gaming business, refocusing on its core platform operations and stepping back from direct competition with Tencent and NetEase.

The collaboration emerges as China's gaming industry returns to growth, with domestic revenue rising 13 per cent to 303 billion yuan this year, overcoming the industry crackdown from two years ago.

(With Reuters Inputs)