Recently, Chuangmeng Tiandi released its 2023 financial report and obtained revenue of about 1.92 billion yuan, gross profit of about 670 million yuan, and adjusted net profit of about 140 million yuan, successfully turning a loss into a profit. Through financial reports, it can be seen that behind the continuous release of Chuangmeng Tiandi's profitability, it is also showing some positive marginal changes that cannot be ignored. The company is entering a new development cycle.

Focus on the Middle East and go overseas to strengthen growth

In this financial report, the author believes that one of the biggest highlights of Dream World is going out to sea.

As the diverse nature of the game industry becomes more and more prominent, it has gone far beyond the scope of simple entertainment, showing deep cultural value and driving effect on cutting-edge technology, and has become the core driving force for the development of the industry.

During the National Conference this year, Guo Yuanyuan, member of the National Committee of the Chinese People's Political Consultative Conference and vice dean of the Megacities Economic and Social Development Research Institute at Capital University of Economics and Trade, pointed out, “The current society's understanding of games is vague or even biased. The game industry has both cultural and economic benefits in the field of international cultural communication. By integrating knowledge, training, and experience in various fields such as education, health, technology, etc., it can be effective on a global scale and pragmatically promote innovation and new productivity development in Chinese society.”

Through globalization, game products can also cross borders, gain a larger market, attract more players, and maximize the commercial value of game products.

Seizing this trend, Dream World will focus on overseas markets, with the goal of increasing the share of overseas revenue to 50% within the next three years. In 2024, Chuangmeng Tiandi will be the first to enter the Middle East market, participate in the Middle East LEAP Technology Exhibition in early March this year, and sign a contract with Saudi Cloud Computing during the exhibition.

This raises the question, why should you be the first to enter the Middle East market in 2024?

The author believes that it can be discussed simply from the three aspects of industry policy, market space, and user needs:

First, from an industry policy perspective, the Middle Eastern government's support for the game industry has provided a solid foundation for game manufacturers to develop.

For example, in Saudi Arabia's “Vision 2030” plan, the game industry is included in the national strategy. It is proposed that by 2030, the revenue generated by the e-sports and game-related industries should reach 0.8% to 1% of the Kingdom's GDP, which is about RMB 93 billion. Furthermore, this summer, Saudi Arabia will launch the annual Esports World Cup (EWC). This policy orientation and ecology not only provides policy guarantees for game manufacturers, but also creates favorable conditions for the long-term development of the industry.

Second, in terms of market space, the Middle East is an important incremental market for global games, showing huge potential.

According to a report by the US market research company Niko Partners, game users in the three major Middle Eastern markets of Saudi Arabia, Turkey, and Egypt will reach 85.8 million, with annual revenue of 3.1 billion US dollars.

Looking at the Saudi market alone, the “Middle East Gaming Trend Report” indicates that NewZoo currently estimates that the ARPPU (average income per paying user) of Saudi game users is as high as 270 US dollars. 12% of users will spend heavily on mobile games, and paying players are close to 29 million, showing the strong spending power of players and the profit potential of the market. Furthermore, the Middle East region has perfect infrastructure and high mobile communication and internet penetration rates, which also provide good technical support for game promotion and user experience.

Finally, users are the lifeblood of games, and the huge user base and demand is another key factor driving the layout of Dream World in the Middle East.

Currently, the Middle East region has a population of nearly 500 million. The population structure is relatively unique. The overall population structure is young, and the Internet penetration rate has reached 80%. The large group of young users, on the other hand, has a strong interest and high acceptance of games. In particular, in the past two years, as the number of young users in the Middle East who have been exposed to European and American culture has increased, the whole Middle East region is becoming increasingly popular, and acceptance of two-dimensional culture is constantly increasing.

Based on this, the author believes that “Kalapicchu”'s entry into the Saudi market and the entire Middle East region is undoubtedly a wise strategic choice.

And this is only the starting point of the strategy of creating a dream world to go overseas. According to reports, “Carapicchu” will also begin overseas testing in Japan, South Korea, Europe, and the US in April, and plans to launch multiple PC, mobile game, and console versions around the world this year.

Strong R&D and operation capabilities create competitiveness and go global

Focusing on the corporate level, Chuangmeng Tiandi, as a game company with integrated global R&D and operation capabilities, is determined to independently develop quality game content, continuously explore the deep needs of existing users, strengthen its own “hematopoietic” capabilities, and continuously activate the company's endogenous growth vitality.

Based on multi-dimensional advantages such as version content updates, IP linkage, long-term operation, and the refined operation capabilities of the community, Dream World's self-developed games are expected to continue to contribute to increased performance in global operations.

First, in terms of self-developed new tours.

Take the blockbuster product “Carapicchu” developed by the company as an example. As the world's first two-dimensional competitive shooter, the “Kalapichu” client was officially tested in China on February 1 this year. During the beta period, the number of new users increased dramatically by 130%, the average number of daily active users increased by more than 60%, and user retention increased by 10%.

At the same time, the participation rate for its new casual gameplay (cart) exceeds 20%, and the average daily online time exceeds 120 minutes, which shows the game's outstanding performance in attracting users and increasing user stickiness, and provides valuable experience and data support for the company's subsequent continuous development and operation.

This data not only highlights the huge potential of “Carapicchu” to become a blockbuster game, but also lays optimistic expectations for its future global distribution layout.

In March of this year, the company brought the blockbuster self-developed product “Kalapichu” to the Communications Technology and Information Technology Exhibition (LEAP) in Riyadh, Saudi Arabia. During the exhibition, the company reached a strategic cooperation with the Saudi Cloud Computing Company (SCCC). The two sides will combine their respective advantages to deepen cooperation in the field of gaming and e-sports to jointly promote the development of the gaming and e-sports industry in Saudi Arabia and the Middle East.

In this cooperation, on the one hand, SCCC will use its advanced cloud infrastructure to provide nationwide network performance optimization services for Dream World to ensure that games such as “Kalapicchu” provide the best user experience and game performance in Saudi Arabia.

The management of Chuangmeng Tiandi said at the performance exchange meeting, “The strategic cooperation with SCCC is mainly to provide cloud infrastructure for games such as “Carapicchu” and “Subway Parkour” to bring a better gaming experience to local players. In the future, we will cooperate with more local companies to better integrate into the local market.”

On the other hand, SCCC will also rely on its resources to help promote Dream World's Fanbook, AI application services, and SaaS tools to further promote game development capabilities in Saudi Arabia.

As a community platform with a large number of users, Chuangtiandi's Fanbook had added more than 10 million users by the end of 2023, and the number of communities had increased by more than 40,000. Through refined operation strategies, the Fanbook community can deepen the connection between the company and users, and achieve efficient interaction and collaboration between the two parties. Also, with the support of AI tools, community activity and user stickiness can also be further enhanced. This user-centered operating model will help “Carapicchu” achieve low cost customer acquisition and high user activity.

According to reports, Dream World plans to launch “Carapicchu” on various platforms such as consoles and mobile devices one after another to achieve a multi-terminal layout, all of which are expanding the game's audience and increasing market share. At the same time, the company will also continue to develop and unlock more content such as new gameplay, new maps, and new characters to meet the growing needs of users and maintain the game's continued competitiveness in the global market.

Second, look at the updated iterative aspect of the product.

For example, “Honor All Stars” has been at the top of the horizontal action fighting RPG mobile game list since its launch in August 2021. Last year, it also launched 7 major updates, including the introduction of the 70-level version, the Dark Domain Maze version, and the Dragon Soul Warlord version. From user experience and interface design to operational fluency, game details have been thoroughly refined to continuously bring new game experiences to players, and various operational and flow data continue to perform excellently.

At the same time, Chuangmeng Tiandi is also actively collaborating across borders with different fields to improve players' satisfaction and loyalty by understanding players' needs and preferences, optimizing games in a targeted manner.

In recent years, the use of IP resources to shape brand image and create new economic growth points has become the focus of attention of the entire entertainment industry.

The “IP+” strategy came into being and promoted cross-border cooperation. In November of last year, “Honor All Stars” was deeply linked with the famous Guoman IP “Shonen Song Xing Overseas Fairy Mountain Edition” to integrate classic elements and gameplay from national comics to bring players a more fresh and fun gaming experience. This cross-border cooperation not only brought new user groups to the game, but also opened up diversified revenue channels for the company and enhanced the brand's market competitiveness.

Finally, many well-known IP products with large user volume, long life cycle, and high user stickiness have laid a broad user base and brand influence for Dream World.

For example, “Subway Parkour” remained popular ten years after its launch, ranking in the top ten iOS game download lists in mainland China, and revenue continued to grow steadily; “Dream Home” and “Dream Garden” were launched for 7 and 8 years respectively, and revenue surged more than 50% over the same period in 2022, reaching a record high since launch.

Overall, based on the advantages of multi-dimensional global R&D and operation capabilities, it is believed that Chuangmeng Tiandi's future growth potential will be further verified and realized in the deepening of its globalization strategy.

epilogue

Returning to the capital market, whether it was the recent holding of the Global Game Developers Conference (GDC) or the fact that many delegates and members emphasized the importance of the game industry to China's local economy and cultural output during the two sessions, the game sector has received great financial attention.

Regarding this, CITIC Securities believes that Chinese games have now made a phased breakthrough in going overseas. In the context of encouraging overseas travel at the policy level, there is still plenty of room for improvement in the penetration rate and payment of overseas mobile games. China's game revenue is expected to reach US$32.898 billion in 2025, and CAGR +20% in the next 4 years, with room to double compared to 2021. The highlight of the next stage of game going overseas is to systematically cultivate overseas markets and strive to build Chinese game brands. Major manufacturers are required to continue to promote game industrialization R&D systems, self-developed IP capabilities, and localization capacity building, so as to continuously strengthen the mentality of overseas players' users and expand commercialization space.

In summary, the author believes that with a variety of long-term IP reserves, self-developed products with explosive potential, global strategic layout, and multi-dimensional capabilities such as the unique Fanbook platform, Chuangmeng Tiandi has more definite repair expectations, and the space for imagination brought by AI is also wider. With the gradual market profits of the company's game products, the company's valuation may also be expected to be re-valued.