NetEase’s ‘Eggy Party’ success leaves gaming rival Tencent scrambling for hits

When Chinese tech group NetEase launched Eggy Party last year, a mobile game featuring cute, squishy eggs navigating obstacle courses, it appeared to be a flop. But then the unexpected happened — it cracked the market. 

NetEase executives were stunned as the game, which according to company insiders, had a smaller development budget than other big titles, racked up 30mn daily active users and became the most downloaded games app in China earlier this year.

Eggy Party has put NetEase in direct competition in the casual games market with its larger rival Tencent and underscored the unpredictable tastes of China’s more than 660mn gamers, who collectively spent $45.5bn on gaming last year, according to Niko Partners.

The viral mobile game, where friends compete against each other, has deepened the rivalry between the two largest Chinese gaming companies after Tencent’s investee company Epic Games put off the publication of a mobile version of a similar title due to a bitter legal dispute with Apple, according to company executives. 

“Eggy Party was a dark horse,” said Chenyu Cui, a gaming analyst at consultancy Omdia. “NetEase did not put much market effort into it, and no one was expecting it to do this well,” she added. 

NetEase, which derives 77 per cent of its revenue from gaming, has excelled in so-called “hardcore games”, including Fantasy Westward Journey and Tianxia, which appeal to seasoned gamers and are geared towards PC and consoles.

Eggy Party is NetEase’s first smash hit in casual titles, which are easy and usually free to play on mobile, a domain that Tencent has traditionally dominated with games such as Fight for the Golden Spatula and Triple Match 3D. The Shenzhen-based internet giant has leveraged its ubiquitous messaging and payment app, WeChat, to cement its top position by building games into its platform. 

Lola Kang, a 19-year-old university student in the southern city of Guangdong, is an Eggy Party fan because it breaks the mould of many other battle royale games filled with buxom female avatars in skimpy outfits designed to appeal to the “male gaze”. 

“This is not a ‘bro’ game but a ‘sis’ game,” she said, adding that she enjoyed the user-generated content that allows players to create their own gaming worlds.

NetEase’s founder and chief executive, William Ding, has become directly involved in Eggy Party’s development to ensure its continued popularity, according to company insiders. He is pushing for the game, which is popular among young women, to be a testing ground for generative artificial intelligence tools for users to create their own obstacle courses. In a recent investor call, he exuded confidence that Eggy Party would become an enduring title with at least a 10-year shelf life.

While Tencent’s gaming portfolio remains popular in the country, NetEase’s ability to create a viral social game such as Eggy Party has caused consternation in its rival’s headquarters after it spent billions of dollars between 2019 and 2021 acquiring studios to secure its next hit title.

Tencent is expecting a big revenue boost this year from the domestic launch earlier this month of the popular shooting game Valorant. But one staffer in the gaming team said senior leadership was still “very anxious about the pipeline of new mobile games.”

“Tencent feels a lot of pressure from Eggy Party,” they said, adding that “nothing has yet materialised” from its massive spending spree.

NetEase’s share price has risen 35 per cent this year, bolstered by a positive turn in investor sentiment after Beijing started issuing gaming licences following an 18-month pause during a regulatory shake-up of the sector. 

Tencent’s stock, meanwhile, has risen just 4 per cent over the same period. The group, which gets around one-third of its revenue from gaming, has been more exposed to the economic downturn, with slowdowns in online advertising and consumption hitting its social media and fintech businesses. 

Robin Zhu, gaming analyst at Bernstein, said Eggy Party’s success underscores the “sometimes random and unpredictable nature of the gaming industry successes”. 

“There is enough evidence of massive companies spending so much money on game development and getting nowhere to suggest that some companies are better at developing games than others,” said Zhu. 

He added that NetEase, famed for its freewheeling and artistic culture, in which teams continuously pitch new game ideas and are given financing through various rounds of testing, has been conducive to yielding good results.

Another Tencent manager in the gaming department, who plays Eggy Party in their free time, said they lacked the same “creative atmosphere”.

“NetEase has a higher tolerance for failure and gives its copywriters, planners and artists more creative freedom,” they said, adding that Tencent had been overreliant on monetising its hugely popular but ageing titles PUBG and Honor of Kings.

Tencent’s frustrations have been compounded by the perception that Eggy Party is a “copycat” game of Fall Guys, another multiplayer obstacle course title developed by developer Mediatonic.

Epic Games purchased Mediatonic in 2021, in a move to cement its position in this burgeoning sub-genre. But according to people familiar with the matter, Mediatonic’s plan to launch the mobile version of Fall Guys was derailed by its parent company’s ongoing legal battle with Apple over its app store policies.

The void was filled by Eggy Party in China, while Finnish-developed Stumble Guys became popular overseas.

Tencent is fighting back by developing what one gaming staffer called a “copycat of the copycat game”. The Shenzhen gaming group is testing a new multiplayer obstacle course game Playground in a move designed to attract Eggy Party’s player base.

But the same employee noted that “with Eggy Party, in this important party game genre, NetEase is in a much better position than Tencent. Once you have a strong product in a genre, you’re the winner”.

Tencent and Epic Games declined to comment.