Huayuan Securities: Mini-games transition to high-quality content, suggesting to seize the mature and large-scale ecological opportunities.

Hua Yuan Securities released a research report stating that casual games are transforming from fragmented pastime to mid-to-high-end and boutique. According to Gamma Data, the total revenue of the Chinese casual game market reached 39.836 billion yuan in 2024, a year-on-year increase of 99.18%. According to DataEye, it is expected that the total revenue of the Chinese casual game market will exceed 60 billion yuan in 2025. Casual games have gradually grown from fragmented entertainment to mid-to-high-end and boutique. The increasingly prosperous content ecosystem is a rare incremental space for the gaming market. At the current point in time, the company recommends seizing the mature ecosystem for volume growth. Key points from Hua Yuan Securities include: Starting from "Aircraft War," we have witnessed the transformation of casual games from fragmented entertainment to mid-to-high-end and boutique over the past ten years. The "Aircraft War" was an early WeChat mini-game, which was popular as phones began to be widely used, and the WeChat ecosystem drove the rise of lightweight games. In 2022, WeChat's mini-game innovation encouragement plan was upgraded, commercial efficiency improved, and a large number of high-quality mini-games appeared, leading to product development towards boutique quality. In April 2024, the SLG mini-game "Endless Winter" under Dotdot Interactive surpassed "The Great Journey," topping the sales list of WeChat mini-games. According to Gamma Data, the total revenue of the Chinese casual game market reached 39.836 billion yuan in 2024, a year-on-year increase of 99.18%. According to DataEye, it is expected that the total revenue of the Chinese casual game market will exceed 60 billion yuan in 2025. Amidst a flourishing ecosystem, the gaming market presents a rare opportunity for incremental growth. 1) Platform/user end: WeChat mini-programs benefit from traffic dividends. WeChat mini-programs, as an important carrier of WeChat traffic, had reached 949 million users with a 3% year-on-year growth in October 2024, and monthly active users had increased by 27.84 million. Data from QuestMobile show that from October 2022 to 2024, WeChat mini-games became the application type with the highest user engagement share. In October 2024, the monthly active users of WeChat mini-games reached 555 million, with a 5.9% year-on-year growth. 2) Channel/monetization model: More flexible, higher quality. WeChat has introduced a series of incentive policies, and WeChat mini-games can enjoy different additional incentives at different stages, with estimated income in hand ranging from 50% to over 100%. 3) Development end: faster cycle and turnover. Currently, manufacturers have mature technical capabilities to support native production and H5 compatible production for mini-games. Even for native-made mini-games, the development cycle and cost can be reduced by at least 50% compared to mobile apps. In addition, Unity has provided special support and optimization for WeChat mini-games, and WeChat has launched the Unity WebGL mini-game adaptation (conversion) solution to reduce the development costs of converting Unity games to WeChat mini-games. Trends at the current stage: Seizing the mature ecosystem for volume growth 1) The trend towards mid-to-high-end games is expected to strengthen user stickiness and ARPU. In the future, casual games may form a fusion trend with light gameplay as an entry point and heavy content for retention. The so-called "light gameplay" is to lower the user's trial threshold, and the so-called "heavy content" is to increase user stickiness through deep design such as nurturing systems. 2) The trend of mixed monetization may be reinforced. Tencent's advertising data shows that the growth rate of mixed mini-games in terms of number of products and advertising consumption exceeded 100% in 2023, and the growth rate continued to be above 100% in 2024, with 60% of the buyout consumption for IAP mini-games being mixed mini-games. Mixed mini-games were the fastest-growing track in terms of buyout trends in 2023 and 2024. 3) Casual games going global is a new form of game output. Casual games going global focus on light games developed at low cost and short cycles, focusing on H5 games, mini-program games, and other forms. User acquisition relies on traffic platforms, and the global release mode is divided into H5 games going global, mini-program games going global, and dual-platform distribution. The overseas ecosystem of casual games is expanding gradually, with overseas social media giants such as YouTube, TikTok, Discord accelerating their layout in the casual games track and gradually opening up in-app monetization features. Risk Warning Operational risks, industry policy change risks, and risks of game revenue falling short of expectations.