TikTok's owner, the Beijing-based Chinese tech unicorn ByteDance, has entered into a strategic acquisition agreement with Shanghai-based mobile games developer Moonton Technology for an undisclosed price.

Justin Yuan, CEO of Moonton Technology, said in a letter to its employees that Moonton will remain independent after the deal and it will strengthen the integration with ByteDance in the areas of games and esports, to jointly explore the global video games market.

Founded in 2014, the developer now has 700 employees and multiple offices around the world. Its most significant title, Mobile Legends: Bang Bang, has over 90 million monthly active users and 1 billion downloads globally. It has a strong position in the mobile gaming and esports markets in Southeast Asia, aided by its massive-scale advertising for user acquisition and successful localisation.

Latest move is a step-change in ByteDance's commitment to the games sector

The deal is undoubtedly the biggest commitment ByteDance has ever made to the video games industry, given the strategic importance and the potentially huge size ($4+ billion, according to several unconfirmed sources as reported by Reuters) of the acquisition. 

ByteDance has been investing in its video games business for over three years, trying to gain a firm foothold in this lucrative industry. It has made some achievements in the distribution of casual games but is still lacking in successful mid- and hardcore titles, which tend to be more engaging and profitable. The acquisition gives ByteDance direct access to a fully-fledged product: talents who have experience operating games in international markets, an established IP in Mobile Legends, and Legends: Bang Bang Professional League (MPL), which is a series of very popular esports tournaments in Southeast Asia.

Moonton is strategically valuable to ByteDance

All these resources give ByteDance a better range of competitive tools, and strengthen its international gaming business - recently rebranded Nuverse. (More info on this move can be found in this insight: https://www.ampereanalysis.com/insight/the-launch-of-bytedances-new-games-website-reveals-the-layout-of-its-gaming-business)

Moonton had other suitors butByteDance offers some unique international advantages even compared to domestic games giants Tencent and NetEase. TikTok's dominance in the social media sector will facilitate Moonton's marketing and advertising activities in the future; an important consideration given the cost of user acquisition in most markets and the incoming IDFA deprecation on iOS devices. Also, ByteDance's abundant capital will help beef up Moonton's R&D and help it to explore more markets, including potentially making a return to China. 

This acquisition is also fuelled by a common rival, Tencent, which is launching another blockbuster mobile multiplayer online battle arena (MOBA) title League of Legends: Wild Rift globally via its wholly-owned subsidiary Riot Games. However, even if Wild Rift is established on a stronger IP, it remains to be seen if it can shake the position of Mobile Legends: Bang Bang in Southeast Asia, as the latter's success was based on differentiated strategies and product features developed through years of operating experience and a long-term understanding of the local market.

Chart: Number of Monthly Active Users (MAU) of Mobile Legends: Bang Bang worldwide (in millions)