JD's Big Ambition To Seize The Gaming Market, Here's The Strategy

JAKARTA — At “China Joy”, one of Asia's largest gaming conferences held in Shanghai, e-commerce giant JD.com built a booth featuring a giant version of its canine mascot, Joy. It became a place where gamers gathered to compete against each other.

The display underscores JD.com's ambitions in the gaming space. But it doesn't want to beat the likes of Tencent and NetEase by making games.

Instead, the Beijing-headquartered company wants to be a go-to place for young people to buy gaming-related goods and sees e-sports and partnerships with device manufacturers as a way to do that. It can also drive growth in other parts of the business.

“We have the ability to aggregate the entire ecosystem,” Daniel Tan, President of JD Mobile Devices, told CNBC.

There are several aspects to JD's gaming business. First, millions of buyers purchased products on the JD platform and provided feedback. JD can work with partners to share that feedback to help them improve their products.

Last year, JD announced plans to work with companies such as Chinese PC maker Lenovo and gaming giant Tencent to develop smartphones enhanced for mobile games. That means JD can also distribute this and target gamers through its shopping app.

The second part of the strategy revolves around e-sports or competitive video games. JD launched its own e-sports team in 2017 called JD Gaming. Last year, he launched a mobile gaming team called JD Esports.

Global e-sports revenue is expected to surpass $1 billion for the first time in 2021, growing 14.5% year-on-year, according to game analytics firm Newzoo. Although still a small part of the overall global gaming market, growth is expected to remain strong. JD was looking forward to this piece of cake.

But its involvement in e-sports is also part of a broader marketing push to associate the company with gaming. “E-sports has helped to get into the consumer mindset,” said Tan.

He added that the company is focused on building player profiles. "By helping us promote the product," he said.

“Ultimately, I think what we want to do is build a platform where when you think about playing games, whatever you need to play games for, you go to JD,” said Tan.

JD is not in the business of producing and creating games like Tencent or NetEase. Tencent in particular has grown globally by acquiring or investing in game studios. Tan said it was not JD's focus but did not rule out co-investing in gaming companies with partners.

"I think if there is an opportunity, if it is a good opportunity, we will consider it, we are very open," Tan said.

Tan said JD's gaming efforts are still in their early stages and the company doesn't see a business model at this point. “At the end of the day, I think the whole industry is still in the incubation stage. So from our point of view, it's an investment,” said Tan.

“But we see huge potential not only in mobile phone sales, not in terms of revenue sharing in games. I think it was towards the end," he said.

What JD is doing is trying to create value. “We need to incubate the entire ecosystem before we think about how you monetize,” Tan said.

Tan also said there are many indirect benefits of investing in games. “It's about participating, it's about engaging with young people, getting along with young people. And that's the kind of consumers we want, you know ... they're going to use JD," he said.