2003: Starting with Foreign Trade

Chapter 357 Profit Sharing Model
Huang Xitong was born in 1976 and is only 30 years old this year.

It's hard to believe that at 30 years old, his current job at Tencent's QQ Space project team is already his eighth job.

Before graduating from university and joining Tencent last year, he was either changing jobs or on his way to changing jobs. It's hard to imagine that someone born in the 70s who went to university could do such a thing.

Even though the job assignment system had been abolished by the time he graduated at the beginning of the century, college students back then were still incredibly impressive.

Perhaps due to the many hardships he has experienced, 30-year-old Huang Xitong looks more like he is 40, with a face that is far beyond his actual age.

Tan Jincheng really wanted to ask Huang Xitong why he would want to become a carpenter. How could a top student who graduated from Sichuan University end up doing this kind of work, especially since it wasn't a lucrative job in those days?

Tan Jincheng has a cousin who does this kind of work. He only has a junior high school education. He can earn more if he does contract work himself, and he can earn 50 or 60 yuan a day for others.

Forget it, let's not ask. It's a bit impolite to ask this on our first meeting.

Accompanying Huang Xitong was an investment manager from Tencent. Huang Xitong mainly discussed technical integration issues with Cheng Hao, while the investment manager was responsible for the cooperation terms. It's likely that Huang Xitong's superiors knew that he wasn't good at communication.

"The success of Happy Farm has created a new model for online game monetization, which is commendable," said Wang Xuesong, the investment manager, politely at the outset.

They carefully analyzed Happy Farm. The game had a very short development cycle and the cost should be around 100,000 to 200,000 yuan. Unlike those games that require tens of millions of yuan and take several years to develop, a small amount of money plus creativity can lead to success.

If we only consider the game development costs, Happy Farm actually broke even after just releasing skins and items. This gave game developers a lot of encouragement, showing them that game development can be done in this way and that the risks can be reduced to such a small extent.

"Mr. Wang, there should be a 'but' after this, right?" Tan Jincheng ignored Wang Xuesong's flattery and replied with a smile.

Wang Wensong also laughed: "There is indeed a 'but'."

"Although Happy Farm has achieved success and developed rapidly, it has problems such as being very easy to imitate and having an uncertain life cycle."

"Currently, we have already found seven or eight counterfeit versions of Happy Farm on the market. I believe there are many more counterfeit products under development. Some of them are just slightly modified versions of your client and then used directly."

Tan Jincheng nodded in agreement. He did not deny this point. In just two months since its launch, seven or eight imitators had appeared, which was quite a rapid pace.

The sustainability of the popularity of social games is indeed questionable. Many games have lifecycles as short as only one or two weeks, such as the later-released "Sheep's Sheep".

Furthermore, almost all players of large-scale online games have paid experience, but social games are mainly played by free players, so how much profit they can bring to developers is also a question.

Good ideas are important, but whether a good idea can generate profit for the company is a question that all developers should consider.

Wang Wensong's words also carried a threatening undertone, implying that Tencent was definitely secretly developing a game similar to Happy Farm; this is understandable, as it aligns with Tencent's corporate culture.

"Mr. Wang is right. There are indeed many imitators on the market, and I believe that as our game becomes more and more popular, there will be more and more imitators. If nothing unexpected happens, Tencent should also have such plans, right?"

Tan Jincheng noticed that Huang Xitong, who was chatting quietly with Cheng Hao, changed his expression. Having been with Tencent for over a year, Huang Xitong was clearly not a seasoned veteran and had not yet mastered the skills.

Wang Wensong, however, remained calm and said, "No, no, Mr. Tan, you misunderstand. Our company is a large company and we would not do such a thing. We are here to discuss cooperation with sincerity."

Give me a break. I know your corporate culture better than your boss does. It's not just Tencent; companies like Renren.com run by Wang Xin are definitely doing the same thing.

Renren.com has also extended a cooperation invitation, wanting to bring Happy Farm to their Renren.com platform. If they can secure a cooperation with QQ Zone, they will likely follow up with a cooperation with Renren.com.

It's a fool not to make money when you can.

"If someone is imitating us, it means our model is successful, which is a good thing. Besides, Mr. Wang should also know that the most successful imitator on the market has already changed his name, right?"

"Open a farm?"

"Yes, I also know that they originally planned to change it to Sunshine Farm or Sunshine Ranch, but unfortunately, we have also registered those two trademarks. So, imitation is fine, but the popularity will always be on our side. We are the only original ones that can be distinguished."

"On the other hand, every game has a life cycle. If you want to extend the life cycle of a game, you have to focus on updates. So we keep updating the game as frequently as once a month to keep it fresh."

"As for the free model, Mr. Wang should know about the Conquer Online game that was launched this year, right? There's no need to say more about that."

Free things are always the most expensive; anyone who's made games knows that.

The guy who sold Brain Gold (a popular health supplement) made a game called "Zhengtu" which went public this year. He abandoned the prepaid card model and adopted a pay-to-play model, making a fortune. Prepaid card games are no longer suitable for most games in the future.

Wang Wensong didn't gain any advantage in the verbal exchange. Orange Technology sent a lawyer's letter to Kaikai Farm, and he knew that the other party was forced to change its name. Kaikai Farm even used this lawyer's letter to gain some attention.

Unfortunately, the other party had registered a formal trademark, and the name change was also a fact. Wang Wensong had checked with the Trademark Office before coming here and found that Orange Technology had registered and applied for a series of domain names and trademarks related to Happy Farm, which indeed made it impossible for imitators to do anything.

He was even surprised to find the trademarks QQ Farm and QQ Ranch at the Trademark Office.

Fortunately, the other party did not register in the Internet-related category. However, after checking, it was found that the registrant was a business owner named Gu Hongshun from Yiwu. Isn't that the father of Gu Qingqing, the CEO of Orange Technology?
It really was a dog, Wang Wensong thought, and it made him angry.

Did he not understand what I just said? No, he understood it very well. There was indeed a threatening element to his words, but Orange Technology has the backing of Flash Group and investment institutions. Apart from verbally threatening the QQ Space project team, he couldn't really do anything.

In terms of the overall strength of the group, Tencent has no problem controlling the small Orange Technology, but no matter how much importance the QQ Space project team receives internally, it is impossible for them to mobilize the group's resources.

In terms of money, Orange Technology has two major backers and is not lacking at all; in terms of game innovation, the other party maintains a monthly update speed, and you don't know what content they will update next.

What's more, the other party has put up so many external defenses, and they've even applied for the trademark for QQ Farm. If it really goes online, there will inevitably be lawsuits.

If a lawsuit goes to court, Tencent will suffer a loss regardless of whether it wins or loses.

If you can't win a verbal battle, then talk about concrete cooperation. Tencent has proposed three cooperation methods.

The first option is a buyout, which means paying a fee to acquire ownership of the Heart Farm, essentially a takeover.

The second method is simply to share revenue based on a percentage of the game's earnings; the better the game's performance, the higher the share.

The third method is also very simple: it's based on a guaranteed minimum income from operations, with a cap after reaching a certain level.

Buyout, revenue sharing, and guaranteed minimum each have their own advantages. A one-time buyout would definitely cost a lot of money. If it were a year ago, Tan Jincheng would definitely have chosen this model to cash out and leave easily and comfortably.

Then he took the money and did something else, but that was a year ago. Now, Tan Jincheng doesn't care much about money anymore.

The user base accumulated by Kaixin.com and Kaixin Farm is a more important customer resource than money, and these users may become the consumer group for Flash Electric Vehicles and new energy vehicles in the future.

At the same time, this user data can also be used to train big data, which is a major trend for future development.

The reason why large internet companies can easily make breakthroughs in big data is because they have huge user resources. This is also true for Douyin. If it weren't for the user resources accumulated by Toutiao, Neihan Duanzi, and others in the early stages, Douyin would not have been able to achieve such success.

They're not even willing to buy out the shares, let alone guarantee a minimum return. Guaranteeing a minimum return is the most ridiculous thing to do. If the difference in strength between the two parties is too great, Orange Technology may be forced to accept either a buyout or a minimum return.

But this situation won't happen now, because QQ Space, or rather Tencent, can't control Orange Technology.

"Then let's talk about profit sharing," Tan Jincheng said with a smile.

Tan Jincheng didn't really care about the share of the profits. He could only earn a few cents from the game's revenue, and it wasn't a large-scale online game like Conquer Online.

Most importantly, if we can adopt the QQ one-click login mode and obtain a certain number of QQ user data, that would be the best outcome. User resources are what Orange Technology values.

With more users, a higher valuation can be obtained in the Series B funding round. Isn't that much easier than making money solely from game revenue?

Revenue sharing is naturally the last thing Tencent wants to accept. With their deep pockets, they would prefer a buyout, but they also know that's impossible.

With the support of investment institutions, only a fool would sell the goose that lays the golden eggs.

As for the guaranteed minimum return, that's a scam clause. It might work for small startups with no funds or connections, but it's just a figure of speech for Orange Technology. What if they lose their minds?
However, Wang Wensong did not expect Orange Technology to have such a big appetite. It was one thing to share the profits, but they also wanted to obtain some of the QQ users' data, which was a bit tricky.

Tan Jincheng wasn't in a hurry and told him to take his time to think it over. He figured that if he waited a day, the data for Happy Farm would improve, and the price would be different from what it was now.

I didn't have much interaction with Huang Xitong today. He seems to have some communication difficulties; his eyes only light up when he talks about technology.

But it doesn't matter. At this moment, Tan Jincheng is not thinking about poaching him directly. It would be a waste of talent to bring him over. Let's build a good relationship first.

(End of this chapter)