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By Zheping Huang August 26, 2021

  •  Download service seeks to match global user base with China’s
  •  Revenue at owner XD dropped 4.3% in 2021’s first half

China’s biggest indie game distributor, XD Inc., aims to introduce its novel zero-commission app store model to global users as revenue at home declines.

The creator of TapTap — a mobile game store that charges no fees on purchases made within games — is seeking to chalk up as many global users as it has domestically by the year-end, hoping to draw overseas players with hits like Genshin Impact and the self-made cartoon battle royale shooter Sausage Man.

XD, backed by TikTok-owner ByteDance Ltd. and e-commerce giant Alibaba Group Holding Ltd., publishes self-made titles as well as third-party hits without charging developers a commission on in-app purchases. That’s unlike Apple Inc. and Alphabet Inc.’s Google, which charge as much as a 30% commission, or Chinese platforms run by Huawei Technologies Co. and Tencent Holdings Ltd. that can take a cut of up to 50%.

In a strategy mirroring that of Fortnite maker Epic Games Inc., XD relies on its own titles to attract users to its store, which in turn lends more exposure to games. But its main draw for developers is the zero-commission policy and a robust gamer community that makes marketing easier.

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The commissions imposed by Apple and Google have drawn lawsuits and criticism from developers who complain they’re too high, while the U.S. mobile giants argue they’re critical to safeguarding app security and quality. XD’s store, in contrast, doesn’t shoulder the same costs that the American companies incur in providing payment or development support.

“We’ll push more developers to leverage Android distribution channels other than Google Play where they can take 100% of sales,” founder Dash Huang said in an interview before the results. “TapTap has no strict rival in the global market.”

Still, shares of XD have plunged roughly 60% since a February peak, buffeted by concerns about whether relying on advertising rather than tried-and-true commission was sustainable for an app store.

Revenue slid 4.3% to 1.38 billion yuan ($213 million) for the six months ended June, while net losses climbed to 325 million yuan, it reported Thursday. XD has previously warned investors about losses as existing cash-cow games mature and in-house development and marketing expenses surge. The firm, also backed by streaming giant Bilibili Inc., grew game developer headcount by almost half to over 1,500. 

XD has plunged as concerns about its business model persist
  

Still, XD has made inroads abroad. In June, the firm soft-launched Sausage Man for overseas markets, and so far the title has garnered 6 million downloads via TapTap. That accounted for about a third of the game’s overseas downloads, with the rest generated from Google Play and Apple’s iOS App Store, Huang said. 

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In the first half, TapTap’s overseas monthly users surged more than fivefold to 13.2 million thanks to downloads of its Steam-style service in Southeast Asia, versus 28.7 million users in China.

Its overseas exploration coincides with tighter controls over online content at home. This month, Chinese state media decried the “spiritual opium” of video games, calling attention to gaming addiction among youths. 

Huang, who’s previously welcomed public scrutiny but called the word choice “insulting,” says his firm is exploring ways to limit minors’ playing time via TapTap, including a youth mode.