Will Messaging Apps Be Gaming Hubs in the US?

Eric Johnson
WeChat commercial promoting it's app.
WeChat | YouTube

Toward the start of the year, one of the big trends to watch in mobile gaming was the spread of messaging apps.

The apps are already a phenomenon in Asia, with Line, KakaoTalk and Tencent-owned WeChat leading the charge in Japan, Korea and China, respectively. Now a few big players are targeting the West as the next battleground.

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The idea behind messaging-gaming combos, in a nutshell: People like mobile games, and people like talking and texting with their friends. Messaging apps can gain a competitive advantage over one another by offering must-play games, and developers potentially gain more engaged players by tapping into an app's social graph for matchmaking, leaderboards and marketing.

U.S.-based Tango, which raised a $280 million Series D led by the Alibaba Group in March, is making games a priority in its messaging app; it announced on Monday the hiring of an experienced VP of games publishing, Jim Ying, who most recently oversaw game publishing partnerships at Gree. Tango also said it would create a $25 million fund to devote to bringing new developers into its app.

In an interview with Re/code, Ying said Tango will "prioritize Western markets."

"There are lots of high quality games in Asia, and strong players in those markets already," Ying said. "In the messaging space, no one is dominant [in the West]."

Apple app winners
Apple app winners

To understand why the current lack of a clear winner matters, consider something like the format wars between VHS and Betamax or HD DVD and Blu-ray. These apps are distribution platforms rather than hardware formats, but they share a creative dilemma: Until someone pulls ahead, most content creators will remain on the sidelines; and until there's an amazingly successful "it" game for an app like Tango (or one of its competitors), it will be harder for anyone to pull ahead in the race.

As the potential distributor of that next "it" game, Tango faces competition from other messaging apps like Line, which is well established in Japan, and WeChat, for which China is home.

Games are a big deal for Line, which recently filed for a $10 billion IPO and attributes 60 percent of its revenue to in-game purchases. Senior business development manager Hyung Jun Kim said Line has "a huge user base" in Latin America and Spain, but is still figuring out how to cater its game delivery to non-Asian markets.

Read More Is LINE a bargain or blowout at $10 billion?

Not all of the big players are so sure about games, though. WhatsApp, which Facebook acquired in February for $19 billion in cash and stock, has avoided the trend because it wants to create a "pure messaging" experience. CEO Jan Koum famously keeps a note taped to his desk that reads, "No Ads! No Games! No Gimmicks!"

Due to heavy competition and market differences, it's possible there will never be just one top messaging app in the U.S., Tango CTO Eric Setton said.

"The U.S. is very diverse," Setton said. "In China, Korea, Japan, one of the reasons they've been won over [by certain apps] is that the users are more uniform. … We want to gain as much momentum as possible in U.S. and [in the end] probably will have two or three established messaging apps."

By Eric Johnson, Re/

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