After two years of ambitious investments, ByteDance, the parent company of popular video-sharing app TikTok, is now facing the consequences of its gaming pursuits. The company’s gaming division, Nuverse, has begun a significant restructuring that has resulted in mass layoffs, surprising many employees.
Key Takeaway
ByteDance’s gaming division, Nuverse, is undergoing a significant restructuring, resulting in mass layoffs. The company’s entry into the gaming industry has failed to yield the anticipated success, leading to doubts about ByteDance’s gaming strategy and its data-driven approach. The layoffs add to the challenges faced by the Chinese internet industry, which has experienced regulatory crackdowns and economic obstacles in recent years.
In late 2021, ByteDance announced its entry into the video game industry, elevating gaming to one of its core business units. This move posed a newfound threat to established players like Tencent and NetEase, as well as rising star MiHoYo. However, despite its initial optimism, Nuverse’s performance failed to meet expectations, leading to the decision to scale back operations.
A ByteDance spokesperson stated, “We regularly review our businesses and make adjustments to center on long-term strategic growth areas. Following a recent review, we’ve made the difficult decision to restructure our gaming business.” The spokesperson did not clarify how many employees would be affected by the restructuring.
Unexpected Layoffs Leave Nuverse Employees Anxious
The mass layoffs at Nuverse commenced on Monday, leaving many employees uncertain about their future with the company. Nuverse had rapidly grown to a workforce of around 3,000 people in 2021, remaining at a similar scale in recent years. The restructuring has surprised industry insiders due to the magnitude of the cutbacks.
ByteDance’s heavy investment in the gaming sector includes acquisitions such as Moonton, a Shanghai-based studio, which was purchased for $4 billion. However, recent reports suggest that ByteDance is now considering divesting from Moonton and has held discussions with a Saudi Arabia-based firm.
The setbacks in gaming have raised doubts about the applicability of ByteDance’s data-driven, A/B testing strategy, which has propelled TikTok to global dominance. Unlike the instant gratification offered by short video clips, the gaming industry requires a longer and more patient creative process, making success less predictable.
Challenges in Rivaling Tencent and NetEase
ByteDance’s struggles to establish a breakthrough title or achieve commercial success in the gaming industry have prompted the company’s management team to closely examine Nuverse’s positioning as a key revenue driver. Both Tencent and NetEase have been dedicating more resources to games with longer development cycles, highlighting the importance of sustainable creativity and investment.
Moreover, ByteDance faces additional hurdles as one of the few Chinese internet giants yet to go public. Its involvement in the escalating tensions between the U.S. and China has contributed to this delay.
The mass layoffs at Nuverse also compound the challenges faced by the Chinese internet industry as a whole. Recent years have seen a regulatory crackdown that has led to decreased business opportunities and reduced workforces. The gaming sector, in particular, suffered from a hiatus in license approvals, and while the approval process has resumed, the industry’s recovery remains constrained by macroeconomic challenges.
