Android Update Source: Chukong Rides China's Android Wave To 14X Its Gaming Revenue Year-Over-Year

With a tidal wave of Android devices finally supporting real revenues for app developers in mainland China, the biggest domestic mobile game makers are scaling up quickly.

Chukong, the parent company behind mainland China’s hit game Fishing Joy, says its revenues are up 14 times year-over-year in the first half of this year, according to Jimmy Lai, the company’s chief financial officer. Back in July, the company said it has passed monthly mobile game sales of $12 million, and expected to end the year with more than $150 million in revenue. They’re also now 700 employees strong, although Lai declined to update the revenue figures for this month.

Keep in mind though that this is gross revenue. This figure doesn’t count the amount that the company has to pay out to payment providers or the local Android app stores.

Unlike the U.S. market, which just has two major platforms in Android and iOS and a standard 30 revenue share given to each, China is much more complicated.

There are numerous Android app stores, which can charge a 40 to 50 percent rate, plus mobile operators which run the billing services. What that means is that developers typically see less than half of each dollar they pull in through in-app purchases.

Most of Chukong’s revenue comes from their first-party games. Perhaps 30 to 40 percent comes from the titles they publish on behalf of other developers.

“That’s starting from almost nothing at the beginning of the year,” Lai said. He brushed off questions about a possible IPO for the company

“We haven’t started anything. Because we’re VC-backed, clearly an IPO would always be one of our options.”

The company took $14 million in funding from Sequoia China and Disney’s Steamboat Ventures and has backing from other firms like Northern Light and Granite Global Ventures.

With that funding, they’ve built out a side-by-side first party development studio and a publishing program. Those two arms have produced about eight of Chukong’s own games, plus 50 other third-party titles.

Through that network, they reach about 63 million monthly active players and about 11 million daily actives. About 90 percent of their players are from mainland China and the company’s flagship title Fishing Joy makes up the bulk of that.

The company is beefing up its third-party publishing offerings by building in a social layer allowing chats between players. Many other predecessors like PapayaMobile, which was another China-focused mobile gaming platform, have tried this. But perhaps they were too early to market.

Chukong also gives away a game engine called Cocos2dX to developers. It’s used by about a quarter of the top 50 game developers, as ranked by PocketGamer.

“It’s very pertinent for us to contribute to this industry. We put so much in this game engine and give this source code for free,” said Liu, who added that the company has about 50 people working on the project. “We don’t think of ourselves as like other Chinese companies, as we want to support the industry as a whole.”

They face a couple of strategic challenges in the next year. Tencent’s WeChat, which has become the mobile social network of choice in mainland China with north of 236 million monthly active users, is becoming a mobile gaming platform by adapting Kakao Talk and Line’s strategies for China.

But the company’s chief operating officer Gary Liu says that Tencent can’t possibly own the market.

“The market might be worth 24 billion renminbi ($3.9 billion) in 2014 and we think the WeChat platform could reach maybe 5 to 6 billion of that,” Liu said. “We don’t think they could exceed 30 percent.”

He said this is especially true if the Tencent doesn’t open up the Wechat, or Weixin, platform to third-party game makers.