The rise of artificial intelligence (AI) has been nothing short of revolutionary, especially over the past few yearsWith 2023 being hailed as the year that boosted the development of AI large models, 2024 is poised to be the year when AI-based advertising applications explode into the mainstreamA striking example of this transition can be seen in Applovin, a company across the ocean that has turned its fortunes around dramaticallyThanks to its smart advertising distribution engine, Applovin has seen its stock price surge more than thirty-fold, establishing its status as a significant player not just in the AI sector but in the entirety of the U.Sstock market.

Alongside Applovin, another company maneuvering through this transformative landscape is X.DNetwork Inc (XD Inc.), which is deeply entrenched in providing services for game developersThis year has marked a pronounced reevaluation of the company’s market value, signaling optimism among investors

Since the beginning of 2024, the stock price of Heartbeat Network has experienced a robust increase, rising from 10 Hong Kong dollars at the start of the year to a current price of 26 Hong Kong dollarsThis upward trajectory distinctly resembles a “U” shape, which suggests a 90% rise compared to previous years.

The resurgence of both stock performance and financial results highlights the strength of the TapTap platform, with investors increasingly focusing their attention thereIn its latest financial report, X.DNetwork Inc has exhibited exceptional performance metricsThe company posted an impressive revenue of 2.22 billion yuan, up 26.7% year over year, and achieved a net profit attributable to shareholders reaching 205 million yuan, reflecting a remarkable 127.4% increaseThe company also reported a gross profit of 1.497 billion yuan for the first half of the year, with a gross margin of 67.4%, a solid improvement when compared to the previous year.

The growth can primarily be attributed to the surging performance of several self-developed games released in 2024. In January and May, the company successfully launched "Let's Go Muffin" in the Hong Kong, Macau, Taiwan, and mainland Chinese markets

Following its release, this game consistently ranked within the top ten of the iOS game charts, alongside other successes like "Sword of Lily" and "Torchlight: Infinite," which bolstered revenue substantiallyFurthermore, in July, the self-developed game "Heart Town" was introduced to mainland China, sparking intense social media discussions and achieving over 25 million downloads in its first month alone.

In addition to its gaming segment, the information service arm of X.DNetwork Inc made significant gains, recording revenue of 734 million yuan during the first half of the year, marking a 21.7% increaseA driving factor behind this success has been the growth in user engagement, with TapTap’s Chinese version app boasting an average monthly active user count (MAU) of 43.2 million, a 27.3% increase from the previous year.

This dual drive of gaming and advertising on the TapTap platform has enabled X.D

Network Inc to witness a resurgence in both stock prices and operational performanceIn response, numerous institutions have rated the company as a "Buy," many analysts projecting a year-over-year revenue growth exceeding one hundred million yuanGiven the ongoing performance of new games and the consistent rise of TapTap, achieving these goals seems quite feasible.

Observers point out that while pure gaming companies might not offer substantial valuation potential, the true advantage of X.DNetwork Inc lies in TapTap on which it relies for its growthGuoyuan Securities has emphasized that the launch of new games is a primary driver behind rapid growth in performance, affirming that the TapTap platform is a pivotal element in investor confidence in the company.

The recent acceleration of TapTap's value is not only tied to its product offering but is also significantly influenced by market demand and favorable policies

alefox

The platform has excelled in areas such as the introduction of third-party games, the excavation of quality content, and innovative operational models.

From a product perspective, TapTap has effectively secured exclusive content through its self-developed games, subsequently leveraging this proprietary content to attract organic traffic and drive user growthFor instance, the recently launched first-party game "Let's Go Muffin" was accompanied by over a thousand marketing materials, successfully boosting user engagement on TapTapThe platform’s unique "non-cooperative revenue sharing" model incentivizes third-party developers to join, alongside the introduction of the new Developer Service System (TDS), designed to provide comprehensive support to developers.

With non-cooperative revenue sharing, TapTap refrains from taking a cut of the revenue generated by third-party games, and offers foundational services such as testing, updates, and operational data packages that assist developers in creating content and managing community interactions on the platform.

As of March this year, approximately 270 exclusive games have been listed on TapTap, with over 160 available for experiential downloads, showcasing a collection of high-quality titles

Third-party developers can utilize game forums to conduct community marketing and content operations, thereby enriching TapTap’s content portfolio and gradually cultivating a thriving, vertical ecosystemThis vibrant community ecology attracts even more users, promoting a beneficial cycle of engagement.

This well-functioning business loop has empowered TapTap to carve out a competitive edge, giving it the confidence to venture into international marketsThe overseas version of TapTap has already launched, and its leadership has noted a lack of similar platforms in the global arenaThus, the platform's uniqueness offers it a significant competitive advantage.

From a market perspective, TapTap has also garnered considerable tractionIn the competitive gaming landscape, marketing and distribution are paramount for a game to break through into mainstream successWhile larger gaming companies expend vast amounts on marketing, smaller developers typically operate with limited advertisement budgets

Consequently, these developers often rely on game forums and community marketing to make users aware of their offerings.

TapTap provides a low-cost advertising channel, allowing third-party developers to efficiently manage detailed community engagement, especially accommodating games with unique gameplayDevelopers are able to create communities on TapTap, enhancing user engagement and establishing a strong reputation as they attract new users.

On the flip side, gamers themselves are in search of rich and diverse gaming communities that can cater to their varied preferencesAccording to iiMedia Research, the preferences among Chinese gamers indicate a strong inclination towards casual puzzle games (40.74%), RPGs (28.71%), shooting games (31.90%), party and board games (18.28%), and multiplayer online battle arenas (29.69%). Notably, a significant portion of gamers favors two or more types of games, highlighting a need for a diverse gaming community that offers distinctive experiences.

Further research confirms that modern gamers value flexibility and convenience highly, desiring top-tier gaming experiences that are device-agnostic and accessible from anywhere

The TapTap game rankings page features a dynamic array of popular genres, encompassing role-playing, simulation, strategy, card games, and Roguelikes.

Recently, TapTap has implemented cloud gaming functionality, transferring computational and storage processes to cloud servers, which liberates players from hardware limitations and enables cross-platform and cross-device gameplay freedom.

From a policy standpoint, TapTap is currently enjoying favorable trendsAs of November, China has approved 1,281 game licenses, with 1,184 designated for domestic online games and 97 for imported titles, marking an increase of 206 game licenses compared to the previous yearThis is indeed a positive indicator that the restrictions on game licensing may soon be relaxed.

The prospect of easing approval processes for game licenses is likely to intensify competition within the gaming market arena, positioning TapTap as a sought-after avenue for game developers vying for user engagement

Thanks to its vast user base and the connectivity with new games, TapTap boasts a unique rarity within the industryFurthermore, the platform's precision in AI-driven advertisement targeting and real-time feedback capabilities provide a robust boost to TapTap's growth trajectory.

As we look toward the future, 2023 has marked a remarkable surge in AI advertisement deployment, establishing it as one of the critical growth engines for X.DNetwork IncAnalysts have projected that, spurred by developments in GPT models, the North American spaces for AI advertising and AI education have witnessed notably high growth ratesIn 2024, the commercial value of a new generation of productivity tools is expected to take center stageDomestically, AI tools are catching on widely among consumer users, with businesses showing a stronger willingness to pay, likely leading to an early surge in this sector.

Understanding the potential of AI advertising, the leadership at X.D

Network Inc has been proactive in capitalizing on this burgeoning marketWeekly meetings centered around AIGC (Artificial Intelligence Generated Content) are being held to strategize and implement advancements across various disciplines including algorithm, product design, and aesthetics.

The ongoing reforms within the company encompass establishing a new workflow amid its art department that focuses on AIGC, alongside training and production efforts linked to Stable DiffusionAdditionally, technologies related to LLM (Large Language Models) and the GPT API are being utilized to enhance existing products through iterative upgrades and testing—all while AI advertising remains a focal point for research and development.

On one hand, TapTap can yield insights into user discussions, gaming preferences, and payment tendencies, allowing algorithms to recommend games that are a precise fit, thereby augmenting advertising effectiveness for developers

Simultaneously, AI-assisted advertisement production can significantly lower the costs associated with ad creation, enabling rapid material generation for third-party developers’ campaigns.

Metrics from 2023 to 2024 indicate an increasing share of ad spend is being directed towards oCPA (Optimized Cost per Action)—an intelligent optimization tool—with more developers inclined to relay game performance data back to TapTapThis feedback loop allows developers to achieve quality user acquisition more efficiently as they optimize their ad spending.

As X.DNetwork Inc harnesses its advantages in AI game advertising distribution, combined with the rapid expansion of China’s AI industry, the effects of network and flywheel dynamics are becoming increasingly evidentBy October 2024, TapTap has seen a 43% uptick in in-platform advertising spend, securing around 10% of the advertising market share in the gaming industry

As the number of developers proliferates, a growing number of them are opting to launch their new games with advertising campaigns on TapTap to maximize visibility upon release.

With stock valuations on the rise and robust performance indicators, the future looks promising for X.DNetwork IncCurrently, the stock price hovers around 26.85 Hong Kong dollars, a stark difference compared to North American AI advertising service providers like Applovin and The Trade Desk (which boast stock prices of 313.07 USD and 127.93 USD respectively).

The trajectory of AI advertising applications aligns with China's recovery in asset valuation, hinting at significant growth potentialLeveraging its distinctive advantages on the TapTap platform and formidable game development capabilities, X.DNetwork Inc stands uniquely positioned within the capital marketsAs it embarks on this journey from a refreshed starting point, the company is set to focus on expanding its horizons.

Moving forward, the company is expected to unlock the potential of AI advertising technologies further and proactively advocate for international expansion of its gaming portfolio, ultimately striving for dual growth in both stock value and operational performance.