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China's Internet Giants Vie to Win Income From Mobile Games

Stocks in this article: BIDU CHL ATVI CHA TCTZF

TAIPEI (TheStreet) -- The next wave of tools to bash sugary little blobs in Candy Crush Saga could really start costing smartphone users in China. Obsessed gamers might feel sideswiped by the gradual accumulation of charges, once they pause play long enough to notice. But China's top mobile Internet providers will experience a burst of sweetness.

Tencent (TCTZF), Baidu (BIDU) and a few mid-cap peers in Chinese Internet space are moving to rely on this gradual accumulation of charges to monetize mobile games as a core second revenue stream after advertising, industry watchers say.

Providers who sell games through social messaging services or other convenient, user-friendly mobile means should score the most serious money. Investors who sell popular game apps to China's smartphone users stand to earn a few chocolate gold coins, as well.

The country's middle-class, particularly its younger urban male population, already forms a willing, passionate consumer base for these pay-to-play schemes. Such schemes are evolving in the West and elsewhere -- still without a clearly defined leading strategy.

Developers and mobile content providers would offer that market segment a free starter version of popular games such as UK-based King's Candy Crush Saga or World of Warcraft by Activision Blizzard's (ATVI) Blizzard Entertainment in the United States. Higher levels of the game or special tools for raising scores would come at incrementally higher prices noticeable to users only in the long term.

"There are a few hundred levels of Candy Crush, for example, so if you pay a few dollars a small amount you can get special powers to crush more of the candy basically," says Eric Harwit, tech-specialized Asian studies professor at the University of Hawaii. "It's like death by a thousand slices. You don't realize how much you're paying for the games. Then it's an economy of scale."

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