Dear fellow investors and friends,
2024 marks our sixth year on the public market, and it’s my fifth time communicating with you in this manner. More than just a tradition, our annual shareholder letter has been an important channel for candid communication. As I review the letters from previous years, it’s evident how they have documented our Company’s growth and aspirations as we navigated challenges along the way. I am committed to maintaining this dialogue in this year’s letter, sharing with you my honest reflections and insights.
In the recent years, we have experienced unexpected challenges. Although it is a pity that we were not able to meet all our goals as planned and faced considerable constraints, these circumstances encouraged us to pause for strategic reflection and to adjust our objectives accordingly. Over the past year, against the backdrop of shifting market conditions and our operational realities, we reassessed our capabilities, sharpened our strategic focus, and optimized our core personnel. Our efforts extended to making selective decisions across our gaming projects and TapTap operations, prioritizing resources where they could have the greatest impact.
Over the past year, we launched Torchlight: Infinite (火炬之光：無限) and T3 Arena (火力蘇打) in Mainland China, and released Sword of Convallaria (鈴蘭之劍) across Mainland China, Hong Kong, Macau, and Taiwan, and GoGo Muffin (出發吧麥芬) in public beta in Hong Kong, Macau, and Taiwan earlier this year. The rollout and operation of these self-developed projects have significantly enhanced our development and distribution capabilities, leading to increasingly promising results.
Even the older games in our portfolio such as Shen Xian Dao (神仙道), Ragnarok M: Eternal Love (仙境傳說RO：守護永恆的愛), and Sausage Man (香腸派對), despite being in its maturity stages of their lifecycles, continue to be our playgrounds for exploring and verifying new ideas. We remain actively involved in the operation and development on these games. These games are expected to receive revolutionary content updates this year.
In the past years, we have made significant investments in game development, aiming to gain a competitive edge through scalable inputs and extensive resources, however the results have not been the most favorable. As the gaming market in China grows fiercely competitive, we no longer take an aggressive approach in terms of content output and resources input. However, these efforts have not been in vain, they have significantly elevated our capabilities in production and ensured our games maintain a quality above industry standards. Looking forward, we will leverage this unique strength and focus on innovating gameplay mechanics and empathetic player engagement to drive better business results.
Due to a strategic shift in marketing investments and the impacts of various internal and external factors due to market changes, the number of active users on TapTap experienced a decline in 2023 compared to the previous year. However, after several adjustments to our advertising strategies, active user growth in TapTap PRC has since rebounded, aligning with our expectations since fourth quarter of last year.
We have continued to optimize the algorithms on TapTap to improve the efficiency of content distribution on the platform. Alongside improving quantity, we have placed a strong emphasis on the quality of content to keep our users satisfied. Furthermore, we have introduced a curated segment dedicated to individually promoting games of higher quality and potential.
As the influence and credibility of our TapTap ratings and ranking systems within the gaming industry continue to grow, our ratings, commentaries and rating systems have also increasingly become targets for manipulation. We are working intensively in combating unethical practices and promotions to maintain the integrity of our ratings. Beyond upgrading existing protocols against manipulation, we are exploring the introduction of a credit system to enable receipt of positive feedback of the long-term reputable game developers and games.
In our ongoing efforts to moderate community content on TapTap, we have observed the adverse effects of malicious reviews on both game developers and the broader community. As part of our community governance, we are continually updating our rules and algorithms to address these issues. While traffic in the content community on TapTap remains modest, it’s important to acknowledge the notable improvements we’ve seen, as user engagement has progressively improved. And, despite iOS restrictions that prevented us from offering game downloads and left the app with only community features, TapTap still achieved meaningful growth on iOS last year.
We have also made great advances in our data-driven initiatives, enabling developers to share backend data with us through a backend protocol since last year. This integration transforms user data from static figures to dynamic metrics, continuously tracked and analyzed post-download. Whether it’s developers advertising on TapTap or our own promotional efforts, the return on investment has significantly increased. Looking ahead, we plan to further lower the threshold of data feedback by integrating it directly into the TapTap SDK. This will empower us to enhance our recommendation and advertising algorithms more effectively, improving user experience and boosting developer revenues.
In the past, our TapTap Developer Services (TDS) was criticized for its complexity, with many of its features failing to meet both developers’ or our own expectations. This year, we are streamlining TDS functionalities by removing underutilized features to improve both service quality and direct revenue generation. We plan to consolidate essential services such as login, updates, friends, gaming career data, and backlink feedback into a single TapTap SDK, in order to reduce the cost for developers. Additionally, by linking multiple data points across TapTap, the SDK will not only offer us the improvement of our algorithms and appeal to higher quality players, but also provide developers clearer insights into the performance of their games at various stages and enable more effective comparisons with site-wide data, and highlighting areas for strength and improvement.
Over the past few years, our grand dreams and ambitions have propelled us through bold trials and explorations across numerous avenues. Whether investing in casual competitive games with high DAUs, expanding the global reach of TapTap, maximizing talent density, fostering a corporate culture of transparency and open dialogue, all our efforts have been commendable.
While these efforts did not always meet our expectations, in the past year we have recalibrated our strategies to capitalize on our greatest strengths in key areas, and the improvements are already evident. Nonetheless, we have not strayed from our initial ideals and ambitions. Our mission to “impact each and every gamer through the spirit of craftsmanship” remains steadfast, reinforced by our commitment to nurturing an excellent corporate culture. We have made timely and necessary adjustments to our approach, setting the stage for a more effective and sustainable progress toward our goals.
This journey has truly been one filled with love and courage, and despite the many challenges, we have no regrets about the dedication we’ve shown. My greatest insights from this last year emerged from the deep reevaluation of my own capabilities and the thorough review of past experiences. These reflections have enabled us to refine our strategies and team structures. By placing the most qualified talent in roles that align with their expertise and clearly defining their responsibilities and motivations, we are building a robust foundation for our long-term goals and assembling a team that is ready for the challenges ahead.
This year marks the 20th anniversary of my career as an entrepreneur. Reflecting on the past two decades, I’ve witnessed the ups and downs of the gaming industry and navigated the highs and lows of leading a business. Fortunately, the invaluable support of my colleagues, partners, and users has empowered me to persist in my beliefs and pursue a career I am passionate about.
I am grateful to the colleagues who have shared their love and courage on this journey with me. Our adventure continues, and although there will still be challenges, I am confident that next year is going to be better.
I would like to express my gratitude to all our Shareholders for your long-standing trust and support. XD will continue to be a company of conviction and perseverance, and we remain committed to long-term value over short-term gains, facing challenges head-on, and maintaining transparency and candor in sharing our progress.
Huang Yimeng
CEO of XD Inc.
