The Logo of social media app TikTok (also known as Douyin) is displayed on a smartphone on December 14, 2018 in Berlin, Germany.
Thomas Trutschel | Photothek | Getty Images
Mobile applications developed by some of China's biggest technology firms have been catching on with U.S. consumers in the past few years, underscoring how companies in the world's second-largest economy are expanding beyond their domestic market and Asia.
In the first quarter of 2019, apps developed by Chinese firms or by companies with large Chinese investors, brought in revenues of $674.8 million in the U.S., according to data compiled by Sensor Tower for CNBC. The mobile app research firm only looked at the top 100 applications by revenue and downloads across Apple's App Store and the Google Play Store. The revenue accounted for 22 percent of the top 100 apps' total sales.
This year's first-quarter haul marks a more than 67 percent year-on-year rise in revenue from the same period in 2018.
Chinese technology firms have managed to expand into America despite the ongoing U.S.-China trade war and negative sentiment toward companies like Huawei from Washington.
Viral hit TikTok was the third-most downloaded app in the U.S. in the first quarter, just behind Facebook Messenger and a game called "Color Bump 3D." TikTok is made by ByteDance, one of the most highly valued private technology firms in China.
While it goes by the name of TikTok in the U.S., the app is known as Douyin in China. Changing names and branding have helped Chinese apps succeed with American users.
"Chinese app publishers are becoming more adept at understanding what resonates with U.S. consumers, whether it be carving out a new niche in social media with apps such as TikTok or capitalizing on hot trends among Western gamers with battle royale titles including PUBG Mobile," Sanders Tran, a data analyst at Sensor Tower, told CNBC.
"They have also greatly expanded their understanding of user acquisition in the U.S. market, which has allowed them to mount much more effective marketing campaigns. They've also backed these up with substantial spending, frequently topping the advertiser charts on Facebook and other mobile app install networks."
"PUBG Mobile," short for "PlayerUnknown's Battlegrounds," is a game developed by Tencent, China's biggest technology firm by market capitalization. Tencent makes the iOS and Android version of the game. South Korean firm Bluehole made the original and other versions of the game for consoles and PC.
Many are using the apps without knowing they are made by a Chinese firm or Chinese-owned company. That is a strategy, according to experts, that Chinese technology firms are intentionally using as they try to expand in the U.S.
"Overall, there is low awareness about the origin of these apps," Hanish Bhatia, senior analyst at Counterpoint Research, told CNBC. "At the same time, it is important for these apps to connect with users in the premium markets. So Chinese tech firms and apps are continuously making efforts to get rid of the Chinese tag. The idea is to position themselves as a global player."
Tencent's tactics
Interestingly, only nine Chinese apps featured in the top 100 apps in the U.S. in the first quarter, down from 14 in the same period last year, according to Sensor Tower. Downloads also fell. However, revenue has risen.
The revenue rise was driven by a number of successful games. Fortnite, which is developed by Epic Games, in which Tencent has a 40 percent stake, was included in Sensor Tower's analysis. It was the seventh-highest earning app in the first quarter.
Other major hits include "Clash of Clans," which is developed by Tencent-owned Supercell, and "PUBG Mobile."
While TikTok has changed branding to appeal to the U.S., Tencent has taken a different approach. Tencent products, such as messaging service WeChat, haven't had much success in the U.S., but the company has managed to get gaming products there through a strategy of acquisitions and investments in other firms.
"Tencent's big push into the West already happened, but they mainly muscled their way into the market indirectly — via acquisitions," Serkan Toto, CEO of games industry consultancy Kantan Games, told CNBC. "So instead of bringing their content to the U.S. and Europe, they rather invest in the crème de la crème locally and maintain a hands-off approach."
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