ByteDance, TikTok’s parent company became a potential challenge to established players like Tencent, NetEase, and others. However, despite the initial spotlight, ByteDance's gaming arm, known as Nuverse, is now undergoing a substantial reduction in operations after two years of underwhelming performance. This move has taken many employees by surprise.

“We regularly review our businesses and make adjustments to centre on long-term strategic growth areas. Following a recent review, we’ve made the difficult decision to restructure our gaming business,” said a ByteDance spokesperson, reported TechCrunch. 

The current wave of extensive layoffs has left numerous Nuverse team members in suspense, awaiting a decision about their future. The ultimate scope of the restructuring's impact on the workforce remains uncertain. However, in 2021, Nuverse expanded rapidly to approximately 3,000 employees, a size it has predominantly maintained in recent years, as per information from the Chinese tech news outlet LatePost.

ByteDance invested substantially in acquisitions, notably acquiring the promising Shanghai-based studio Moonton for $4 billion. Earlier this month, Reuters reported that the company is actively exploring the divestment of the studio and has engaged in discussions with a firm based in Saudi Arabia.

Reuters initially reported the news of the layoffs on Monday morning, indicating that ByteDance would soon disclose the "winding down of its Nuverse gaming brand and a complete withdrawal from mainstream video games," based on insider sources. 

However, according to TechCrunch, ByteDance's statement implied that certain segments of the team will be retained. ByteDance's setbacks in the realm of video games, as well as its virtual reality venture Pico, raise questions about the universal applicability of its data-driven A/B testing strategy that propelled TikTok to global dominance. 

While ByteDance has accumulated an unparalleled wealth of consumer insights through its short-video apps, the success of video games requires a more protracted and patient creative process, arguably less predictable than the immediate satisfaction provided by dopamine-infused video clips. 

In contrast, both of its competitors, Tencent and NetEase, have been channeling more resources into games characterised by extended development cycles.