asian eye for the gaming guy tgx edition

Asian  Eye  for  the  

Gaming  Guy  

@benjaminjoffe  |  CEO,  +8*  |  Plus  Eight  Star  TGX  |  Singapore,  September  2011  

Asia,  Gaming  and  Me  

•  Background  •  10+  years  in  China/Japan/Korea  •  Researched  all  top  SNS  &  virtual  worlds  in  Asia  •  Advised  IMVU,  Kabam,  DeNA…  •  Organized  40  Mobile  Monday  in  Beijing  

•  Now  building  a  social  startup  in  Singapore  

•  Gaming  •  “SoLoMo”  startup  Newt  Games  in  2003  (JP)  •  Founding  Partner  of  Cmune  (#1  FPS  on  FB)  

Content  

1.  What  is  Asia?  2.   China  3.   Japan  4.   South  Korea  5.   Succeeding  in  Asia  6.  New  Asian  wisdom  

1.  What  is  Asia?  

The  Trouble  with  “Asia”  

1.  Different  infrastructures  

2.  Different  GDP  /  capita  

3.  Different  distribuCon  channels  

4.  Different  payment  soluCons  

5.  And  somedmes  different  regulaCons  

6.  Highly  compeCCve  

(and  of  course:  language)  

Users  

Country  USA   China   Japan   South  Korea  

PopulaCon   310  mln   1,330  mln   130  mln   50  mln  

Internet  Users   245  mln   485  mln   100  mln   40  mln  

Mobile  Users   295  mln   900  mln   120  mln   50  mln  

3G  Users   120  mln   80  mln   115  mln   30  mln  

Sources:  CIA  World  Fact  Book,  MIIT,  Japan  TCA,  SKT,  March  2011.  Numbers  are  rounded  for  easier  comparisons  

©PlusEightStar,  2011  -­‐  www.plus8star.com

Networks  3G

 Users  (%

)  

China  

0%

20%

40%

60%

80%

100%

0% 20% 40% 60% 80%

3G:  60%  (W-­‐CDMA  only)  Web:  72%  Avg.  14  Mbps  

3G:  98%  Web:  60%  Avg.  8.5  Mbps  

3G:  40%  Web:  34%  Avg.  5.0  Mbps  

3G:  5%  Web:  0.5%  Avg.  1.0  Mbps  

Sources:  Akamai  4Q10,  Japan  TCA,  SKT,  ITU,  IDA,  Internet  World  Stats,  March  2011  

Internet  ConnecCons  Measured  >5  Mbps  (%)  

©PlusEightStar,  2011  -­‐  www.plus8star.com  

Source:  G

apMinde

r.org  

MONEY  

H  A  R  D  

What  is  this?  

What  is  this?  

Answer:  Tencent’s  new  HQ  in  Shenzhen  

#Gimougous  Companies  

•  China  –  Tencent  made  $1B  in  1Q2011  (40%  net  profit,  50%  games)  –  10  others  listed  on  Nasdaq,  NYSE,  HKSE  –  Renren  (SNS)  listed  on  NYSE  for  $5B  in  April  2011  

•  Japan  –  DeNA  $1.3B  (2010)  –  GREE  $600  million  (2010)  

•  Korea  –  Nexon            $1B  (2010  est.)  –  NHN  (Naver,  Hangame)  $1.3  billion  (2010,  35%  games)  –  NC  So\            $525  million  (2010)  

Social  Networks  in  Asia  China   Accounts   Korea   Accounts   Japan   Accounts  

Facebook   n.a.   Facebook   4M   Facebook   3M  

Qzone  (Tencent)  

505M   Cyworld   25M  Mobage  (DeNA)  

25M  

51.com   178M   Naver   n.a.   GREE   25M  

Renren   117M   Daum   n.a.   Mixi   25M  

Pengyou  (Tencent)  

101M  Yahoo  Mobage  

3M  

Kaixin001   100M  ©PlusEightStar,  2011  -­‐  www.plus8star.com  

Just  an  idea  about  staff…  

•  Twiuer      500  

•  Facebook      2,500  

•  Renren      1,500  

•  Tencent      12,000  

Digital  Goods  &  Currencies  in  2010  

Asia:  $18  Billion  USA:  $2  Billion  

Source:  Plus  Eight  Star,  2011  

$18  billion    Digital  Goods  &  Currencies  in  Asia  

5,000   4,700  

1,500  

200   100  

2,000  

910  

2,000  

1,000  

0  

2,000  

4,000  

6,000  

8,000  

10,000  

China   Korea   Japan  

Online  Games   Social  Plavorms   Social  Games  

Virtual  Worlds   Tencent  IM,  etc.   Secondary  Market  

Unit:  MUSD  

©PlusEightStar,  2011  -­‐  www.plus8star.com  

Digital  Labor  

2.  China  

Users  Demographics  

35.8%  

35.4%  

19.6%  

7.9%  

1.1%   0.2%  

11-­‐19  

20-­‐29  

30-­‐39  

40-­‐49  

50-­‐59  

60  and  above  

Source:  CNNIC,  2010.07  

Educadon  

9.2%  

27.5%  

40.1%  

12.0%  

11.3%  

Primary  School  

Junior  Middle  School  

Senior  Middle  School  

Professional  Training  College  

Undergraduate  EducaCon  and  The  Above  

Source:  CNNIC,  2010.07  

Income  

8.1%  

20.5%  

13.5%  

13.9%  

14.4%  

14.4%  

10.1%  

2.8%  2.3%  

without  income  

Below  $76  

$77-­‐153  

$154-­‐229  

$230-­‐306  

$307-­‐458  

$459-­‐764  

$765-­‐1222  

Above  $1222  

Source:  CNNIC,  2010.07  

Online  Games  

•  120  million  online  game  users  

•  $5  billion  in  2010  

Sources:  2008-­‐2014  China's  Online  Game  Market  Annual  Report  by  Ministry  of  Culture,  iResearch,  2011  

3.2  4.1  

5  5.6  

6.2   6.6   7  

2008   2009   2010   2011   2012   2013   2014  

Unit:  billion  $US  

Tencent 31%

Netease 16%

Shanda Game 12%

Perfect World 7%

Changyou 7%

Giant 4%

Others 16%

Market  Shares  

Source:  iResearch,  2010  

Revenue  &  Profit  

2,966  

689  852   866  

365   329   203   148   81   213   111   77  

1,228  

197   180  336  

128   176   123   56   5   22  0  

1,000  

2,000  

3,000  

4,000  

Tencent   Shanda  Game  

Shanda   Netease   Perfect  World  

Changyou   Giant  Interacdve  

Kingsoy   NetDragon   CDC   The9   Renren  

Revenue   Profit  Unit:  million  US$  

Source:  Companies,  2010  

LOSS  

Market  Cap  

2.4  

6.2  

4.5  

1.1  1.7   1.7  

0.764  0.29   0.1   0.165  

5  

0  

1  

2  

3  

4  

5  

6  

7  

8  

Tencent   Shanda  Game  

Shanda   Netease   Perfect  World  

Changyou   Giant  Interacdve  

Kingsoy   NetDragon   CDC   The9   Renren  

$53.5B  

Unit:  billion  US$  

Source:  Companies,  2011.04  except  Renren,  2011.05  

Tencent  

Online Games

49% Non-gaming digital goods

30%

Other 21%

$3B  in  2010,  $1B  in  1Q2011  

Renren  SNS  +  Game  Dev.  

42%  

45%  

13%  

Online  Games  Top  MMORPG  =  31%  of  game  rev.  

(14%  of  total)  

Value-­‐Added  Services  Includes  Nuomi  (Groupon  Clone)  

AdverCsing  -­‐  Mostly  ads  sold  “per  day”  -­‐  Limited  targedng  

$76.5m  in  2010  (Loss)  

Walled  Garden  

Item   Figure  

Third-­‐party  ApplicaCons   1,000  

Revenue  from  Plahorm  in  2010  

$3.5  million  (Renren  share)  

Revenue  Share  Renren:  52%  (avg.)  Developer:  48%  

Most  developers  Look  Overseas  or  at  Qzone  

3.  Japan  

Japan’s  Gaming  Market  

•  Online  Games  

–  $1.5B  in  2010  –  Casual  Games  &  MMOs  from  Korea,  China  

–  Shiy  to  Free-­‐to-­‐Play  

•  Mobile  &  Social  boom  

–  Konami:  Mobile/Social!  ($10M/month  on  GREE)  

– Mobile  social  gaming  ecosystem  >$500M  in  2010  

The  Real  Thing:  Mobile  Social  Gaming  

Self-­‐published  +  Open  plavorms  

           Some  ads  

SNS  +  

Free  games  +  

Virtual  goods  Homepage  

GREE  Service  

Digital  goods  

80%  

AdverCsing  

20%  

AdverCsing  

Avatars  

Social  Games  

-­‐   Banners  &  Ce-­‐ups  

-­‐   CustomizaCon  with  various  items  (clothes,  accessories,  etc..)  

-­‐   Integrated  with  SNS  funcCons  

GREE  top  page  

banner  

GREE  Games  (8  self-­‐published)  

Revenue  of  Leading  Plavorms  

Net  sales  and  profitability  (million  USD)   Adverdsing  revenue  vs.  digital  currency*  

* Considering  that  there  are  no  other  source  of  revenues  

Not  Only  Kids  &  Housewives  

Teens   20s   30s  

Male   Female  

DENA  &  GREE  

•  Self-­‐Published  Games  +  Walled  Gardens  

•  Proprietary  digital  currencies  

•  70/30  Revenue  share  

•  $500  million  paid  to  third-­‐pardes  (GREE,  2010)  

Mobile  Social  Apps  Make  Money  in  Japan  

Very  Local  Payment  

CyberAgent  |  $18M  in  1Q2011  

CyberAgent  Subsidiaries   37  Ctles  across  6  plahorms  

Source:  CyberAgent,  2011.03  

#1  Virtual  World  |  Pigg  

Pigg  by  CyberAgent  

•  6M  reg.  users  bring  fortunes  •  $20M  in  1Q2011  

•  As  much  as  Angry  Birds!  

•  $100M+  in  2011?  

Mini-­‐Games  for  $1M  

•  Each  game  generated  $1.2M  in  December  2010  

On  Android  

4.  South  Korea  

Digital  Goods  Market  

$4.7  bln  

$1  bln  

$100  mln   $10  mln   $10  mln  

Online  Games  

Secondary  Market  

Social  Plavorms  

Social  Games  

Virtual  Worlds  

Online  Games  |  Key  Players  

Revenue  &  Profits  (2010)  

Unit:  MUSD  

>50%  of  Nexon’s  revenue  is  overseas  

935  

1,310  

525  427  

243  376  

607  

251  111  

47  0  

200  

400  

600  

800  

1,000  

1,200  

1,400  

Nexon   NHN  (Hangame)  

NC  Soy   Neowiz   CJ  Internet  

Revenue   Profit  

Market  Cap  (2011.04)  

13.0  

9.2  

5.4  

1.1  0.3  

0.0  

2.0  

4.0  

6.0  

8.0  

10.0  

12.0  

14.0  

Nexon   NHN  (Hangame)  

NC  Soy   Neowiz   CJ  Internet  

Unit:  billion  USD  

This  is  sCll  $300  million!  

Ranking  in  Internet  Cafes    

Name Category Publisher Market Share

AION MMORPG NCsoft 15.6%

Tera MMORPG NHN (Hangame) 14.2%

Sudden attack FPS CJ Internet 10.6%

WarCraft 3 RTS Blizzard (US) 5.9%

StarCraft RTS Blizzard (US) 5.0%

FIFA Online Sports Neowiz Games + Electronic Arts (US) 4.3%

World of Warcraft MMORPG Blizzard (US) 4.0%

Lineage 2 MMORPG Ncsoft 3.5%

Dungeon & Fighter MMORPG Nexon 3.2%

Lineage 1 MMORPG Ncsoft 2.9%

Source  :  Gametrix,  2011.02  

MMORPG  Massively  Muldplayer  Online  Role-­‐Playing  Game  RTS    Real-­‐Time  Strategy  FPS    First-­‐Person  Shooter  

Secondary  Markets  

Growth  of    ItemBay  users  

Unit:  million  

Source  :  ItemBay  

6M  Users     $480M  

Social  Plavorms  

•  Fragmented  – Naver  Social  Apps  – Nate  /  Cyworld  –  Facebook  Korea  – Daum  Yozm  

•  All  early  stage  –  Limited  revenue  (<$10M  in  2010)  

–  Facebook  growing  fast  but  weak  payment  soludons  

Type of payment

Credit card Regular credit cards

Mobile billing Reported on the mobile phone bill

1588 ARS Call 1588 and bill on fixed line

Rainbow point SK Telecom’s membership

E-Station pointBox SK’s web-to-phone system point

OK Cashbag SK Group’s loyalty points service

BC Top point BC card’s point service

KB Total point KB bank’s point

Hyundai Card point Hyundai credit card point

PointRO(KT point) KT’s point system

Culture Coupon Coupon from Ministry of Culture

Book & Culture Coupon Coupon from Book Organization

Happy Money Coupon Independent firm’s coupon

Teen Cash Independent firm’s coupon

Cyworld Coupon Cyworld’s coupon

Cyworld  |  Digital  Currency  

5.  Succeeding  in  Asia  

Defining  Success  

1.  Revenue  

2.  Profit  

3.  Usage  /  Brand  recognidon  

4.  Development  

5.  Learning  

Western  Companies  China   Japan   Korea  

OperaCons  Zynga  (w/  Tencent)  PopCap  (w/  Renren)  

Zynga  RockYou  

WoW  

Licensing  /  Partners  WoW  (+Netease)  

Crossfire  (+Tencent)  Angry  Birds  

PopCap  Crowdstar  

EA  (FIFA  Online)  PopCap  Kabam  RockYou  Playfish  Cmune  

Development  

Ubisoy  PopCap  Zynga  Playfish  Kabam  Cmune  

Zynga  Playfish  RockYou  

Ideas  too!  The  First  Farm  Game  was  made  in  China  

Wealth  of  Plahorms:  How  much  for  you?  

•  China  – Qzone    $M  for  happy  few  (~10)  –  Renren    Sdll  small  – Others    Unclear  

•  Korea  –  Sdll  small:  total  market  was  $10M  in  2010  

•  Japan  – Mobile  mostly,  but  hundreds  of  $mln!  –  Chinese  companies  first  movers  (Rekoo,  Rakoo,  etc.)  

iOS  Mobile  Rankings  |  China  (games  &  udlides)  

FHM  

PvZ  

Nubee  

iOS  Mobile  Rankings  |  Japan  (RPGs,  Adventure)  

(Book)  

BioHazard  

(Photo)  

(Slot)  

(Book)  

(BioHazard)  

(AR  Game)  

(Music)  

(Racing  Game)  

(Adv.  Game)  

(RTS,  SEGA)  

(Social  RPG)  

(Slot)  

(Adv.  Game)  

(Pokemon)  

(Pirate  RPG,  by  GREE)  

(Hostess  SIM)  

(RPG)  

(RPG)  

iOS  Mobile  Rankings  |  Korea  (English,  Tools,  Games)  

(English)  

(English)  

(Xvid  player)  

(Tool)  

(Tool)  

Case  Studies  

•  PopCap      Pragmadc  and  organic  

•  Angry  Birds    Soon  big  in  China?  

•  Cmune      Made  from  China  

Uberstrike      by  Cmune  

•  #1  FPS  on  Facebook  

•  Made  from  China  +  Global  reach  

•  We’re  hiring!  

•  www.facebook.com/uberstrike  

Disclosure:  I  am  an  investor  in  Cmune  

Mac  App  Store  

Facebook  

Cyworld  (Korea)  

Uberstrike.com  

6.  New  Asian  Wisdom  

Interesdng  New  Things  

1.   Nano-­‐transacdons  

2.   SNS  as  MMO  funnels  

3.   New  social  plavorms  

4.   Fourth  GeneraCon  Digital  Goods  Model  

5.   Smartphone  opportunity  

6.   Various  deals  &  partnerships  

1.  Nano-­‐Transacdons  

•  Tencent  had  – 1  Q  Coin  =  1  RMB  =  0.1  EUR  

•  They  introduced  – 1  Q  Point  =  0.1  RMB  =  0.01  EUR  

•  …for  goods  &  dme-­‐based  “nano-­‐transacCons”  

2.  SNS  as  MMO  funnels  

•  Renren  revenue  more  from  games  than  ads  

•  MoneCzaCon  much  higher  in  MMOs  

•  RetenCon  is  beuer  too  

•  What’s  your  ROI?  

3.  New  Social  Plavorms  

•  Naver,  Nate,  Daum      Portals  

•  QQ,  NateOn          IM  

•  Ameba              Blog  plahorm  

•  DeNA,  GREE          Mobiles  +  Smartphones  

4.  Fourth  Generadon  Model?  

•  1G    Box  game  /  Pay-­‐per-­‐download    (e.g.  COD)  

•  2G    Time-­‐based  (1  hour  to  1  year)  (e.g.  WoW)  

•  3G    Digital  goods:  permanent        (e.g.  IMVU)  

•  3.5G  Digital  goods:  rental          (e.g.  QQ)  

•  4G?  Digital  goods:  trading      (e.g.  ZT  Online  2)  

e.g.  ZT  Online  2  

•  Giant  Interacdve  no  longer  sells  items  in  ZTO2!  –  Trading  is  main  revenue  model  –  Reward  acdve  users  with  items  –  Let  users  decide  on  the  right  price  –  5%  commission  on  transacCons  

•  Benefits  –  Capture  secondary  market  – Avoid  “one-­‐price  for  all”  for  digital  goods  –  Ensure  fairness  – MoCvate  users  

5.  Smartphone  Opportunity  

•  Smartphones  booming  in  Japan  &  Korea  •  Japan:  50%  of  new  phones  in  2011  (today:  5M+  iPhones)  

•  Korea  >  10M  smartphones  

•  China  has  lots  of  smartphones  &  feature  phones  •  Beijing  Apple  store  is  #1  worldwide  (>Times  Square)  

•  Android  spreading  but  app  stores  fragmented  •  Building  apps  from  China  works  

Disclosure:  I  am  an  investor  in  MyGengo  

6.  Deals  &  Partnerships  

•  China  –  Funds  by  Tencent,  Giant,  Shanda  (>$1B)  

•  Japan  –  Funds  by  DeNA,  GREE,  Mixi  (>$1B?)  – GREE  acquires  OpenFeint  (US)  – GREE  partners  with  Tencent  (CN)  and  Mig33  (SE  Asia)  – DeNA  acquires  NGMOCO  (US)  

•  Korea  –  Various  M&As  –  Some  investments  by  Nexon  in  US  

More  about  “Innovadon  Arbitrage”  

Thanks!  

www.plus8star.com  

benjamin@plus8star.com    

benjaminjoffe  

@benjaminjoffe  

www.linkedin.com/in/benjaminjoffe    

www.slideshare.net/plus8star    

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