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 (%)


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


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


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


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

[email protected]

benjaminjoffe

@benjaminjoffe

www.linkedin.com/in/benjaminjoffe

www.slideshare.net/plus8star

+81 | Japan

+82 | Korea

+86 | China

Telecom & Internet

+ Added Value

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