!GLOBIS CAPITAL PARTNERS

Virtual Goods – A Global Perspective

GLOBIS CAPITAL PARTNERS

Shinichi (Shin) TakamiyaGlobis Capital PartnersTel: +81-(0)3-5275-3637Fax: +81-(0)3-5275-3825Email: s-takamiya@globis.co.jphttp://www.facebook.com/shin1http://www.globiscapital.co.jp/

"GLOBIS CAPITAL PARTNERS

Speakers

SpeakersLudovicLudovic BodinBodin, CMUNE, CMUNEDoug Doug BewsherBewsher, mig33, mig33Andy Andy TianTian, XPD Media, XPD MediaPhilip Philip YunYun, NHN USA, NHN USAModerator: Shin Takamiya, Moderator: Shin Takamiya, GlobisGlobis Capital Partners Capital Partners

#GLOBIS CAPITAL PARTNERS

Framework for Today’s Session

Device

WebPF

EnablingService

App

RoW

Geography

Layer2

1Agenda1. Situation Around the Globe1. Situation Around the Globe

• Japan• China• Other Countries

2.2. Going Global Going Global –– Feasibility Feasibility and Key Success Factorsand Key Success Factors

• App Layer• Enabling Service Layer• Web PF Layer• Device Layer

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Agenda

1. Situation Around the Globe1. Situation Around the Globe

2. Going Global 2. Going Global –– Feasibility and Key Success FactorsFeasibility and Key Success Factors

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Situation Around the Globe – JapanWho is Making $$$?

Registered Users

$1.31(¥105)

Paying Users (Assuming 10%)

$13.15(¥1,183)

Registered Users: 15M on MobileAnnual Revenue: $154MOperating Margin: 60%Monthly ARPU2)

GLOBIS CAPITAL PARTNERS1) $1 = ¥ 902) Jul - Sept 2009

and rising…

&GLOBIS CAPITAL PARTNERS

Situation Around the Globe – JapanA Representative Example: GREE

GREE: sales $154M, operating margin 60% (08) with virtual goods

• 99% of traffic from mobile• 74% of revenue from virtual goods

(in-game items, and avatars)• 3 monetizing apps + numerous free

traffic generating apps• Closed: in-house app dev.

Top Monetizing App: “Fishing Stadium”

• Strong Engagement Factor• Level up – fishing points, and items etc• Frequent events and stage updates (in days)• Collection

• Moderate Viral/Social Factor• Fishing w/ team (trip and competition)• Ranking board

• Users Acquire Gold by• Premium membership subscription• Avatar item purchase• Invitation• Affiliate program

2.9

13.90.3

60%

-32%

36%

05

10

15

Jun. '07 Jun '08 Jun. '09

-50%

0%

50%

Revenue (¥ B)

OperatingMargin

'GLOBIS CAPITAL PARTNERS

Situation Around the Globe – JapanWeb PF: 3 Dominant SNSs

GREE mainly monetizing from in-game items, and Mobage avatars. mixi on its way – just opened up their PF

2.913.9

0.1 0.30.0

36% 60%

-32%

9%-14%

0

20

40

06/'05 06/'06 06/'07 06/'08 06/'09

1.910.1 12.1

0.7 5.2

37% 31%48%22%

42%

0

20

40

03/'05 03/'06 03/'07 03/'08 03/'09

DeNA:Mobage

6.437.629.7

2.914.2

42%43%29%17% 32%

0

20

40

03/'05 03/'06 03/'07 03/'08 03/'09As of Jun 09, except for GREE1)

Source: Company IR documents, except for “guess-timate”1) Sep 09, 2) Sales from virtual goods on SNS business only, 3) “Guess-timate”: rough guess from qualitative info.

Revenue ¥B Operating Margin

UU

Mobile TrafficVirtual Goods

SalesVirtual Goods

ARPU/UUPaying%

(“Guess-timate”3))

ARPU/Paying U.

15M

99%

77%2)

$1.31

10%+?

Around $13?

17M

73%

8%2)(Premium Subscription)

$0.04(No Sales from VG Yet)

1.4%

$3.5(Premium Subscription Fee)

14M

100%

52%2)(Avatars)

$0.53

5-10%?(Assuming 7.5%)

Around $7?

(GLOBIS CAPITAL PARTNERS

Situation Around the Globe – JapanApp: Open SNS PF

SNS PFs opening up – $ few hundred million app market emerging

Mobage(DeNA)

1) Mar 092) Reuters, Jul 6, 20093) Mar 09 SNS PF business only4) Estimated from PF market size

Revenue($ M)

PV/Mon.(M)))

UU(M)))

PF MarketApp Market ($ M)

mixi+

Mobage5003)15,36032

Few $Hundred M

-Billion4)?

Facebook

Approx

500?2)79,226276Approx

500-1,000?

App Market Size

Aug 09: PC PF Oct 09: mobile PF

Jan 10: initial partners Mar 10: full open

Opening Up of mixi and Mobage (DeNA)

*GLOBIS CAPITAL PARTNERS

Situation Around the Globe – JapanApp: App Trends Across 3SNSs

Global trends, and local trends co-exists

App Category

Farm Quiz

Action

Commu-nication

Board/Card

Pet

Sports

Promo/Coupon

1.Helper “Gyaruo”

3.Beans Walk

2.Baseball Stadium

5.Dep’s Summer Holiday

4.Playing Cards

6.Mah-jong

7.Night Campus

8.Moba soritia

9.City Golf 2

10.Seat puzzle

• Fishing Stadium

• Kurinoppe

• Box Garden

• Dri Land

1.Sunshine RanchDv:Rekoo, 2.04M UU

2.Social FarmRAKOO 0.95M

3.Kanji TestDrecom 0.95M

4.Speed+RacingRock You! Asia 0.55M

5.My mixi ReportSoratobu 0.52M

6.Memory SketchREAL 0.52M

7.My mixi TetrisTetrisonline 0.46M

8.Paper FortuneHonda 0.37M

9.Monster LifeHigh Five 0.35M

10.Social FaceCybird 0.27M

Source: mixi app ranking, Mobage-town app ranking, GREE web page

DeNA:Mobage

mixi• Farming games popular • Porting of console games

DeNA: Mobage• Light casual games

generating traffic, and monetizing via avatars

GREE• Fishing game and pet game

monetizing engine generating most of the revenue

• Generating traffic by numerous free light casual games

,GLOBIS CAPITAL PARTNERS

Situation Around the Globe – JapanWeb PF: SNS vs Online Game

Rapidly growing SNS, and slowing online game. Comparable size in 1-2 years?

Source: JOGA online game market report 2009

06 07 0806 07 08Source: 3 companies’ IR

CAGR06-08131%

0

50

100

24% 11% 11%124

112102

¥B150

YoYGrowth426% 234% 61%

9

2846

0

50

100

¥B150

CAGR06-0811%

SNS Market Size (Total Sales of 3 SNSs) Online Game Market Size

"!GLOBIS CAPITAL PARTNERS

Situation Around the Globe – JapanWeb PF: Emerging Models

Emerging new models – Cookpad & Ameba Pigg

•Flash based PC/mobile virtual world – chat and mini games

•Virtual goods model: avatar and my room deco.•1.1M UU, revenue $ a few M/mon, achieved monthly breakeven (as of Nov 09)

•PC/mobile recipe CGM - 571K recipes•6.9M MAU - 25% of the women in their 30’s•Revenue US12M, EBIT $4.6M (FY 04/09),

• 57% marketing solution (B2B)• 28% ad• 16% premium membership

Targeted Media “Cookpad” Browser Based Virtual World “Ameba Pigg”

$1 = ¥ 90

""GLOBIS CAPITAL PARTNERS

Situation Around the Globe – JapanEnabling Service

No integrated enabling service PF since mobile carriers serving as payment PF across mobile and PC

Overview

1) Unique requirement in Japan

Community Management

MonetizationSupport

Community Patrol1)

User Support

Ad

Payment

Virtual Currency

Viral Mechanism (Invite, Review, and Ranking etc)

Social GraphUser Acquisition

• Enabling service vendor

• App provider and web PF respectively• Mobage: available to 3rd party at a cost

• Web PF’s official ad program

• Primarily mobile carriers, plus prepaid web money, and credit card

• App providers – no 3rd party enabling service vendors

*SNS avatars: Web PFs’ proprietary avatars provided by 3rd party

• Web PF – no 3rd party enabling service vendors

• Open space in iPhone

Analytics

In-Game Avatar

App Provider

Enabling ServiceProvider

Web PF

!

!

!

!

!!

!!

!!

"#GLOBIS CAPITAL PARTNERS

Situation Around the Globe – ChinaOverview

AppApp

Enabling Enabling ServiceService

Web Web PlatformPlatform

DeviceDevice

•Virtual goods preferred monetization method•App genre seeing many original innovations – farming, aquarium, hospital, tower, etc•Chinese companies are brining their original games to global audience•Market is early with many small developers, no dominant players as on Facebook

•Most SNS platforms local – available only in Chinese. •PF fragmentation: 10+ SNS, major Internet companies launching their own SNS’s•Non-SNS sites such as forums and portals actively launching social games•50:50 rev share model between PF and app, with PF actively promoting and distribution apps

•Access dominantly via PC•Social gaming early and rapidly growing on mobile Internet

– Mostly text/image games in large mobile communities– iPhone to be launched in end of 09 from China Unicom– Android based OPhone launched in Jul 09 from China Mobile

•Direct consumer payments based on virtual currencies provided by PFs•No analytics and optimization support from the PFs or 3rd parties

"$GLOBIS CAPITAL PARTNERS

Agenda

1. Situation Around the Globe1. Situation Around the Globe

2. Going Global 2. Going Global –– Feasibility and Key Success FactorsFeasibility and Key Success Factors

"%GLOBIS CAPITAL PARTNERS

Going GlobalApp Layer

Global common trends and some developers global across PFs

Source: mixi:mixi app ranking as of 23 Oct 09, Facebook: all Facebook app ranking as of 23 Oct 09, Renren: becommedia app ranking as of 22 oct 09

1.Sunshine RanchRekoo 2.04UU

2.Social FarmRAKOO 0.95M

3.Kanji TestDrecom 0.95M

4.Speed+RacingRock You! Asia 0.55M

5.My mixi ReportSoratobu 0.52M

6.Memory SketchREAL0.52M

7.My mixi TetrisTetrisonline 0.46M

8.Paper FortuneHonda 0.37M

9.Monster LifeHigh Five 0.35M.

10.Social FaceCybird 0.27M

1. Farm VilleZynga 61.1M MAU

2.CausesCauses 33.6M

3.Mafia WarsZynga 25.9M

4.Café WorldZynga 22.1M

5.We’re RelatedFamilylink.com 21.3M

6.Pet SocietyPlayfish 20.5M

7.Yo VilleZynga 19.9M

8.Farm TownSlashkey 18.7M

9.Texas Holdem PokerZynga 18.5M

10.Birthday CardsRockYou! 18.1M

1. Happy FarmFive Minutes 3.60M DAU

2. Sunshine RanchRekoo 2.3M

3. FishpoolFishpool 1.1M

4. Sole TowerKingnet 0.9M

5. AquariumTwo-fish 0.9M

6. Renren RestaurantRenren 0.7M

7. RonHospitalRongTian 0.7M

8.Animal ParadiseRekoo 0.5M

9. Cute PigYibo 0.5M

10. Hoolai HotelHoolai 0.4M

App Category

Farm Quiz

Action

Commu-nication

Board/Card

Pet

Sports

Promo/Coupon

Virtual management

"&GLOBIS CAPITAL PARTNERS

Going GlobalApp Layer

What it take to become a “global contents” – reflecting fundamental human needs into the game system?

Self Actualization

Self Esteem

Social Needs

Safety Needs

Physiological Needs

Game Element• Game Design: game world/story,

graphics/BGM, and characters etc• Growth: level up, skills and items etc• Battle/Competition• Item Production/Trading• Community Management: events,

quests, and updates etcSocial Element• Reach of Community Involvement• Strength of Community Involvement• Interaction Among Users:

help/competition

Fundamental Needs(Maslow’s Hierarchy of Needs) Game System

"'GLOBIS CAPITAL PARTNERS

Going GlobalWeb PF

Global business or accumulation of countries?

Source- US: Hitwise 9/09- Canada: Hitwise 9/09- Germany: Nielsen Online~8/09 /Unique Audience- UK: Hitwise 9/09- Brazil: Neilsen Online 12/08- Mexico :Alexa ~8/09- China: Nielsen Online 12/08- Japan: mixi/DeNA/GREE IR report/Unique Users

1

3

2

GermanyMexico China JapanUS UKBrazilCanada

North America North AmericaSouth

America Europe

SNS Ranking by Traffic

"(GLOBIS CAPITAL PARTNERS

Going GlobalEnabling Service

In general enabling service highly reliant on the local situation. The key to globalization cross boarder payment system?

Community Management

MonetizationSupport

Community Patrol

User Support

Ad

Payment

Virtual Currency

Viral Mechanism (Invite, Review, and Ranking etc)

Social GraphUser

Acquisition

• Regulatory issue only in some countries

• Process universal, but language issue

• Technology universal, but ad sales local business

• Hugely reliant on local regulations and historical industry evolution

• Technology and process universal and basis for virtual goods monetization

• Based on real social community

Analytics

In-Game Avatar

Global

Global/Local Nature of the Function

Local

• Reliant on web PF and social graph – if the PF is global potential to become global

• Technology universal, but taste of the avatars highly local

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Going GlobalDevice Layer

Mobile or PC? Or, does it even matter?

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Thanks for Listening!