CHINA IN YOUR HANDS
Challenges & Opportunities in
China„s Mobile Gaming Market
THINGS YOU SHOULD
KNOW ABOUT CHINA

2
CHINA IS BIG

It‟s a big place…

9.6 Million Km2

with a “Great Firewall”…

Project Golden Shield
3
CHINA‟S INTERNET IS BIG

..and a lot of people “behind” it…

1.3 Billion
4
CHINA‟S INTERNET IS BIG
China: The World‟s largest online population

78.5% access the internet via mobile device
Sources:...
CHINA IS MOBILE
CHINA„S ONLINE

China: Over IS BIG
1.1 billion mobile subscribers
LANDSCAPE
Mobile subscribers in China by...
CHINA IS ANDROID
Chinese Smartphone Shipments To Exceed 360
Million In 2013 - IDC
China Top Five Smartphone Vendors Q2 201...
CHINA IS ANDROID

Umeng Sept 2013

Kantar Aug 2013

IDC Sept 2013

Enfodesk Nov 2012

Sources: umeng.com, kantarworldpanel...
CHINA IS ANDROID
Why the discrepancy in figures?
•

Data gathered may be platform specific

•

Data may not include custom...
A LITTLE APPLE BUT A LOT OF REVENUE
App revenue distribution by country
August 2013
China Ranks 5th
despite no Google
Play...
iPAD, KING OF TABLETS
CHINA„S ONLINE
LANDSCAPE IS BIG
The rise and fall(?) of the “Steak”
China Tablet Market Share Q2 201...
CHINA„S SMART TV FUTURE IS BRIGHT
CHINA„S ONLINE
LANDSCAPE IS TV
China‟s SmartBIG Market is booming

Sources: thenextweb.c...
CHINA LOVES MOBILE GAMES
CHINA„S ONLINE
LANDSCAPE IS BIG
In 2012 the Chinese Games Market was worth

Mobile gaming = YoY g...
CHINA LOVES MOBILE GAMES
CHINA„S ONLINE
LANDSCAPE Mobile
The Chinese IS BIG Gaming Market
Paid Mobile Gaming Market
Gross ...
THE REGULATORS AND
REGULATIONS

15
THE GAMING REGULATORS
More than 20 national level government agencies are
responsible for the control of the internet, man...
THE GAMING REGULATORS

Cultural regulators
set to be merged
“The merger is designed to
minimize the overlap of duties,
inc...
THE GAMING REGULATIONS
• Games publishing license required which in turn requires 10
Million Yuan ($1.6 million U.S) of re...
THE GAMING REGULATIONS

Oh… and foreign games are banned
(sort of) under “Notice 13” from the
GAPP

Sources: gapp.gov.cn, ...
YOUR PATH TO CHINA

20
THE DIY ROUTE

The problem:
“Foreign enterprises are not allowed to provide online game
operation in China market in forms...
THE DIY ROUTE
A solution?
The “Sina-Model” /
Variable Interest Entity
(VIE)
“Chinese law has a very clear
provision. A con...
THE DIY ROUTE

Exceptions to the rule?

Sources: nasdaq.com, seekingalpha.com

23
THE DIY ROUTE

Exceptions to the rule?
“Since 2010, Shanghai‟s arbitration board has
invalidated two Variable Interest Ent...
THE PARTNER ROUTE

Work with a China partner who knows the China
gaming, mobile, and social landscape as well as
the polit...
ADAPTING YOUR
MOBILE GAME FOR CHINA

26
LOCALIZATION
• Over 200 million Chinese
can read some English words,
less than 1% can speak English
• Chinese people are v...
LOCALIZATION
• For your game to be
successful in China
quality localization is a
must
• Watch out for
encodings! ANSI and
...
TRANSCREATION
• Most people in
China have never
heard of Hansel and
Gretel, Goldilocks
and the three bears,
or know the st...
TRANSCREATION
• Graphics may need to be adapted to be be more
farmiliar and engaging to a Chinese audience
• “Harmonizatio...
BRAND

=
kě kǒu kě lè

=
fēi sǐ bù kě

31
MONETIZATION
Forget Pay to Play. China is Free to Play
• IAP Prices must be calibrated to acceptable Chinese standards
– E...
MONETIZATION

Free to Play makes life harder for
the pirates

Sources: Smartions’ Research

33
SOCIAL MEDIA

Google+, Facebook,
Twitter & YouTube
are just some of the
services not available
in China due to
government ...
SOCIAL MEDIA
“Social media is huge
in China - bigger than
anything I've seen
in the west.”
– Hugo Barra @ Xiaomi
(Former A...
SOCIAL MEDIA

7 major social networks
In China each with
over 100 million
users

Sources: socialtimes.com, gamasutra.com, ...
SOCIAL MEDIA
Make sure your Game allows for sharing via China SNS
“Chinese gamers boast about game
upgrades they've purcha...
PAYMENT INTEGRATION

Google Wallet and
PayPal are not
options for China

Sources: Smartions’ Research, greatfire.org

38
PAYMENT INTEGRATION
• In China there are multiple
mobile payment solutions

Independent Payment Services

(Independent, Ca...
PAYMENT INTEGRATION

Sources: iresearchchina.com, chinainternetwatch.com

40
PAYMENT INTEGRATION
China 3rd Party Mobile Payment Services - Q2 2013

Mobile Payment

Sources: iresearchchina.com

41
PAYMENT INTEGRATION
China 3rd Party Mobile Payment Services - Q2 2013

Mobile Internet
Payment

Sources: iresearchchina.co...
PAYMENT INTEGRATION

137+ Million
Registered Accounts

800+ Million
Registered Accounts

• Alipay is King, but carrier bil...
PAYMENT INTEGRATION

+

+

• Baidu has aquired 91.com and HiAPK
• Baidu has entered the mobile payment
services arena with...
A NOTE ON INTEGRATIONS
•

As part of the API key application process for many 3rd party
China social and payment services,...
PUBLISHING YOUR
MOBILE GAME IN CHINA

46
APP STORE PUBLISHING

Say goodbye to the West…

47
APP STORE PUBLISHING

…and hello to China!

48
APP STORE PUBLISHING
iiMedia Q3 2012 China
App Store Rankings
Rank

App Store

1

myapp.com

2

91.com

3

mm.10086.cn*

4...
APP STORE PUBLISHING
China App Store Market Fragmentation
• App stores can be unprofessional,
unstructured, & arbitrary in...
APP STORE PUBLISHING
Caution!

If dealing with app stores directly…
• Never sign extended exclusivity with a
single app st...
APP STORE PUBLISHING
What about Apple„s China App store?
• Apple„s App Store servers not in Mainland China
(Hong Kong, Mac...
APP STORE PUBLISHING
Are there 3rd party iOS app stores in China?
• Yes, but you cannot distribute apps to them
without be...
DEALING WITH PIRACY

54
BRAND/IP PROTECTION
Dealing with piracy

• Make sure your game uses a solid F2P model
• Calibrate entry level IAP pricing ...
BRAND/IP PROTECTION
Dealing with piracy

• Reclaim your brand and ensure differentiation
through rebranding where necessar...
THE SUCCESS STORIES

57
THE PRIZE
2013: “Fishing Joy's monthly
sales over $6 million”
- Jon Jordan pocketgamer.biz

58
CONCLUSION
Summary of recommendations
Work with a trusted China partner who will:
•
•
•
•
•
•

Provide the necessary struc...
CONTACT US

Thank you for your attention!

Questions?
Patrick Wheeler
CEO at Smartions EU

www.smartions.net

@PatrickJWhe...
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Smartions China in Your Hands - Casual Connect Kiev 2013

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China is the world's largest and fastest growing mobile and gaming market with over 250 mobile gamers. Given high market entry barriers (technical, cultural, regulatory, and trust) what does it take to monetize your game in China and how do you take on the pirates? Welcome to a world where there is no Facebook, Twitter, or YouTube, a world where there are 400+ app stores. With 538+ million Chinese people online, who is really “behind” the “Great firewall of China?

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Smartions China in Your Hands - Casual Connect Kiev 2013

  1. 1. CHINA IN YOUR HANDS Challenges & Opportunities in China„s Mobile Gaming Market
  2. 2. THINGS YOU SHOULD KNOW ABOUT CHINA 2
  3. 3. CHINA IS BIG It‟s a big place… 9.6 Million Km2 with a “Great Firewall”… Project Golden Shield 3
  4. 4. CHINA‟S INTERNET IS BIG ..and a lot of people “behind” it… 1.3 Billion 4
  5. 5. CHINA‟S INTERNET IS BIG China: The World‟s largest online population 78.5% access the internet via mobile device Sources: Tech in Asia, Internet World Stats 5
  6. 6. CHINA IS MOBILE CHINA„S ONLINE China: Over IS BIG 1.1 billion mobile subscribers LANDSCAPE Mobile subscribers in China by operator April 2013 Operator Subscribers 3G users China Mobile 750.4 million 158.7 million China Unicom 269.5 million 107.8 million China Telecom 178.6 million 93.4 million Total 1,198.5 million 359.9 million 4G is on the way… Sources: China Mobile, China Unicom, China Telecom, mobiThinking, China Daily 6
  7. 7. CHINA IS ANDROID Chinese Smartphone Shipments To Exceed 360 Million In 2013 - IDC China Top Five Smartphone Vendors Q2 2013 Q1 2013 Market Share Q2 2013 Market Share Growth Rate Q2 Vs Q1 18.5% 18.3% -1.0% Lenovo 9.8% 12.6% 28.6% Coolpad 9.2% 11.0% 20.4% ZTE 8.2% 8.8% 7.1% Huawei 9.6% 8.7% -8.5% 45.0% 41.0% -8.9% Vendor Samsung Others China‟s top five vendors = 20% of the world‟s Smartphone shipments Source: idc.com, technode.com, canalys.com 7
  8. 8. CHINA IS ANDROID Umeng Sept 2013 Kantar Aug 2013 IDC Sept 2013 Enfodesk Nov 2012 Sources: umeng.com, kantarworldpanel.com, idc.com, enfodesk.com 8
  9. 9. CHINA IS ANDROID Why the discrepancy in figures? • Data gathered may be platform specific • Data may not include custom Android ROMs (e.g. MIUI & Baidu Yi) • Data collected via carriers may not account for dual SIMs (one device 2 separate carrier SIMs, common in China) • Data assumes 3G subscriptions = Total “active” Smartphones. Many Smartphones in China are 2.5G • Some reports counts sales within a period, some count “active devices”, some count total devices, some mix smartphone and tablet data. Notwithstanding the discrepancies, Android is still King in China Sources: Smartions’ Research 9
  10. 10. A LITTLE APPLE BUT A LOT OF REVENUE App revenue distribution by country August 2013 China Ranks 5th despite no Google Play data N.B. In China, only iPhone/iPad revenues counted. Figures for RoW includes Google Play. Sources: distimo.com 10
  11. 11. iPAD, KING OF TABLETS CHINA„S ONLINE LANDSCAPE IS BIG The rise and fall(?) of the “Steak” China Tablet Market Share Q2 2013 Vendor Units Q2 Share 1 Apple 1,481,000 28% 2 Samsung 571,000 11% 3 Lenovo 413,000 8% 4 ASUS 65,000 1% 5 Acer 62,000 1% Despite and increase in sales, Apple‟s tablet market share plummeted 40% year-over-year in China in the second quarter of 2013 Sources: The Financial Times, brg.com 11
  12. 12. CHINA„S SMART TV FUTURE IS BRIGHT CHINA„S ONLINE LANDSCAPE IS TV China‟s SmartBIG Market is booming Sources: thenextweb.com 12
  13. 13. CHINA LOVES MOBILE GAMES CHINA„S ONLINE LANDSCAPE IS BIG In 2012 the Chinese Games Market was worth Mobile gaming = YoY growth rate of 50.7% in 2013 74% of Smartphone users download games Sources: gamesindustry.biz, iresearchchina.com mobithinking.com, miit.gov.cn, ctia.org, AliResearch, Flurry 13
  14. 14. CHINA LOVES MOBILE GAMES CHINA„S ONLINE LANDSCAPE Mobile The Chinese IS BIG Gaming Market Paid Mobile Gaming Market Gross Merchandise Value (GMV) U.S. $ China has more than 250+ Million Mobile Gamers (336 Million by 2015) Sources: gamesindustry.biz, AliResearch, China Daily, pocketgamer.biz, researchandmarkets.com 14
  15. 15. THE REGULATORS AND REGULATIONS 15
  16. 16. THE GAMING REGULATORS More than 20 national level government agencies are responsible for the control of the internet, many regulating online games Ministry Area of control pertaining to Games The General Administration of Press and Publication (GAPP) Regulation of games publishing and operation. Enforcement of a ban on foreign games Ministry of Culture (MoC) Inspection of imported online video games and issuing of game publishing licenses State Administration of Radio, Film, and Television Enforcement of a ban on game advertising in the state-run media The Ministry of Industry and Information technology (MIIT) Province level ICP licenses & promoting the development of domestic games Ministry of Commerce (MOFCOM) Control of payment operators and virtual currencies Ministry of Public Security of the People's Republic of China Responsible for policing the great firewall of China and the internet Sources: gapp.gov.cn, mcprc.gov.cn, sarft.gov.cn, mps.gov.cn, miit.gov.cn, jdsupra.com 16
  17. 17. THE GAMING REGULATORS Cultural regulators set to be merged “The merger is designed to minimize the overlap of duties, increase efficiency“ - Wang Feng (State Commission Office for Public Sector Reform) Sources: China Daily 17
  18. 18. THE GAMING REGULATIONS • Games publishing license required which in turn requires 10 Million Yuan ($1.6 million U.S) of registered capital in a Chinese company. • “Online games” must have in-built “anti-fatigue/addiction” mechanisms to discourage lengthy game-play • Gambling (including online gambling) is illegal in China. • Virtual currency is allowed in games, but virtual currency that is freely tradable amongst players is not allowed. Sources: gapp.gov.cn, mcprc.gov.cn, sarft.gov.cn, mps.gov.cn, miit.gov.cn, horacexiong.com theregister.co.uk, latestcasinobonuses.com, wikipedia.com, baike.baidu.com 18
  19. 19. THE GAMING REGULATIONS Oh… and foreign games are banned (sort of) under “Notice 13” from the GAPP Sources: gapp.gov.cn, horacexiong.com, jdsupra.com 19
  20. 20. YOUR PATH TO CHINA 20
  21. 21. THE DIY ROUTE The problem: “Foreign enterprises are not allowed to provide online game operation in China market in forms of WFOE (Wholly ForeignOwned Enterprise), JV (Joint Venture)” – Notice 13, GAPP October 2009 Remember: To obtain a Games publishing license requires a wholly Chinese owned enterprise Sources: gapp.gov.cn, mcprc.gov.cn, sarft.gov.cn, mps.gov.cn, miit.gov.cn 21
  22. 22. THE DIY ROUTE A solution? The “Sina-Model” / Variable Interest Entity (VIE) “Chinese law has a very clear provision. A contract written to avoid the requirements of Chinese law is void and the court will not enforce it,” – Steve Dickinson (China Law Blog) Sources: stanford.edu, thenextweb.com, nytimes.com, China Business Law Journal, China Law Blog, jdsupra.com 22
  23. 23. THE DIY ROUTE Exceptions to the rule? Sources: nasdaq.com, seekingalpha.com 23
  24. 24. THE DIY ROUTE Exceptions to the rule? “Since 2010, Shanghai‟s arbitration board has invalidated two Variable Interest Entities that had been used by foreign companies to control onshore businesses. In one case involving an online game company” - Neil Gough (The New York Times) Sources: stanford.edu, thenextweb.com, nytimes.com, China Business Law Journal, China Law Blog 24
  25. 25. THE PARTNER ROUTE Work with a China partner who knows the China gaming, mobile, and social landscape as well as the political macro environment! Watch out for dispute resolution/choice of law clauses Sources: China Law Blog 25
  26. 26. ADAPTING YOUR MOBILE GAME FOR CHINA 26
  27. 27. LOCALIZATION • Over 200 million Chinese can read some English words, less than 1% can speak English • Chinese people are very proud of their language and culture • For software, localization is a legal requirment (GB18030 certification) Sources: mcprc.gov.cn, CESI (CHINA Electronics Standardization Institute), intersolinc.com, wikipedia.com 27
  28. 28. LOCALIZATION • For your game to be successful in China quality localization is a must • Watch out for encodings! ANSI and ASCII are dead, long live UNICODE! • When drawing fonts remember there are 6,500 simplified Chinese characters used in computerized fonts 28
  29. 29. TRANSCREATION • Most people in China have never heard of Hansel and Gretel, Goldilocks and the three bears, or know the story of Robin Hood • In-game references to Western history, mythology, and popular culture will need to be reviewed and may need to be adapted Sources: Smartions’ Research 29
  30. 30. TRANSCREATION • Graphics may need to be adapted to be be more farmiliar and engaging to a Chinese audience • “Harmonization“ of any violent content is important and can be subject to review and regulation in China. • Be mindful of geo-political issues and the meaning of symbols etc. Sources: Smartions’ Research 30
  31. 31. BRAND = kě kǒu kě lè = fēi sǐ bù kě 31
  32. 32. MONETIZATION Forget Pay to Play. China is Free to Play • IAP Prices must be calibrated to acceptable Chinese standards – Entry level IAP on Android should be circa 2 to 3 RMB (€0.24 to €0.36) – A new virtual currency pack may be required to accomodate a lower entry level IAP without impacting other monetization mechanics • What is lost in premium is gained in volume China Mobile Games Freemium Revenue as a Percentage of Total Revenue Sources: pocketgamer.biz, Smartions’ Research, tech.163.com 32
  33. 33. MONETIZATION Free to Play makes life harder for the pirates Sources: Smartions’ Research 33
  34. 34. SOCIAL MEDIA Google+, Facebook, Twitter & YouTube are just some of the services not available in China due to government control Sources: Smartions’ Research 34
  35. 35. SOCIAL MEDIA “Social media is huge in China - bigger than anything I've seen in the west.” – Hugo Barra @ Xiaomi (Former Android VP @ Google) China represents the world‟s most active social-media population Sources: ciccorporate.com blog, Hugo Barra’s blog 35
  36. 36. SOCIAL MEDIA 7 major social networks In China each with over 100 million users Sources: socialtimes.com, gamasutra.com, mckinseyquarterly.com 36
  37. 37. SOCIAL MEDIA Make sure your Game allows for sharing via China SNS “Chinese gamers boast about game upgrades they've purchased, and enjoy showing them off whenever they can.” - gamasutra.com WeChat Sina Weibo Tencent Weibo RenRen 400+ Million users 503 Million users 540 Million users 184 Million users 236 Million MAU 150 Million MAU 200 Million MAU 46 Million MAU Sources: socialtimes.com, gamasutra.com, mckinseyquarterly.com 37
  38. 38. PAYMENT INTEGRATION Google Wallet and PayPal are not options for China Sources: Smartions’ Research, greatfire.org 38
  39. 39. PAYMENT INTEGRATION • In China there are multiple mobile payment solutions Independent Payment Services (Independent, Carrier, App Store) • Online payment services are required to be “Chinese-owned” Carrier Payment Services App Store Payment Services Sources: Smartions’ Research, contextchina.com 39
  40. 40. PAYMENT INTEGRATION Sources: iresearchchina.com, chinainternetwatch.com 40
  41. 41. PAYMENT INTEGRATION China 3rd Party Mobile Payment Services - Q2 2013 Mobile Payment Sources: iresearchchina.com 41
  42. 42. PAYMENT INTEGRATION China 3rd Party Mobile Payment Services - Q2 2013 Mobile Internet Payment Sources: iresearchchina.com 42
  43. 43. PAYMENT INTEGRATION 137+ Million Registered Accounts 800+ Million Registered Accounts • Alipay is King, but carrier billing offers customer convenience • Native app atore payment integraiton is often essential • For broad reach your game should provide for or integrate with several payment methods Sources: paypal.com, reuters.com 43
  44. 44. PAYMENT INTEGRATION + + • Baidu has aquired 91.com and HiAPK • Baidu has entered the mobile payment services arena with its Baidu Wallet solution Sources: The Financial Times, pehub.com, technode.com 44
  45. 45. A NOTE ON INTEGRATIONS • As part of the API key application process for many 3rd party China social and payment services, a “demo” integration via your Game‟s Chinese website is required. • To have a website in China with a publically accessible IP, an ICP (Internet Content Provider) license is required. • To obtain a China ICP license a business registered in China is required. • 3rd party social and payment SDK documentation may only be avialable in Chinese • Testing of China social and payment integrations may be “virtually impossible” outside of China Sources: Smartions’ Research 45
  46. 46. PUBLISHING YOUR MOBILE GAME IN CHINA 46
  47. 47. APP STORE PUBLISHING Say goodbye to the West… 47
  48. 48. APP STORE PUBLISHING …and hello to China! 48
  49. 49. APP STORE PUBLISHING iiMedia Q3 2012 China App Store Rankings Rank App Store 1 myapp.com 2 91.com 3 mm.10086.cn* 4 hiapk.com 5 360.cn 6 189store.com** 7 anzhi.com 8 appchina.com 9 gfan.com 10 nduoa.com The Top 10 app stores only account for half of the total app downloads in China Wandoujia has made massive gains in the last year * Carrier Store: China Mobile ** Carrier Store: China Telecom Sources: umeng.com, Smartions’ research, chinainternetwatch.com, iiMedia Research 49
  50. 50. APP STORE PUBLISHING China App Store Market Fragmentation • App stores can be unprofessional, unstructured, & arbitrary in their approach • Some may insist on your game using their payment integration, which creates the need to develop app store specific versions of your game • None of the China app stores provide developers with rich ecosystems similar to those offered by Google Play (“decoupling“ required) 50
  51. 51. APP STORE PUBLISHING Caution! If dealing with app stores directly… • Never sign extended exclusivity with a single app store • Remember app stores will not invest time in optimizing your game in-market • Always define the scope and level of agreed promotion (marketplace app, mobile website, PC browser, download “assistant“ application) 51
  52. 52. APP STORE PUBLISHING What about Apple„s China App store? • Apple„s App Store servers not in Mainland China (Hong Kong, Macao, Taiwan) • Apple app store claimed to be 10x faster after CDN deployment in mainland China in March 2013 • Apple is currently building a new data center in Hong Kong (ETA 2015) Sources: thenextweb.com, chinabyte.com 52
  53. 53. APP STORE PUBLISHING Are there 3rd party iOS app stores in China? • Yes, but you cannot distribute apps to them without being in breach of your iOS Developer Program License Agreement Sources: Smartions’ Research, kuaiyong.com, extremetech.com, apple.com 53
  54. 54. DEALING WITH PIRACY 54
  55. 55. BRAND/IP PROTECTION Dealing with piracy • Make sure your game uses a solid F2P model • Calibrate entry level IAP pricing to Chinese levels • Use traction gained by pirated or unofficial versions of your game. – App store marketplace notifications to push upgrade to the official release (Requires close cooperation with app stores) 55
  56. 56. BRAND/IP PROTECTION Dealing with piracy • Reclaim your brand and ensure differentiation through rebranding where necessary (distinguish from previous pirate/unofficial releases) • Create engaging content targeted towards your Chinese audience and plan seasonal updates (to coincide with Chinese public holidays) • Work with a China partner with app store connections who will continually monitor all app stores for pirated versions 56
  57. 57. THE SUCCESS STORIES 57
  58. 58. THE PRIZE 2013: “Fishing Joy's monthly sales over $6 million” - Jon Jordan pocketgamer.biz 58
  59. 59. CONCLUSION Summary of recommendations Work with a trusted China partner who will: • • • • • • Provide the necessary structure & deal with all approvals Preform cultural adaption and “transcreation“ of content Develop deep China SNS integration & sharing Optimize and calibrate the F2P model for China Develop rich IAP interfaces & multiple payment options Decouple from Google & other services not available in China & implement native solutions for China • Publish to multiple China app stores for broad reach • Actively manage app store relations/promotional deals, SNS & player community, brand/IP protection, and maintain and optimize your game in-market 59
  60. 60. CONTACT US Thank you for your attention! Questions? Patrick Wheeler CEO at Smartions EU www.smartions.net @PatrickJWheeler www.linkedin.com/in/patrickwheeler patrick.wheeler@smartions.net 60

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