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 ©PlusEightStar, 2011 -‐ www.plus8star.com 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

Networks 100% 3G: 98% Web: 60% Avg. 8.5 Mbps 80%3G Users (%) 3G: 60% (W-‐CDMA only) Web: 72% 60% Avg. 14 Mbps C hi 3G: 40% 40% n Web: 34% Avg. 5.0 Mbps a 20% 3G: 5% Web: 0.5% ©PlusEightStar, 2011 -‐ www.plus8star.com Avg. 1.0 Mbps 0% 0% 20% 40% 60% 80% Internet ConnecCons Measured >5 Mbps (%) Sources: Akamai 4Q10, Japan TCA, SKT, ITU, IDA, Internet World Stats, March 2011

H Source: GapMinder.org A R MONEY 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 Mobage 505M Cyworld 25M 25M (Tencent) (DeNA) 51.com 178M Naver n.a. GREE 25M Renren 117M Daum n.a. Mixi 25M Pengyou Yahoo 101M 3M (Tencent) Mobage Kaixin001 100M ©PlusEightStar, 2011 -‐ www.plus8star.com

Just an idea about staﬀ… •  Twiuer 500 •  Renren 1,500 •  Facebook 2,500 •  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 Online Games Social Plavorms Social Games Virtual Worlds Tencent IM, etc. Secondary Market 10,000 Unit: MUSD 8,000 2,000 6,000 910 200 1,000 100 4,000 5,000 4,700 2,000 2,000 ©PlusEightStar, 2011 -‐ www.plus8star.com 1,500 0 China Korea Japan

Digital Labor

2. China

Users Demographics 1.1% 0.2% 7.9% 11-‐19 35.8% 20-‐29 19.6% 30-‐39 40-‐49 50-‐59 60 and above 35.4% Source: CNNIC, 2010.07

Educadon Primary School 11.3% 9.2% Junior Middle School 12.0% 27.5% Senior Middle School Professional Training College 40.1% Undergraduate EducaCon and The Above Source: CNNIC, 2010.07

Income 2.8% 2.3% without income 8.1% 10.1% Below $76 $77-‐153 20.5% $154-‐229 14.4% $230-‐306 $307-‐458 14.4% 13.5% $459-‐764 13.9% $765-‐1222 Above $1222 Source: CNNIC, 2010.07

Online Games •  120 million online game users •  $5 billion in 2010 Unit: billion $US 7 6.2 6.6 5.6 5 4.1 3.2 2008 2009 2010 2011 2012 2013 2014 Sources: 2008-‐2014 Chinas Online Game Market Annual Report by Ministry of Culture, iResearch, 2011

Market Shares Others 16% Tencent 31% Giant 4%Changyou 7% Netease 16% Perfect World 7% Shanda Game 12% Source: iResearch, 2010

Revenue & Proﬁt 4,000 Unit: million US$ Revenue Proﬁt 2,966 3,000 2,000 1,228 852 866 1,000 689 LOSS 336 365 329 197 180 128 176 203 148 81 213 111 123 56 5 22 77 0 Tencent Shanda Shanda Netease Perfect Changyou Giant Kingsoy NetDragon CDC The9 Renren Game World Interacdve Source: Companies, 2010

Market Cap $53.5B 8 Unit: billion US$ 7 6.2 6 5 5 4.5 4 3 2.4 2 1.7 1.7 1.1 1 0.764 0.29 0.1 0.165 0 Tencent Shanda Shanda Netease Perfect Changyou Giant Kingsoy NetDragon CDC The9 Renren Game World Interacdve Source: Companies, 2011.04 except Renren, 2011.05

Tencent Other 21% Online Games 49% Non-gaming digital goods 30%$3B in 2010, $1B in 1Q2011

Renren SNS + Game Dev. Value-‐Added Services Includes Nuomi AdverCsing (Groupon Clone) -‐ Mostly ads sold “per day” 13% -‐ Limited targedng 42% 45% Online Games Top MMORPG = 31% of game rev. (14% of total) $76.5m in 2010 (Loss)

Walled Garden Item Figure Third-‐party ApplicaCons 1,000 Revenue from $3.5 million Plahorm in 2010 (Renren share) Renren: 52% (avg.) Revenue Share 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 + Homepage Virtual goods

GREE Service AdverCsing -‐  Banners & Ce-‐ups GREE top page AdverCsing 20% banner Avatars -‐  CustomizaCon with various items (clothes, accessories, etc..) Digital goods Social Games 80% -‐  Integrated with SNS funcCons

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 $100 mln $10 mln $10 mln $1 bln Online Games Secondary Market Social Plavorms Social Games $4.7 bln Virtual Worlds

Online Games | Key Players

Revenue & Proﬁts (2010) Revenue Proﬁt 1,400 1,310 Unit: MUSD 1,200 1,000 935 800 607 600 525 427 376 400 251 243 200 111 47 0 Nexon NHN NC Soy Neowiz CJ Internet (Hangame) >50% of Nexon’s revenue is overseas

Market Cap (2011.04) 14.0 13.0 12.0 Unit: billion USD 10.0 9.2 8.0 6.0 5.4 This is sCll 4.0 $300 million! 2.0 1.1 0.3 0.0 Nexon NHN NC Soy Neowiz CJ Internet (Hangame)

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% Neowiz Games + FIFA Online Sports 4.3% Electronic Arts (US) 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%MMORPG Massively Muldplayer Online Role-‐Playing Game RTS Real-‐Time Strategy FPS First-‐Person Shooter Source : Gametrix, 2011.02

Secondary Markets 6M Users $480M Growth of ItemBay users Unit: million Source : ItemBay

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

Cyworld | Digital Currency 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

5. Succeeding in Asia

Deﬁning Success 1.  Revenue 2.  Proﬁt 3.  Usage / Brand recognidon 4.  Development 5.  Learning

Western Companies China Japan Korea Zynga (w/ Tencent) Zynga OperaCons WoW PopCap (w/ Renren) RockYou EA (FIFA Online) PopCap WoW (+Netease) PopCap Kabam Licensing / Partners Crossfire (+Tencent) Crowdstar RockYou Angry Birds Playfish Cmune Ubisoy PopCap Zynga Zynga Development Playfish Playfish RockYou Kabam Cmune 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) Nubee PvZ FHM

iOS Mobile Rankings | Japan (RPGs, Adventure) (Book) (Adv. Game) BioHazard (RTS, SEGA) (Photo) (Social RPG) (Slot) (Slot) (AR Game) (Adv. Game) (Racing Game) (Pokemon) (Music) (Pirate RPG, by GREE) (Book) (Hostess SIM) (BioHazard) (RPG) (RPG)

iOS Mobile Rankings | Korea (English, Tools, Games) (English) (Tool) (Tool) (Xvid player) (English)

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 Uberstrike.com Facebook Cyworld (Korea)

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

Thanks! More about “Innovadon Arbitrage” www.plus8star.com benjamin@plus8star.com +81 | Japan benjaminjoffe +82 | Korea +86 | China @benjaminjoffe Telecom & Internet www.linkedin.com/in/benjaminjoffe + Added Value * High quality www.slideshare.net/plus8star

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Asian Eye For The Gaming Guy TGX Edition

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