Learning From Asian Social Networks

iGaming Marketing Masterclass Macau | 2010.02 Lessons from Asian Social Networks +8* | Plus Eight Star Benjamin Joffe, CEO

Benjamin Joffe 本杰明ベンジャミン 벤자민

5 years 1 year 4 years

Consulting | Startups | Community

| Plus Eight Star • “Innovation Arbitrage” • Internet & Mobile Digital strategy • Best practices from China, Japan & Korea • Published reports • Inside Cyworld (2007) • Inside Tencent (2009) • Inside Alibaba (upcoming) • Contact • benjamin@plus8star.com

References EUROPE USA ASIA

Cmune • 3D Social Games • First “Social Shooter” – Facebook – Apple.com – Web • Check it out! – www.facebook.com/paradisepaintball

Asian Leaders

Common Assumptions 1. Social Networks 1. The definition of “social network” is clear 2. All social networks are variations of Facebook 2. Asia 1. Asia is homogeneous 2. Asia is all about copy 3. What happens in Asia stays in Asia

Quick Survey!

How about those?

On the Origin of SNS in Asia

Charles Darwin “On The Origin of Species” (1859)

Voyage of “The Beagle”

“Diverging” from common ancestors

150 years later…

IT Infrastructure 100% Avg. 7 Mbps 80% Avg. 15 Mbps 60% 3G users 40% C hi n 20% a Avg. 4 Mbps www.plus8star.com 0% 0% 20% 40% 60% 80% % of Internet connections measured above 5Mbps (Source: Akamai, 4Q08)

Diverging digital species

Revenue vs. Profit (2008) 70% 60% 50% Profit Margin 40% 30% 20% 10% 0% 0 200 400 600 800 1,000 1,200 Million USD

Market Caps (February 2010) $34.5B $3.3B $2.2B $800M

Evolution of Social Networks

SNS Timeline: USA 1967 1996 2002 2003 2004

Facebook • Real-name • Revenue models – Advertising (90%) – Some digital gifts (10%) • Application platform – Leverage social graph – Mostly games • Text games • Flash games • (3D games) – All for developers!

SNS Timeline: Korea 1967 1999

Cyworld “Mini-hompy” (Initial Model) • Real-name • Digital goods – Avatars – Page designs – Music – Fonts – Many payment systems • Advertising – Brand pages

Cyworld Integrated Into SK Communications’ Ecosystem • 20M reg. users (40% of web users) • Revenue 2Q09: 50M USD – (Includes IM + Portal) – Community 40% – Ads 40% – Other 20% • Revenue 2009: 200M USD – (Minor loss) – 1,000 staff – 10 years! Getting old?

3D Evolution

Application Platforms

Source: Web20Asia.com

3D Social Networks Converging with Games & Virtual Worlds

Conclusions for Korea 1. Convergence of SNS, gaming & virtual worlds 2. Cyworld still dominant, but young users 3. Branded pages main way to advertise 4. Social apps growing

SNS Timeline: Japan 2004 2006 2006

SNS Timeline: Japan

Mixi (Initial Model) • Nickname • Advertising – Banners – Brand pages • Premium services – Storage

PC vs. Mobile • Registered Users 18.6M – Monthly UV 12.6M • Monthly PV 27.6B – Monthly PV / UV >2,000!

Going Mobile

Social Apps on PC + Mobile!

From PC to Mobile Unit: 100M PV Unit: 10K Users Application platform introduced PV (mobile) PV (PC) Users Monthly PV 27.6B – Mobile (80%) 22.5B – PC (20%) 5.1B 2007.12 2008.12 2009.12

Demographics Total Mobile Total Mobile Most active social life?

Mobile Platform since Oct.09 (330 apps as of February 2010) City Building Harvest Moon Shopkeeper Furauni By Liveware By Liveware By Geisha Tokyo By Konami

Parenthesis How is this Possible? 1. 3G everywhere (>95% users) 2. Unlimited data widespread (>50%) 3. Flash on all mobiles

Web Apps • Over 500 titles – Tougher selection than FB – Farm & Pet games leading • Usage & Monetization – 4.6M users for #1 (~25%) – 800K USD in 1 month for #1 – Revenue share with Mixi • Top developers are Chinese!

Revenue • Revenue 2009: 130M USD – 10 USD / active user / year! • Revenue Sources – Advertising 89% – Paid Services 7% – Job Search 4% • New Sources – Applications & Payment (PC & Mobile)

Mixi (New model) • Saturation of user base – Need for new revenue models • Full throttle on mobile – Mobile 4 times more active than web! • Tapping into digital goods revenue – Mobile & Web social apps – Revenue share on apps

Mobile Game Town

Source: DeNA

3D Avatars For Self-Expression & Gaming

National Brands on Board!

Mobile Open Platform • Launched January 2010 – 40 partners – 92 games – Virtual goods, ads, avatars – Leverage expertise from in- house games – Some games also released on Mixi Mobile! • Target: Become the #1 Social Entertainment Platform

Revenue

Revenue 70 MUSD in Q3! PV x2 With apps 35M USD = games!

Gree (Initial Model) • Web-based • Real name • Advertising • Competing with Mixi!

Gree Model Change! • Web-based > Mobile > Mobile + Web • Real name > Nickname • Advertising > Digital goods • Competing with Mixi! > With MBGT!

Usage & Demographics • PageViews • Demographics – 99% Mobile – Gender parity – 24.7 bln/month – 75% users 20+ y.o.

Advertising Gree Home Advertising & Affiliates | 25% Avatars & items B2C virtual Games goods | 75% 60% avatars 40% games

4Q09 Revenue 81M USD Profit 50M USD!

Results • Spent millions of USD on ads! • Users skyrocketed – 15 million! (15% of mobile users) – Mostly thanks to 2 games titles! (fishing & pet games) • Opening mobile platform too

Conclusion for Japan 1. Mobile SNS is a Business – Facebook makes $0 on mobile 2. Mobile SNS is a Media – Not only for kids! – Various FMCG already on it 3. Mobile Social Games – In-house vs. Third-party – Ecosystem getting more complex

SNS Timeline: China 1996 1998

Digital Goods

Will it blend?

In 2008 • Revenue: 1bln USD – 90% from digital goods • (35% from games) – 10% from ads • Net margin: 40% • 2009: >1.5 bln USD

Facebook Influence Kaixin001.com

Fighting Dirty Kaixin001.com Kaixin.com

Tencent Joins the Dance Kaixin001.com Kaixin.com

Happy Farm!

Main Model • Advertising is not enough! • Social games – First farm game was in China! – Advertising in games

Demographics & Users • Young – 70% of Internet users in China < 30 y.o. – Urban white collars (have PC) – University students – Many women! • Average income – Avg. salary 500 USD / month

Key Numbers • Users – Tencent 1B+ (485M active) – Qzone 310M users – RenRen 200M (50M also mobile) – Kaixin001 75M – 51.com 160M (38M MAU) • Multiple accounts!

Conclusion for China 1. Tencent dominates with IM – BUT other SNS competing – Huge ad inventory for all 2. Social games = major revenue model – Social games are media too!

Leaders Going Global?

International Expansion • Korea – Cyworld early mover! China, Japan, USA, Europe, etc. – Most operations closed by now. – Online game companies growing globally. • Japan – DeNA (Mobile Game Town) acquisition in China, subsidiary in US. – Gree at home. – Mixi office in Shanghai but no traction so far. • China – Tencent: partnerships & investments (including US). – Kaixin001, RenRen, 51.com busy at home. Social networks are cultural products!

DeNA Buys TX.com.cn (July 2009) • 9M members • Leverage expertise in – Avatars – Games – Content

Conclusion

SNS in Asia 1. Social networks = media 2. Japan = mobile innovation 3. Korea = web innovation 4. China = leads by all numbers

How do you think? 1. Social Networks 1. The definition of “social network” is clear 2. All social networks are variations of Facebook 2. Asia 1. Asia is homogeneous 2. Asia is all about copy 3. What happens in Asia stays in Asia

Thanks! More about “Innovation Arbitrage” www.plus8star.com benjamin@plus8star.com +81 | Japan benjamin0123 +82 | Korea +86 | China http://twitter.com/plus8star Telecom & Internet www.linkedin.com/in/benjaminjoffe + Added Value * High quality www.slideshare.net/plus8star

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Learning From Asian Social Networks

by Benjamin Joffe

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