Social Gaming in Asia

Social Gaming in Asia @benjaminjoﬀe | CEO, +8* Casual Connect, Hamburg | 2011.02

ngmoco:) + DeNA (October 2010) $400M < 2010 Proﬁt!

Riot Games + Tencent (January 2011) $400M = 1/3 of 2010 proﬁt

Tencent CollaboraJon Fund (January 2011) $760m Fund!

@benjaminjoﬀe

4 years 1 year 5 years

•  CEO, Plus Eight Star | www.plus8star.com –  Best pracJces from Asia’s digital space –  Research, Strategy & “InnovaJon Arbitrage” •  References

Angel Investor, Advisor, Keynote Speaker •  Speaker 100+ talks in 16 countries •  Advisor to Incubators •  Investor in Asia-‐based global companies

IntroducJon Quiz! Chapter 1 South Korea Chapter 3 Japan Chapter 4 China Chapter 6 Conclusions

More than Facebook and USA •  Facebook •  LinkedIn •  QQ (Tencent) •  Qzone •  RenRen •  Kaixin001 •  Xiaonei •  51.com •  Mixi And more… •  Mobile Game Town •  Gree •  Cyworld •  Friendster

Billion Dollar Brands $B $B •  Facebook •  LinkedIn $B $B •  QQ (Tencent) •  Qzone $B $B •  RenRen •  Kaixin001 •  Xiaonei •  51.com •  Mixi $B And more… •  Mobile Game Town •  Gree •  Cyworld •  Friendster

Market Caps (2011.02) $800M $3.5B $5.2B $45B

South Korea

Cyworld •  SNS/VG pioneer since 10 years ago –  Stagnant for several years –  “The new MySpace”?

2009.10 | Nate App Store •  Leverages Nate’s reach •  Slow rise (2M users) •  Semi-‐open •  Rev share (70/30)

Portals join the dance •  . Naver Social Apps •  . Yozm by Daum •  Results –  Just started –  No social graph

Facebook Rising •  Facebook in Korea –  Usage growing –  Local oﬃce –  Hired from Cyworld •  Why? –  Users bored of Cyworld –  Virtual goods market –  Games market

Online Games •  Online games market $3B+ •  Leaders Nexon, NHN, NC Sos •  Expanding overseas China, Japan, US, Emerging markets Source: KOCCA

Answer •  #1 in Online Gaming •  Pioneer in virtual goods •  First MMO in 1996! Min Seo, CEO

Nexon Today •  Revenue 2010: $1 billion (E) –  Over half from overseas –  Market lisJng in 2011 (rumor) •  Some famous games •  Kart Rider (200M reg. users) •  Dungeon & Fighter (200M reg. users) •  Maple Story (95M reg. users) •  Combat Arms (FPS) •  Sudden Avack (FPS) •  Etc. Source: Nexon

Foreign Players in Korea? Some limited successes…

Summary: South Korea •  3 social plaworms (+ Facebook) •  Young market (<$10M) •  But strong in online gaming ($ bln)

Mobile SNS Make a Killing •  Revenue $2 billion! •  Walled Garden mobile app plaorm •  Mass promoJon TV, Billboards, Posters… •  Publish + Develop 1st, 2nd, 3rd Party dev.

Mixi •  Inspired by •  Friends (PC) •  Mobile (mobile) •  FB (apps, “like”) •  Twiver (micro-‐blog) •  21 million users •  Pageviews –  14 million MAU –  Mobile 28 billion PV –  PC 5 billion PV

Mixi Page (PC)

Mixi Page (mobile)

Mixi •  Revenue 2010 (E) $166 million –  Proﬁt margin 20% •  2Q2010 $49M –  Proﬁt margin 25% –  Run rate 2010 $200M

Mixi | Users •  Gender-‐Balanced •  90% above 20 y.o. Total Mobile Total Mobile

Mixi | Pageviews 2009.10 PC ApplicaJons Plaworm 2009.08 Mobile Ad prices for mobile = 1/3 of PC price

Mixi | Apps •  Apps –  PC > 1,000 –  Mobile > 600 •  Apps contribuJon –  Minor for revenue <10% –  High for PV •  Smartphone UI “Mixi Touch” Machi Tsuku (3M MAU) by Unoh / Zynga Japan Source: Masaru Ikeda @ Asiajin

Mixi | Popular Games Game MAU Category Developer1 Sunshine Farm 5.4M RPG Rekoo2 Mixi Xmas 2010 2M Entertainment Mixi 3 City Builder 3.3M Simulation Unoh (now Zynga)4 Bandit Nation Royale 4.3M RPG DeNA 5 Star sky bar town 1.5M Simulation CyberX6 Source of Decision 3.2M Fortune Telling Grafio7 Let’s play together 5.5M Entertainment Community Factory8 Funny Face 2M Entertainment Cybird9 Farming story 1.5M Simulation Liveware10 Calm Down Advice 0.3M Fortune Telling Digital Tact

Answer •  CEO of DeNA •  Operates “Mobile Game Town”, a top mobile SNS in Japan Tomoko Namba, CEO

DeNA •  Revenue 2010 $1.2~1.3 billion •  Proﬁt margin 50% •  Revenue source 90% digital goods

Mobile Game Town | Open Plaworm •  154 partners companies •  Avatars in open •  350 Jtles (July 2010) plaworm games too •  In-‐house games too •  Common currency

Mobage | Popular Games Game Category Developer1 Bandit Nation Royale RPG DeNA2 “Sengoku” (Warring State) Royale RPG DeNA3 Hokkorina (Okinawa Farm) RPG DeNA4 Hoppin City Simulation DeNA5 Aquasquare Simulation DeNA6 Space Debries Simulation DeNA7 Pirates’ treasure RPG DeNA8 Nobunagas Ambition RPG/Strategy Tecmo Koei 9 Monster Hunter Airu Village RPG Capcom10 Our baseball field Entertainment Kayac

DeNA | Target: Global Leader

Yahoo Mobage (PC) •  Launched 2010.10 •  2M users (= FB Japan) •  70 partners, 104 Jtles •  Rev share –  Plaworm 30% –  OperaJons 13% –  Developer 57%

By 2014, DeNA wants to have $4 billion in revenue, 50% in Japan and 50% overseas. I want DeNA to become a $40 billion market cap company. Tomoko Namba CEO of DeNA

Answer •  CEO of GREE, top mobile SNS in Japan •  #2 youngest self-‐made billionaire in the world (aser Mark Zuckerberg) Yoshikazu Tanaka, CEO

GREE •  Users 22 million •  2010 revenue $600 million (E) –  Digital goods 80% –  Ads 20% •  Proﬁt margin 50%

Adver`sing Gree Home Adver`sing & Aﬃliates Avatars & items B2C virtual goods Games (avatar + games)

GREE | Service Strategy Members SNS Social Games Diary/Notes Q&A Community/BBS Page views Virtual Goods Media Ad Sales VG Sales GREE

GREE | Monthly Page Views 35.7 Billion Google Images = 30 billion

Self-‐Published Games

Fishing Star Sea River

GREE •  2010.06 | Open plaworm •  2010.10 | Non-‐gaming apps (27 coming up)

GREE | Popular Games Game Category Developer RPG (Card1 Dragon Collection Konami game)2 My Darling is a Celebrity RPG Voltage3 Three Kingdoms RPG Tecmo Koei4 My lover is in the Special Police RPG Voltage Simulation /5 Fashion Coordination Mania Sumzap avatar6 My New Boyfriend RPG Winlight7 Our Love Affairs in College RPG Style Walker8 Love Affairs, Handsome Boys College RPG Voltage9 Princess Love (Hime Koi) RPG Winlight10 The Legend of Derby King RPG Alt Plus

Community Safety •  DeNA –  861 employees… –  Many doing content monitoring Pipo-‐kun Tokyo Police Mascot –  Monitoring 24/7 since 2006.11 –  “Patrol Center” built in 2008.03 Gree’s Patrol Center

Who’s AcJve in Japan? Ac`ve Not Ac`ve •  Zynga •  Playdom •  Playﬁsh / EA •  Kabam •  CrowdStar •  Digital Chocolate •  RockYou Happy Aquarium •  And also –  Rekoo –  Rakoo –  Five Minutes

Zynga in Japan SosBank CEO Masayoshi Son (Les), Zynga Japan CEO Robert Goldberg (Middle) Mixi CEO Kenji Kasahara (Right)

Have you heard of…?

CyberAgent •  History –  Started as ad network –  Branched into blogs (10M users), virtual world & social games –  1,900 employees •  Sales 2009 $1.1 billion –  Proﬁt 2009 $55 million •  Sales 2010 (E) $1.1 billion –  Proﬁt 2010 (E) $98 million

| Social Games •  DeNA 10 Jtles •  Gree 3 Jtles •  Mixi 8 Jtles •  Facebook 7 Jtles

| Social Games •  $13M in 4Q2010 –  Run-‐rate 2011 > $50M ( > ngmoco ?)

| 2D Virtual World

| 2D Virtual World •  PromoJon –  Leveraging Ameba’s blog plaworm –  TV ads •  Paying Users –  80% are 20 to 40 y.o. –  70% female •  Payment –  68% Mobile, 20% Webmoney, 12% Credit Card

| Revenue split •  Sales 2Q2010 $10 million

| Subs & ARPU 4.3 million users (2010.06) monthly ARPU = $15

| Fishing Game

Facebook Making Inroads •  Facebook in Japan –  Growing (2M) –  Mobile JP version –  Real-‐Name •  Why? –  GDP –  Online adverJsing –  Virtual goods KDDI’s Summer Line-‐Up –  Mobile!

Foreign Players in Japan •  Zynga –  Acquired local company Unoh –  JV with Yahoo! Japan (#1 portal) for games •  Chinese social games doing well –  Rekoo, Rakoo, Elex … but for how long? •  Online games growing too –  Perfect World (China) acquired local licensee

Summary: Japan •  3 social plaworms (+ Facebook) •  Walled gardens •  Mostly mobile ($2 bln)

Social Games Growing But… •  Fragmented market –  4 compeJng social networks –  Facebook sJll blocked •  SNS revenue not great (esp. for third parJes) –  Low adver`sing –  Plaworms develop games in-‐house –  Rev share variable & osen unajrac`ve

…Online Games SJll Dominate •  Online games biggest money maker –  $900M in 2Q2010 –  Tencent (20%), Shanda (20%), Netease (13%) •  Social networks channel users to MMOs •  China = 30% of global online games market $4 billion in 2010 Source: iResearch, Lazard Capital Markets

Answer •  CEO of Tencent! •  #3 Internet company in the world Ma Huateng (Pony), CEO

QQ IM & QZone

Digital Goods? •  Iden`ty related •  Game related •  Music related •  And more…

Tencent Bigger Than Ever? •  Sales 2010 (E) $2.8 billion –  Sales 1H2010 $1.3 billion –  Proﬁt 2010 (E) $1 billion Internet penetraJon sJll only 30%!

RenRen •  Claims to be #1 SNS in China •  More open than others •  Tencent announced it would open too

QQ Farm

Foreign Players in China? •  Oﬃces –  Zynga –  Playﬁsh –  Kabam –  Cmune •  Games –  Not launched locally

Summary: China •  4 social plaworms (-‐ Facebook) •  Self-‐serving plaworms •  Leader in MMOs

Globaliza`on Durian Strudel (Singapore)

Ideas, Talent & Markets •  Ideas First farm game = made in China! •  Dev. Zynga (JP, CN) Playﬁsh (CN) Kabam (CN) •  Market Facebook (JP, KR, SG, SEA) Zynga (JV with Sosbank for JP) Rockyou (JP), Others?

Nexon •  Ndoor M&A 2010.05 Korea •  GameHi M&A 2010.05 Korea •  BoomBang Invest. 2010.10 Spain •  Disney oﬀering $6 billion? (rumor) •  EA’s market cap is $5.8 billion… (2010.10) Source: +8*, Nexon

DeNA •  ngmoco:) M&A USA •  Astro Ape Invest. USA •  Aurora Feint Invest. USA •  GameView M&A USA •  Icebreak M&A USA •  TX.com.cn M&A China •  Social Gaming Fund of $27.5 million

Tencent •  Riot Games M&A 2011.01 USA •  Sanook Invest. 2010.08 Thailand •  Comsenz M&A 2010.08 China •  Shenzhen DN M&A 2010.04 China •  DST Invest. 2010.04 Russia •  Outspark Invest. 2008.01 USA

Other Chinese Companies •  Emerging markets, Japan, US •  Rekoo & Yicha doing great with social games •  Shanda buys Mochi Media (2010.01, $80M)

China + Russia + South Africa $18B $3B $35B 10% Source: +8*, October 2010

DST | Digital Sky Technologies •  Invested $180M in Zynga •  Invested ~$350M in Facebook (~10%) •  Invested $135M in Groupon •  Acquired ICQ for $188M •  Mail.ru (portal), Astrum (games) –  70% of all PV in the Russian speaking Internet

NASPERS

Conclusions

Conclusions •  Social games = growing fast •  Online games sJll > Social games (except Japan) •  Massive ads (TV, billboards, etc.) if ROI is good! •  Media proper`es entering social (portals, blogs) •  SNS can channel users to MMOs with bever ROI •  Mobile great in emerging & advanced markets

Conclusions •  CJK companies expanding globally •  TransiJon to digital goods is a `dal wave •  Epiphanies in the West like Korea 10 years ago

Digital Goods in 2010 Asia: $10 Billion USA: $2 Billion Source: +8*, 2011

Market PotenJal? •  From analog to digital –  Global video game market >$40 billion –  In Korea >50% of ALL GAMES = online games •  PotenJal = all games in the world –  Global game market $120 billion –  With digital goods dominant model?

From Asia to the World Durian Strudel (Singapore)

Facebook’s First FPS: UberStrike Thursday 2:30pm Hall E | www.facebook.com/uberstrike

Asia is part of your world too! What we do –  Best pracJces from Asia –  Digital Research & Strategy References +81 | Japan +82 | Korea +86 | China Telecom & Internet + Added Value Contacts * High quality –  benjamin@plus8star.com –  @benjaminjoﬀe –  www.slideshare.net/plus8star

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Social Gaming in Asia

by Benjamin Joffe

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