Virtual Goods Summit - Global Perspectives

Virtual Goods – A Global Perspective Shinichi (Shin) Takamiya Globis Capital Partners Tel: +81-(0)3-5275-3637 Fax: +81-(0)3-5275-3825 Email: s-takamiya@globis.co.jp http://www.facebook.com/shin1 http://www.globiscapital.co.jp/ GLOBIS CAPITAL PARTNERS GLOBIS CAPITAL PARTNERS !

Speakers Speakers Ludovic Bodin, CMUNE Doug Bewsher, mig33 Andy Tian, XPD Media Philip Yun, NHN USA Moderator: Shin Takamiya, Globis Capital Partners GLOBIS CAPITAL PARTNERS "

Framework for Today’s Session 1 Agenda Geography 1. Situation Around the Globe RoW • Japan 2 Layer • China App • Other Countries 2. Going Global – Feasibility Enabling and Key Success Factors Service • App Layer Web • Enabling Service Layer PF • Web PF Layer Device • Device Layer GLOBIS CAPITAL PARTNERS #

Agenda 1. Situation Around the Globe 2. Going Global – Feasibility and Key Success Factors GLOBIS CAPITAL PARTNERS $

Situation Around the Globe – Japan Who is Making $$$? Registered Users: 15M on Mobile Annual Revenue: $154M Operating Margin: 60% Monthly ARPU2) Registered Users Paying Users (Assuming 10%) $1.31 $13.15 (¥105) (¥1,183) and rising… 1) $1 = ¥ 90 2) Jul - Sept 2009 GLOBIS CAPITAL PARTNERS %

Situation Around the Globe – Japan A Representative Example: GREE GREE: sales $154M, operating margin 60% (08) with virtual goods Top Monetizing App: “Fishing Stadium” Revenue Operating (¥ B) Margin 15 60% 10 36% 50% 13.9 5 0.3 2.9 0 0% Jun. '07 Jun '08 Jun. '09 • Strong Engagement Factor • Level up – fishing points, and items etc -32% -50% • Frequent events and stage updates (in days) • Collection • 99% of traffic from mobile • Moderate Viral/Social Factor • 74% of revenue from virtual goods • Fishing w/ team (trip and competition) (in-game items, and avatars) • Ranking board • 3 monetizing apps + numerous free • Users Acquire Gold by traffic generating apps • Premium membership subscription • Closed: in-house app dev. • Avatar item purchase • Invitation GLOBIS CAPITAL PARTNERS • Affiliate program &

Situation Around the Globe – Japan Web PF: 3 Dominant SNSs GREE mainly monetizing from in-game items, and Mobage avatars. mixi on its way – just opened up their PF DeNA: Mobage Revenue ¥B Operating Margin 40 40 40 36% 60% 48% 42% 37% 31% 29% 32% 43% 42% 22% 17% 9% -14% 13.9 29.7 37.6 20 -32% 20 10.1 12.1 20 6.4 14.2 2.9 1.9 5.2 2.9 0.7 0 0.0 0.1 0.3 0 0 As of Jun 09, except for GREE 1) 06/'05 06/'06 06/'07 06/'08 06/'09 03/'05 03/'06 03/'07 03/'08 03/'09 03/'05 03/'06 03/'07 03/'08 03/'09 UU 15M 17M 14M Mobile Traffic 99% 73% 100% Virtual Goods 77%2) 8%2) 52%2) Sales (Premium Subscription) (Avatars) Virtual Goods $1.31 $0.04 $0.53 ARPU/UU (No Sales from VG Yet) Paying% 10%+? 1.4% 5-10%? 3) (“Guess-timate” ) (Assuming 7.5%) ARPU/Paying U. Around $13? $3.5 Around $7? (Premium Subscription Fee) Source: Company IR documents, except for “guess-timate” GLOBIS CAPITAL PARTNERS 1) Sep 09, 2) Sales from virtual goods on SNS business only, 3) “Guess-timate”: rough guess from qualitative info. '

Situation Around the Globe – Japan App: Open SNS PF SNS PFs opening up – $ few hundred million app market emerging Opening Up of mixi and Mobage (DeNA) App Market Size App PF Market Market ($ M) Aug 09: PC PF UU PV/Mon. Revenue Oct 09: mobile PF (M))) (M))) ($ M) Approx Face Approx 276 79,226 500?2) book 500-1,000? Mobage Jan 10: initial partners (DeNA) Mar 10: full open Few mixi $Hundred M + 32 15,360 5003) Mobage - Billion4)? 1) Mar 09 2) Reuters, Jul 6, 2009 3) Mar 09 SNS PF business only GLOBIS CAPITAL PARTNERS 4) Estimated from PF market size (

Situation Around the Globe – Japan App: App Trends Across 3SNSs Global trends, and local trends co-exists DeNA: Mobage 1.Sunshine Ranch mixi 1.Helper “Gyaruo” • Fishing Stadium Dv:Rekoo, 2.04M UU • Farming games popular 2.Social Farm 2.Baseball Stadium • Kurinoppe • Porting of console games RAKOO 0.95M 3.Kanji Test 3.Beans Walk • Box Garden Drecom 0.95M DeNA: Mobage 4.Speed+Racing 4.Playing Cards • Dri Land • Light casual games Rock You! Asia 0.55M generating traffic, and 5.My mixi Report 5.Dep’s Summer Soratobu 0.52M Holiday monetizing via avatars App Category 6.Memory Sketch 6.Mah-jong REAL 0.52M Farm Quiz GREE 7.My mixi Tetris 7.Night Campus • Fishing game and pet game Tetrisonline 0.46M Action Pet monetizing engine generating 8.Paper Fortune 8.Moba soritia most of the revenue Honda 0.37M Board/ Sports 9.Monster Life 9.City Golf 2 Card • Generating traffic by High Five 0.35M Commu- Promo/ numerous free light casual 10.Social Face Cybird 0.27M 10.Seat puzzle nication Coupon games GLOBIS CAPITAL PARTNERS Source: mixi app ranking, Mobage-town app ranking, GREE web page *

Situation Around the Globe – Japan Web PF: SNS vs Online Game Rapidly growing SNS, and slowing online game. Comparable size in 1-2 years? SNS Market Size (Total Sales of 3 SNSs) Online Game Market Size YoY ¥B Growth ¥B 150 426% 234% 61% 150 24% 11% 11% 124 CAGR06-08 112 11% 102 100 100 CAGR06-08 46 131% 50 50 28 9 0 0 06 07 08 06 07 08 Source: 3 companies’ IR Source: JOGA online game market report 2009 GLOBIS CAPITAL PARTNERS ,

Situation Around the Globe – Japan Web PF: Emerging Models Emerging new models – Cookpad & Ameba Pigg Targeted Media “Cookpad” Browser Based Virtual World “Ameba Pigg” •PC/mobile recipe CGM - 571K recipes •Flash based PC/mobile virtual world – chat and •6.9M MAU - 25% of the women in their 30’s mini games •Revenue US12M, EBIT $4.6M (FY 04/09), •Virtual goods model: avatar and my room deco. • 57% marketing solution (B2B) •1.1M UU, revenue $ a few M/mon, achieved • 28% ad monthly breakeven (as of Nov 09) • 16% premium membership GLOBIS CAPITAL PARTNERS $1 = ¥ 90 "!

Situation Around the Globe – Japan Enabling Service No integrated enabling service PF since mobile carriers serving as payment PF across mobile and PC Enabling App Service Web Provider Provider PF Overview User Social Graph ! • Web PF – no 3rd party enabling service vendors Acquisition Viral Mechanism (Invite, Review, and Ranking etc) ! • Open space in iPhone Virtual Currency ! • App providers – no 3rd party enabling Analytics ! service vendors *SNS avatars: Web PFs’ proprietary Monetization Support In-Game Avatar ! avatars provided by 3rd party Payment ! • Primarily mobile carriers, plus prepaid web money, and credit card Ad ! • Web PF’s official ad program Community User Support ! ! • App provider and web PF respectively • Mobage: available to 3rd party at a cost Management Community Patrol1) ! • Enabling service vendor 1) Unique requirement in Japan GLOBIS CAPITAL PARTNERS ""

Situation Around the Globe – China Overview •Virtual goods preferred monetization method •App genre seeing many original innovations – farming, aquarium, hospital, tower, etc App •Chinese companies are brining their original games to global audience •Market is early with many small developers, no dominant players as on Facebook Enabling •Direct consumer payments based on virtual currencies provided by PFs Service •No analytics and optimization support from the PFs or 3rd parties •Most SNS platforms local – available only in Chinese. •PF fragmentation: 10+ SNS, major Internet companies launching their own SNS’s Web •Non-SNS sites such as forums and portals actively launching social games Platform •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 Device – 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 GLOBIS CAPITAL PARTNERS "#

Agenda 1. Situation Around the Globe 2. Going Global – Feasibility and Key Success Factors GLOBIS CAPITAL PARTNERS "$

Going Global App Layer Global common trends and some developers global across PFs 1.Sunshine Ranch 1. Farm Ville 1. Happy Farm Rekoo 2.04UU Zynga 61.1M MAU Five Minutes 3.60M DAU 2.Social Farm 2.Causes 2. Sunshine Ranch RAKOO 0.95M Causes 33.6M Rekoo 2.3M 3.Kanji Test 3.Mafia Wars 3. Fishpool Drecom 0.95M Zynga 25.9M Fishpool 1.1M 4.Speed+Racing 4.Café World 4. Sole Tower Rock You! Asia 0.55M Zynga 22.1M Kingnet 0.9M 5.My mixi Report 5.We’re Related 5. Aquarium App Category Soratobu 0.52M Familylink.com 21.3M Two-fish 0.9M 6.Memory Sketch 6.Pet Society 6. Renren Restaurant Farm Quiz REAL0.52M Playfish 20.5M Renren 0.7M 7.My mixi Tetris 7.Yo Ville 7. RonHospital Action Pet Tetrisonline 0.46M Zynga 19.9M RongTian 0.7M 8.Farm Town 8.Animal Paradise Board/ 8.Paper Fortune Sports Honda 0.37M Slashkey 18.7M Rekoo 0.5M Card 9.Monster Life 9.Texas Holdem Poker 9. Cute Pig Commu- Promo/ High Five 0.35M. Zynga 18.5M Yibo 0.5M nication Coupon 10. Social Face 10.Birthday Cards 10. Hoolai Hotel Virtual management Cybird 0.27M RockYou! 18.1M Hoolai 0.4M GLOBIS CAPITAL PARTNERS 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 "%

Going Global App Layer What it take to become a “global contents” – reflecting fundamental human needs into the game system? Fundamental Needs (Maslow’s Hierarchy of Needs) Game System Game Element Self Actualization • Game Design: game world/story, graphics/BGM, and characters etc • Growth: level up, skills and items etc Self Esteem • Battle/Competition • Item Production/Trading Social Needs • Community Management: events, quests, and updates etc Social Element Safety Needs • Reach of Community Involvement • Strength of Community Involvement Physiological Needs • Interaction Among Users: help/competition GLOBIS CAPITAL PARTNERS "&

Going Global Web PF Global business or accumulation of countries? SNS Ranking by Traffic South North America America Europe North America US Canada Brazil Mexico UK Germany China Japan 1 2 3 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 GLOBIS CAPITAL PARTNERS - Japan: mixi/DeNA/GREE IR report/Unique Users "'

Going Global Enabling Service In general enabling service highly reliant on the local situation. The key to globalization cross boarder payment system? Global/Local Nature of the Function Global Local Social Graph • Based on real social community User Acquisition Viral Mechanism • Reliant on web PF and social graph – if the PF is (Invite, Review, and Ranking etc) global potential to become global Virtual Currency • Technology and process universal and basis for virtual goods monetization Analytics Monetization • Technology universal, but taste of the avatars In-Game Avatar Support highly local • Hugely reliant on local regulations and historical Payment industry evolution Ad • Technology universal, but ad sales local business User Support • Process universal, but language issue Community Management Community Patrol • Regulatory issue only in some countries GLOBIS CAPITAL PARTNERS "(

Going Global Device Layer Mobile or PC? Or, does it even matter? GLOBIS CAPITAL PARTNERS "*

Thanks for Listening! GLOBIS CAPITAL PARTNERS ",

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Virtual Goods Summit - Global Perspectives

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