Strategic Analysis of Game Developer

bursts, simple in design, and require very less skill to play, while on the other hand, with
lower churn rates, complex/social games are analogous to sit-down dinners, which
engages users for longer time and require more skills to play. The strategic challenge is
focusing on low ARPU (Average Revenue Per User) , but high DAU(Daily Average User)
casual games or vice-versa complex/strategic games.
Development- Should more resources be put to in-house game development or more to
platform management and acquisition of third party developers? The key strategic
decision yet to be made is whether to continue invest in in-house game development or
focus on being a platform providing tools for third-party developers?
From developers’ perspective:
Discoverability- With high competition and wide variety of games availability, the
discoverability of the application by customer is of prime importance. Most of the App
stores (namely, Amazon Appstore, Appstore for iPhone, Appstore for iPad, Blackberry
App world, Google’s Android Marketplace, Nokia Ovi Store and Windows Phone
Marketplace) did not have good discoverability functions.
Monetization- The reliability and trust on the quality of the App is the primary issue that
hinders the monetization of the game. The billing infrastructure and transaction
capabilities are fragmented across different mobile operators, payment providers and
by nature, quite costly to manage for an independent developer.
Distribution- In order to success the App, the customer base needs to be huge, well
segmented and with high willingness to pay. And such a large structured customer base
is quite elusive. Moreover, the app store provide an easier and cheaper way to
distribute their games, it also increases competition for market share.
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Analogy: The strategic decision of offering Game-as-a-service can be the real success
factor in future as it will help to encounter the trend of the industry and reduce
operational costs.
Trend of App advertising broker: There are now companies that get in between the
advertiser and the app, it’s a broker that manages the complexity and manage to get
good coverage everywhere. They create an inventory of the adds and the apps, they
negotiate with the advertisers to fill the ads. The take a commissions of up to 50%.
STRATEGIC OPTIONS:
The three strategic options of Market, Type of game and Development (as described above)
seems to be distinct, but are inter-correlated. The choice of the first will guide the second and
the effect will trickle down the ladder.
Based on the analysis, the first option is to decide between developing or developed market,
depending on the following criteria:
Ø Growth potential
Ø Size of customer base
Ø Monetization possibility
Ø Mobile penetration
The second decision of selecting type of game, i.e., casual or complex/social will depend on the
first choice. Due the correlation factor and different trends in different markets, the following
combinations can be possible:
Ø Emerging market with casual gaming
Ø Developed market with casual gaming
Ø Emerging market with complex/social gaming
Ø Developed market with complex/social gaming

2. Type of game: Casual. Why?
ARPU is limited to income constraints. Complex/Social games are very costly to
develop and can only refinance themselves by charging high in-app sale fees. This is
not possible in countries with low customer spending.
Quality expectations or issues are not that high with causual games allowing low
budget productions
Skill set required for casual games is not that high and can thus suite better “less
educated customers”
3. Method of development: 3rd Parties. Why?
Market will not be dominated by iOS iPhones and Tablets but will be flooded by a huge
variety of other “low-cost” Smartphone due to the low income levels in Emerging
Markets
Support the talent needed: To ensure the production of successful complex/social
games like Farmville high development investments are needed. Thus ensuring high
quality complex games core resources and talent must be controlled, hence favoring in-
house app production. However, as quality requirements for casual games are much
lower they can be developed by 3rd parties. 3rd parties have the talent for developing
casual games. Tequila’s talent is to bring the parties together and allow them to
exchange.
Foster network effect: By allowing 3rd parties to join, Tequila’s focus lies on the
development on a huge platform on which competition between developers will ensure
quality and customer satisfaction.
Solving the Problems: Developer’s Perspective
1. Discoverability: algorithm, the streamlined, scalable nature of the app store enabled
apps to reach a much wider audience who never would have bought or downloaded an

v 15% to tequila
IMPLEMENTATION PLAN
TARGET MARKET: India
Mobile gaming revenues in India are expected to reach $450 million by 2012#
India is expected to lead among Asian countries in terms of mobile gaming revenues,
with the 2007 figure at around $80 million, global technology research firm Gartner said
Programming and operational costs are much lower
Huge customer base with continuous growth potential
Less number of competitors in this segment.
Acquired experience by Tequila over the past years
Already has a footprint in the market with highest volume percentage of transaction,
i.e., 21.24% is coming from India in Q3, 2011.
The biggest advantage of India is its growth potential and the huge potential customer base.
This is why the business model has to focus on SIZE. Tequila has to reach a huge number of
customers by creating a network effect.
Serve customers what they want: their Mobile App Budget is low, thus complex social
games with high in-app sales focus would not be profitable. Thus, serve customer casual
simple games and try to profit from economies of scale and direct as well indirect network
effects they bring to the platform.
Support most relevant partners: Developers are the most important party in this two-sided
market relation. Offer them a 70:30 revenue share model and serve them with huge
platform traffic by focusing Tequila’s resources on the acquisition of customers. For
example, Tyroo as the traffic partner, Gamiloft as the gaming partner with strong presence
in Indian market.

Revolutionary Business Model
Exhibit 2This document is a partial preview. Full document download can be found on Flevy:

Global mobile data traffic
Exhibit 5

Implementation Strategy
Exhibit 8

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