Asian Eye For The Game Guy

1. Asians Got Game Looking into Asia’s Gaming Opportuni4es @benjaminjoﬀe | CEO, Plus Eight Star Web Game Conference | Paris, May 2011

2. Survey Do you play games?

3. Survey Have you been to Asia?

4. HELLO! MY NAME IS @benjaminjoffe! Ask me!

5. “Mister Asia” – Mike Butcher, TechCrunch

6. 4 years 1 year 5 years

7. #HowAsianAreYou? 4% 2% 2% Chinese 8% Japanese 8% 42% Korean French American 33% German Singaporean

8. CEO, Plus Eight Star www.plus8star.com

9. “Innova;on Arbitrage” Best Prac*ces from Asia’s Digital Space

10. Co-‐Founder, Mobile Monday Beijing (41 events, 150 speakers, 4,000 par4cipants)

11. Angel Investor, Advisor, Keynote Speaker •  Speaker 100+ talks in 17 countries •  Advisor •  Investor in Asia-‐based global companies

12. Quiz! Which Western Gaming Company Succeeded in Asia?

13. Answer It depends on how you deﬁne “success”

14. Pain-‐au-‐chocolat 1.  What is Asia? 2.  China 3.  Japan 4.  South Korea 5.  Succeeding in Asia 6.  From Asia with Love

15. 1. What is Asia?

16. The Trouble with “Asia” 1.  Different infrastructures 2.  Different GDP / capita 3.  Different distribu;on channels 4.  Different payment solu;ons 5.  And some4mes different regula;ons 6.  Highly compe;;ve (and of course: language)

17. USERS Source: GapMinder.org

18. H Source: GapMinder.org A R MONEY D

19. Users USA Japan South Korea China Unit: million ©PlusEightStar, 2011 -‐ www.plus8star.com 2,000 1,500 1,000 500 0 Popula4on Internet Users Mobile Users 3G Users Sources: CIA World Fact Book, MIIT, Japan TCA, SKT, March 2011

20. Users ©PlusEightStar, 2011 -‐ www.plus8star.com Country USA China Japan South Korea Popula;on 310 mln 1,330 mln 130 mln 50 mln Internet Users 245 mln 460 mln 100 mln 40 mln Mobile Users 295 mln 860 mln 120 mln 50 mln 3G Users 120 mln 50 mln 115 mln 30 mln Sources: CIA World Fact Book, MIIT, Japan TCA, SKT, March 2011. Numbers are rounded for easier comparisons

21. 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 Connec;ons Measured >5 Mbps (%) Sources: Akamai 4Q10, Japan TCA, SKT, ITU, IDA, Internet World Stats, March 2011

22. What is this?

23. What is this? Answer: Tencent’s new HQ in Shenzhen

24. #Gimougous Companies •  China –  Tencent made $1 billion in 1Q2011 (40% net proﬁt) –  10 others listed on Nasdaq, NYSE, HKSE –  Renren (SNS) listed on NYSE for $5 billion in April 2011 •  Japan –  DeNA $1.3 billion (2010) –  GREE $600 million (2010) •  Korea –  Nexon $1 billion (es4mate for 2010, 30% from games) –  Naver $1.3 billion (2010) –  NC So` $525 million (2010)

25. Social Networks •  China •  Korea –  QQ 674M –  Cyworld 25M –  Q Zone 490M –  Daum, Naver, Nate –  QQ Microblog 160M –  Pengyou 101M •  SE Asia –  RenRen 117M –  Mig33 (mobile) 40M –  Sina Microblog 100M –  Kaixin001 178M? –  51.com 100M? •  Japan –  Mobage (mobile) 24.5M –  GREE (mobile) 23.8M –  Mixi (web+mobile) 22.6M Numbers are “registered” and “ac4ve” accounts as of 2011.05, depending on sources

26. Social Platorms in Asia China Accounts Korea Accounts Japan Accounts Facebook n.a. Facebook 4M Facebook 2.9M Qzone Mobage 505M Cyworld 25M 24.5M (Tencent) (DeNA) 51.com 178M Naver n.a. GREE 23.8M Renren 117M Daum n.a. Mixi 22.6M Pengyou Yahoo 101M 3M (Tencent) Mobage Kaixin001 100M ©PlusEightStar, 2011 -‐ www.plus8star.com

27. Digital Goods & Currencies in 2010 Asia: $18 Billion USA: $2 Billion Source: Plus Eight Star, 2011

28. $18 billion Digital Goods & Currencies in Asia Online Games Social Platorms 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

29. 2. China

30. 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

31. Educa4on Primary School 11.3% 9.2% Junior Middle School 12.0% 27.5% Senior Middle School Professional Training College 40.1% Undergraduate Educa;on and The Above Source: CNNIC, 2010.07

32. 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

33. 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 China's Online Game Market Annual Report by Ministry of Culture, iResearch, 2011

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

35. 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 Kingsox NetDragon CDC The9 Renren Game World Interac4ve Source: Companies, 2010

36. Market Cap $53.5 8 Unit: billion US$ 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 Kingsox NetDragon CDC The9 Renren Game World Interac4ve Source: Companies, 2011.04 except Renren, 2010.05

37. Digital Goods Dominate a Crowded Market New Game Titles (2010) 2,000 1,500 1,000 500 0 Charged by time Charged by item others Sources: Online game industry in 2010 year-‐end summary report, CNZZ, 2011

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

39. Renren SNS + Game Dev. Value-‐Added Services Includes Nuomi Adver;sing (Groupon Clone) -‐ Mostly ads sold “per day” 13% -‐ Limited targe4ng 42% 45% Online Games Top MMORPG = 31% of game rev. (14% of total) $76.5m in 2010 (Loss)

40. Renren Digital Currency •  “Renren Beans” since 2007.10 •  Sales channels Type Channel 1.  Bank cards 2.  Mobile Payment Online 3.  SMS 4.  Third-‐party (Alipay, Yeepay) 1.  News stands Oﬄine 2.  Convenience Stores 3.  Internet cafes

41. Walled Garden Item Figure Third-‐party Applica;ons 1,000 Revenue from $3.5 million Plamorm in 2010 (Renren share) Renren: 52% (avg.) Revenue Share Developer: 48% Most developers Look Overseas or at Qzone

42. 3. Japan

43. Online Games Market in Japan Online game users accounts (unit: million, incl. mul4ple accounts by same user) 100 89 80 75 $1.5B in 2010 59 60 42 40 28 19 20 0 2004 2005 2006 2007 2008 2009 Source: Japan Internet White Paper 2010 – Japan Online Game Associa4on, 2010.07

44. MMOs & Casual Games Origin of PC MMOs in 2009 Origin of PC casual games in 2009 Korea & China Dominate MMOs Source: Japanese Online Game Associa4on, 2010.07

45. Business Models Shix Online games and their revenue model, evolu4on since 2005 Source: Japanese Online Game Associa4on, 2010.07 F2P over 40% in 2010

46. The Real Thing: Mobile Social Gaming Self-‐published + Open platorms Some ads SNS + Free games + Homepage Virtual goods

47. DENA & GREE •  Self-‐Published Games + Walled Gardens •  Proprietary digital currencies •  70/30 Revenue share •  $500 million paid to third-‐par4es (GREE, 2010) Mobile Social Apps Make Money in Japan

48. CyberAgent | $18M in 1Q2011 CyberAgent Subsidiaries 37 ;tles across 6 plamorms Source: CyberAgent, 2011.03

49. 4. South Korea

50. Digital Goods Market $100 mln $10 mln $10 mln $1 bln Online Games Secondary Market Social Platorms Social Games $4.7 bln Virtual Worlds

51. Online Games | Key Players

52. Revenue & Proﬁts (2010) Revenue Proﬁt 1,400 1,310 Unit: MUSD 1,200 1,000 1,000 800 607 600 40%? 525 427 400 251 243 200 111 47 0 Nexon NHN NC Sox Neowiz CJ Internet (Hangame) >50% of Nexon’s revenue is overseas

53. 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 s;ll 4.0 $300 million! 2.0 1.1 0.3 0.0 Nexon NHN NC Sox Neowiz CJ Internet (Hangame)

54. 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 Mul4player Online Role-‐Playing Game RTS Real-‐Time Strategy FPS First-‐Person Shooter Source : Gametrix, 2011.02

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

56. Social Platorms •  Fragmented –  Naver Social Apps –  Nate / Cyworld –  Facebook Korea –  Daum Yozm •  All early stage –  Limited revenue (<$10M in 2010) –  Facebook growing fast but weak payment solu4ons

57. 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

58. 5. Succeeding in Asia

59. Deﬁning Success 1.  Revenue 2.  Proﬁt 3.  Usage / Brand recogni4on 4.  Development 5.  Learning

60. Western Companies China Japan Korea Zynga Opera;ons n.a. RockYou Blizzard (WoW) Gamelox EA (FIFA Online) PopCap Zynga (rumor) PopCap Kabam Licensing PopCap Crowdstar RockYou Playfish Cmune PopCap Zynga Zynga Playfish Playfish Development Kabam RockYou Cmune Gamelox AntVoice Ideas too! The First Farm Game was made in China

61. Wealth of Plamorms: How much for you? •  China –  Qzone $M for happy few (~10) –  Renren S4ll small –  Others Unclear •  Korea –  S4ll small: total market was $10M in 2010 •  Japan –  Mobile mostly, but hundreds of $mln! –  Chinese companies ﬁrst movers (Rekoo, Rakoo, etc.)

62. Case Studies •  Blizzard Korea’s religion •  EA FIFA Online in Korea •  PopCap Pragma4c and organic •  Angry Birds Soon big in China? •  Cmune Made from China

63. Case Studies •  Blizzard Korea’s religion •  EA FIFA Online in Korea •  PopCap Pragma4c and organic •  Angry Birds Soon big in China? •  Cmune Made from China

64. PopCap •  $100 million in revenue (2010), famous games –  Dev. team in Shanghai for years –  No business in China •  Partnerships –  Japan: with Taito for mobile social games –  Korea: with NC Sox for web games –  China: PvZ on Renren •  First ever social adapta4on •  Exclusive launch announced 2 days ago

65. Rovio •  Angry Birds | #1 smartphone game in the world –  $20M (1Q2011), $100M+ in 2011 –  100M 200M downloads globally –  Free DL + Fake birds on sale in China •  Wants China, Japan and Korea! –  Partnerships with mobile carriers –  Partnerships with handset makers (Nokia, etc.) –  Will release on feature phones in China

66. Uberstrike by Cmune #1 First-‐Person Shooter on Facebook •  Made from China + Global reach •  Combines East & West exper4se •  500,000 MAU = Top 3D MMO on Facebook •  Also on Mac App Store! Disclosure: I am an investor in Cmune | www.facebook.com/uberstrike

67. “You can learn more about someone in an hour of FPS PvP than in years of Farmville” – Sun Tzu

68. 6. From Asia with Love

69. Interes4ng New Things 1.  Nano-‐transac4ons 2.  SNS as MMO funnels 3.  New social platorms 4.  Fourth Genera;on Digital Goods Model 5.  Smartphone opportunity 6.  Various deals & partnerships

70. 1. Nano-‐Transac4ons •  Tencent had –  1 Q Coin = 1 RMB = 0.1 EUR •  They introduced –  1 Q Point = 0.1 RMB = 0.01 EUR •  …To allow items and 4me “nano-‐transac;ons”

71. 2. SNS as MMO funnels •  Renren revenue more from games than ads •  Mone;za;on much higher in MMOs •  Reten;on is be•er too •  What’s your ROI?

72. 3. New Social Platorms •  Naver, Nate, Daum Portals •  QQ, NateOn IM •  Ameba Blog plamorm •  DeNA, GREE Mobiles + Smartphones

73. 4. Fourth Genera4on 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)

74. e.g. ZT Online 2 •  Giant Interac4ve no longer sells items in ZTO2! –  Trading is main revenue model –  Reward ac4ve users with items –  Let users decide on the right price –  5% commission on transac;ons •  Beneﬁts –  Capture secondary market –  Avoid “one-‐price for all” for digital goods –  Ensure fairness –  Mo;vate users

75. 5. Smartphone Opportunity •  Smartphones booming in Japan & Korea –  Japan: 50% of new phones in 2011, already 5M+ iPhones –  Korea > 10M smartphones •  China has lots of smartphones & feature phones –  Beijing Apple store is #1 worldwide (>Times Square) –  Making money with apps in China s4ll tough –  Android spreading but app stores fragmented –  Building apps from China is totally ﬁne •  Localize apps! –  Angry Birds #1 iOS App in China –  Akinator (France) is a top paid app in Japan –  Do it quick with MyGengo  Disclosure: I am an investor in MyGengo

76. 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) –  DeNA acquires NGMOCO (US) –  So`bank invests in Japan, China, Korea •  Korea –  Various M&As –  Some investments by Nexon in US

77. To look further… •  We helped Kabam with market entry •  We helped IMVU with best prac4ces •  We helped Ci;bank with ecosystem mapping

78. Merci! -‐ Thanks! More about “Innova4on 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

Asian Eye For The Game Guy

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