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Digital Goods Real Billions
The document discusses the growth of digital goods and virtual economies in Asia and what it means for the West. It notes that Asia's digital goods market was worth $7 billion in 2009 compared to $1 billion in the US, and is projected to grow to $10 billion in Asia and $2 billion in the US by 2010. It suggests the global digital goods market could exceed $100 billion within the decade as the transition from analog to digital continues. The document also provides examples of large Asian social networks and gaming companies and their business models around digital goods.
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Digital Goods Real Billions
- 1. Digital Goods, RealBillions Asia’s Digital Life & What it means for the West @benjaminjoffe | CEO, +8* Virtual Goods Summit, San Francisco | 2010.10
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- 3. 4 years 1 year 5 years
- 4. • CEO, PlusEight Star | www.plus8star.com – Best practices from Asia’s digital space – Research, Strategy & “Innovation Arbitrage” • Clients
- 5. Angel Investor, Advisor,Keynote Speaker • Speaker 100+ talks in 16 countries • Advisor • Investor in Asia-based global companies
- 6. My Interests • Technology, Sociology and Anthropology • Virtual economies • Digital third places • Artificial artificial intelligence (AAI) • Online social dynamics
- 7. All the world’sa… All the world’s a stage… William Shakespeare All the world’s a game… Gabe Zichermann …And one man in his time plays many avatars. Benjamin Joffe
- 8. Introduction Quiz! Chapter 1 South Korea Chapter 3 Japan Chapter 4 China Chapter 5 Rest of Asia Chapter 6 Conclusions Chapter 7 Globalization
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- 16. More than Facebookand USA • Facebook • LinkedIn • QQ (Tencent) • Qzone • RenRen • Kaixin001 • Xiaonei • 51.com • Mixi And more… • Mobile Game Town • Gree • Cyworld • Friendster
- 17. 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
- 18. Market Caps (2010.10) $780M $3.3B $4.2B $43B
- 19. ngmoco:) news $400M < 2010 Profit!
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- 21. Cyworld • SNS/VG pioneersince 10 years ago – Stagnant for several years – “The new MySpace”?
- 22. 2009.10 | NateApp Store • Leverages Nate’s reach • Slow rise (2M users) • Semi-open • Rev share (70/30)
- 23. Portals join thedance • . Naver Social Apps • . Yozm by Daum • Results – Just started – No social graph
- 24. Facebook Rising • Facebookin Korea – Usage growing – Local office – Hired from Cyworld • Why? – Users bored of Cyworld – Virtual goods market – Games market
- 25. Virtual Worlds • 3Dvirtual worlds still early, even for Korea – Non-gaming not working – Nurien (3D social world) fail, revamp into social app • Only PuppyRed seems successful – Yet not that big… – $4M in 2008, equivalent to $40M in US? (= IMVU)
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- 28. PuppyRed | Conversion •225,000 MAU – 18,000 paying (8%) – Top 2,000 = 46% sales • Ideas – Ratio > Social games – 1% users = 50% sales Source: Inside Social Games, Oct 2010, PuppyRed data from Nov 2009 to Jan 2010
- 29. PuppyRed | Monetizing •Time investment – Since reg. – In-world • Friends – More value to items – Gifts • Items balance – Limit free items – Large inventory (15,000+) Source: Inside Social Games, Oct 2010, PuppyRed data from Nov 2009 to Jan 2010
- 30. Online Games • Onlinegames market $3.3 billion? • Leaders Nexon, NHN, NC Soft • Expanding overseas China, Japan, US, Emerging markets Source: KOCCA
- 31. Answer • #1 in Online Gaming • Pioneer in virtual goods • First MMO in 1996! Min Seo, CEO
- 32. Nexon Today • Revenue2009: $561 million (+56%) • Over half from overseas (first in 2009 !) • Some famous games • Kart Rider (200M reg. users) • Dungeon & Fighter (200M reg. users) • Maple Story (95M reg. users) • Mabinogi • Combat Arms (FPS) • Sudden Attack (FPS) • Etc. Source: Nexon
- 33. Foreign Players inKorea? Some limited successes…
- 35. And… Starcraft CheatingScandal! • April-May 2010 • Largest scandal in e-sports history in Korea • 16 pro gamers involved in match set-ups & illegal betting. Pro Gamer sAviOr (Ja Mae-Yoon)
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- 37. Mobile SNS Makea Killing • Revenue total > $1 billion! • All 3 have a mobile app platform • Mass promotion TV, Billboards, Posters… • Publish + Develop 1st, 2nd, 3rd Party dev.
- 38. Mixi • Inspired by • Friends (PC) • Mobile (mobile) • FB (apps, “like”) • Twitter (micro-blog) • 21 million users • Pageviews – 14 million MAU – Mobile 28 billion PV – PC 5 billion PV
- 39. Mixi • Revenue 2009 $166 million – Profit margin 20% • 2Q2010 $49M – Profit margin 25% – Run rate 2010 $200M
- 40. Mixi | Users •Gender-Balanced • 90% above 20 y.o. Total Mobile Total Mobile
- 41. Mixi | Pageviews 2009.10 PC Applications Platform 2009.08 Mobile Ad prices for mobile = 1/3 of PC price
- 42. Mixi | Apps •Apps – PC > 1,000 – Mobile > 600 • Apps contribution – Minor for revenue <10% – High for PV • Smartphone UI “Mixi Touch” Machi Tsuku (3M MAU) by Unoh / Zynga Japan Source: Masaru Ikeda @ Asiajin
- 43. Answer • CEO of DeNA • Operates “Mobile Game Town”, a top mobile SNS in Japan Tomoko Namba, CEO
- 44. DeNA • Revenue 2009 $517 million – Profit 2009 $228 million (44%) • Revenue 2Q2010 $279 million – Profit 2Q2010 $138 million (49%) – 90% from digital goods On track for $1 billion in 2010
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- 46. Mobile Game Town|Sales Breakdown $250 million (2010.04~06) 1% 9% 12% 78%
- 47. Mobile Game Town| Users • 20 million users • 74% over 20 y.o.
- 48. Mobile Game Town| Open Platform • 154 partners companies • Avatars in open • 350 titles (July 2010) platform games too • In-house games too • Common currency
- 49. DeNA | Target:Global Leader
- 50. Answer • CEO of GREE, top mobile SNS in Japan • #2 youngest self-made billionaire in the world (after Mark Zuckerberg) Yoshikazu Tanaka, CEO
- 51. Advertising Gree Home Advertising & Affiliates Avatars & items B2C virtual goods Games (avatar + games)
- 52. GREE | ServiceStrategy Members SNS Social Games Diary/Notes Q&A Community/BBS Page views Virtual Goods Media Ad Sales VG Sales GREE
- 53. GREE ARPU =$2.2 / month! Revenue $133M ARPPU > $20? 2010.04-06 20M Users Digital goods (82%) Ads (18%) 2010.06
- 54. GREE • Year toJune 2010 – Sales $430 million – Operating profit $240 million (56%) • Year to June 2011 – Apr-Jun 2010 $133 million – 2011 revenue run rate >$600 million
- 55. GREE | MonthlyPage Views 35.7 Billion Google Images = 1 billion/day
- 56. GREE • 2010.06 |Open platform • 2010.10 | Non-gaming apps (27 coming up)
- 57. 2010.09 | GREEon iPhone ( + Android soon)
- 58. 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
- 59. Have you heardof…?
- 60. 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
- 61. | Social Games •DeNA 10 titles • Gree 3 titles • Mixi 8 titles • Facebook 7 titles
- 62. | Social Games •$4M in July 2010 – Run-rate 2010 = $50M ( > ngmoco ? )
- 63. | 2D VirtualWorld
- 64. | 2D VirtualWorld • Promotion – Leveraging Ameba’s blog platform – TV ads • Paying Users – 80% are 20 to 40 y.o. – 70% female • Payment – 68% Mobile, 20% Webmoney, 12% Credit Card
- 65. | Revenue split •April-June 2010 $10 million
- 66. | Subs &ARPU 4.3 million users (2010.06) monthly ARPU = $15
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- 68. Facebook Making Inroads •Facebook in Japan – Growing (1.2M) – Mobile JP version • Why? – GDP – Online advertising – Virtual goods – Mobile! KDDI’s Summer Line-Up
- 69. Foreign Players inJapan • 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
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- 71. Social Games GrowingBut… • Fragmented market – 4 competing social networks – Facebook still blocked • SNS revenue not great (esp. for third parties) – Low advertising – Platforms develop games in-house – Rev share variable & often unattractive
- 72. …Online Games StillDominate • 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
- 73. Answer • CEO of Tencent! • #3 Internet company in the world Ma Huateng (Pony), CEO
- 74. QQ IM &QZone
- 75. Digital Goods? • Identity related • Game related • Music related • And more…
- 76. Tencent Bigger ThanEver? • Sales 2009 $1.8 billion – Net profit 2009 42% (= $750M) • Sales 1H2010 $1.3 billion – Run rate 2010 (E) $2.5 billion (1/3 games) – Profit 2010 (E) $1 billion Internet penetration still only 30%!
- 77. PHOTO: MOBILE PHONE,BEIJING, APRIL 2010 © Benjamin Joffe / Plus Eight Star Ltd.
- 78. Hardware Innovation: “Shanzhai”(山寨) PHOTO: MOBILE PHONE, BEIJING, APRIL 2010 © Benjamin Joffe / Plus Eight Star Ltd.
- 79. PHOTO: MOBILE PHONE,BEIJING, APRIL 2010 © Benjamin Joffe / Plus Eight Star Ltd.
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- 82. Time-Shifted Markets • Vietnam – ~$150M from online games – 86 million people – 4-5 years behind china • Indonesia – #3 on Facebook! – 238 million people! – Behind Vietnam • Other places: Thailand (66M), Philippines (92M), etc. Virtual Goods Time Machine • Biggest potential: online games & mobile SNS
- 83. Mig33 “We have decidedwe want to be like QQ for mobile in the rest of the emerging world.” – Steven Goh, CEO Source: VentureBeat, March 2010
- 84. Mig33 Made in China “We have decided we want to be like QQ for mobile in the rest of the emerging world.” – Steven Goh, CEO Not iPhone! Not rich countries! Source: VentureBeat, March 2010
- 85. About Mig33 • Nationality • Founders from Australia • Moved to Silicon Valley • Relocated to Singapore • Users • India, Indonesia, Bangladesh, Vietnam, South Africa…
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- 87. Conclusions • Social games= growing fast • Online games still > Social games (except Japan) • Massive ads (TV, billboards, etc.) if ROI is good! • Media properties entering social (portals, blogs) • SNS can channel users to MMOs with better ROI • Mobile great in emerging & advanced markets
- 88. Conclusions • CJK companiesexpanding globally • Transition to digital goods is a tidal wave • Epiphanies in the West like Korea 10 years ago
- 89. Digital Goods in2009 Asia: $7 Billion USA: $1 Billion US market potential $35 Billion? Source: +8*, October 2009
- 90. Digital Goods in2010 Asia: $10 Billion USA: $2 Billion Source: +8*, October 2010
- 91. $100 billion withinthe decade? “The virtual goods market would likely exceed globally $100 billion within this decade.” Trip Hawkins CEO, Digital Chocolate Founder, Electronic Arts Source: Trip’s OMG Blog, April 2010
- 92. Market Potential? • Fromanalog to digital – Global video game market $35 billion – In Korea >50% of ALL GAMES = online games • Potential = all games in the world – Global game market $120 billion – With digital goods dominant model?
- 93. Globalization Durian Strudel (Singapore)
- 94. Ideas, Talent &Markets • Ideas First farm game = made in China! • Dev. Zynga (JP, CN) Playfish (CN) Kabam (CN) • Market Facebook (JP, KR, SG, SEA w/ MOL) Zynga (JV with Softbank for JP) Rockyou (JP), Others?
- 95. Platform Partnership • Cyworld,Mixi, RenRen join forces for one-stop “Social Application Platform” • Catching up on analytics to leapfrog Facebook? • For reference • Cyword 25M users (1999, Korea) • Mixi 21M users (2004, Japan) • RenRen 150M users (2005, China) Source: Mixi, September 2010
- 96. Chinese family inOregon during the Gold Rush Virtual Goods in Asia The US Gold Rush Begins Benjamin Joffe | CEO, Plus Eight Star Virtual Goods Summit, San Francisco | 2009.10
- 97. 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
- 98. 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
- 99. Tencent • Sanook Invest. 2010.08 Thailand • Comsenz M&A 2010.08 China • Shenzhen DN M&A 2010.04 China • DST Invest. 2010.04 Russia • Riot Games Invest. 2009.09 USA • Outspark Invest. 2008.01 USA
- 100. Other Chinese Companies •Emerging markets, Japan, US • Rekoo & Yicha doing great with social games • Shanda buys Mochi Media (2010.01, $80M)
- 101. China + Russia+ South Africa $18B $3B $35B 10% Source: +8*, October 2010
- 102. DST | DigitalSky 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
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- 104. From Asia tothe World Durian Strudel (Singapore)
- 105. Paradise Paintball byCmune • World’s first FPS on social networks! • Over 500,000 users in open beta – “Paradise Paintball – you feel like you’re playing a console game.” - Gareth Davis, Games Platform Manager, Facebook – “Abandoned my clan, crops have withered and my cafe has gone bankrupt. Thank you for creating the first real game on Facebook!” – Facebook user
- 106. Paradise Paintball |World’s First Social FPS! www.facebook.com/paradisepaintball www.cmune.com
- 107. Asia is partof your world too! What we do – Best practices from Asia – Digital Research & Strategy Clients sample +81 | Japan +82 | Korea +86 | China Telecom & Internet + Added Value Contacts * High quality – benjamin@plus8star.com – @benjaminjoffe – www.slideshare.net/plus8star