Presentation from July 2011 for YetiZen, gaming-focused accelerator in San Francisco. Kao-nashi rulz.

1. Asia
and
Gaming
@benjaminjoffe
|
CEO,
+8*
|
Plus
Eight
Star
YeAZen
|
San
Francisco,
July
2011

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

3. What
do
I
know
about
Games?
• Asia
– In
Asia
2000-­‐2010
(Japan,
Korea,
China)
– Researched
all
major
SNS
&
virtual
worlds
in
Asia
– Advised
IMVU,
Kabam,
Layar,
DeNA…
– Founded
and
ran
40
Mobile
Monday
in
Beijing
• Gaming
– Part
of
“SoLoMo”
startup
Newt
Games
in
2003
– Founding
Partner
of
Cmune
(#1
FPS
on
Facebook)
– Now
building
a
social
uAlity
startup:
WEE.SH

4. CDMA
1x
Handset
(KDDI,
Japan,
2003)
Other
user’s
avatar
/
distance
/
nickname

7. Mac
App
Store
Uberstrike.com
Facebook
Cyworld
(Korea)

8. Content
1.
What
is
Asia?
2.
China
3.
Japan
4.
South
Korea
5.
Succeeding
in
Asia
6.
Some
new
Asian
wisdom

9. 1.
What
is
Asia?

10. The
Trouble
with
“Asia”
1. Different
infrastructures
2. Different
GDP
/
capita
3. Different
distribuAon
channels
4. Different
payment
soluAons
5. And
someAmes
different
regulaAons
6. Highly
compeAAve
(and
of
course:
language)

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

12. Users
©PlusEightStar,
2011
-­‐
www.plus8star.com
Country
USA
China
Japan
South
Korea
PopulaAon
310
mln
1,330
mln
130
mln
50
mln
Internet
Users
245
mln
460
mln
100
mln
40
mln
860
mln
Mobile
Users
295
mln
120
mln
50
mln
900
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

13. 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
ConnecAons
Measured
>5
Mbps
(%)
Sources:
Akamai
4Q10,
Japan
TCA,
SKT,
ITU,
IDA,
Internet
World
Stats,
March
2011

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

15. What
is
this?

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

17. #Gimougous
Companies
• China
– Tencent
made
$1B
in
1Q2011
(40%
net
profit,
50%
games)
– 10
others
listed
on
Nasdaq,
NYSE,
HKSE
– Renren
(SNS)
listed
on
NYSE
for
$5B
in
April
2011
• Japan
– DeNA
$1.3B
(2010)
– GREE
$600
million
(2010)
• Korea
– Nexon
$1B
(2010
est.)
– NHN
(Naver,
Hangame)
$1.3
billion
(2010,
35%
games)
– NC
So
$525
million
(2010)

18. Social
Networks
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

19. More
Social
Plavorms
(note:
Facebook:
750M,
Twiwer:
200M)
• China
• Korea
– QQ
674M
– Cyworld
25M
– Q
Zone
490M
– Me2Day
(Naver
microblog)
5M
– QQ
Microblog
160M
– Daum,
Naver,
Nate
– Pengyou
101M
– RenRen
117M
• SE
Asia
– Sina
Microblog
100M
– Mig33
(mobile)
40M
– Kaixin001
178M?
– 51.com
100M?
• Japan
– Mobage
(mobile)
24.5M
– GREE
(mobile)
23.8M
– Mixi
(web+mobile)
22.6M
Numbers
are
“registered”
and
“acAve”
accounts
as
of
2011.05,
depending
on
sources

20. Just
an
idea
about
staff…
• Twiwer
500
• Renren
1,500
• Facebook
1,500
• Tencent
12,000

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

22. $18
billion
Digital
Goods
&
Currencies
in
Asia
Online
Games
Social
Plavorms
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

23. Digital
Labor

24. 2.
China

25. 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

26. EducaAon
Primary
School
11.3%
9.2%
Junior
Middle
School
12.0%
27.5%
Senior
Middle
School
Professional
Training
College
40.1%
Undergraduate
EducaAon
and
The
Above
Source:
CNNIC,
2010.07

27. 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

28. 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

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

30. 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
Kingsoz
NetDragon
CDC
The9
Renren
Game
World
InteracAve
Source:
Companies,
2010

31. Market
Cap
$53.5B
8
Unit:
billion
US$
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
Kingsoz
NetDragon
CDC
The9
Renren
Game
World
InteracAve
Source:
Companies,
2011.04
except
Renren,
2011.05

32. 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

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

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

35. 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

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

37. 3.
Japan

38. Online
Games
Market
in
Japan
Online
game
users
accounts
(unit:
million,
incl.
mulAple
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
AssociaAon,
2010.07

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

40. Business
Models
Shiz
Online
games
and
their
revenue
model,
evoluAon
since
2005
Source:
Japanese
Online
Game
AssociaAon,
2010.07
F2P
over
40%
in
2010

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

42. GREE
Service
AdverAsing
-­‐
Banners
&
Ae-­‐ups
GREE
top
page
AdverAsing
20%
banner
Avatars
-­‐
CustomizaAon
with
various
items
(clothes,
accessories,
etc..)
Digital
goods
Social
Games
80%
-­‐
Integrated
with
SNS
funcAons

43. GREE
Games

44. Revenue
of
Leading
Plavorms
Net
sales
and
profitability
(million
USD)
AdverAsing
revenue
vs.
digital
currency*
* Considering
that
there
are
no
other
source
of
revenues

45. Not
Only
Kids
&
Housewives
Teens
20s
30s
Male
Female

46. Who
Pays?
Social
apps
users
spending
per
plavorm
according
to
age

47. Social
vs.
Virtual
Graph

48. Benefits
of
Virtual
Graph

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

50. Payment

51. CyberAgent
|
$18M
in
1Q2011
CyberAgent
Subsidiaries
37
Atles
across
6
plaiorms
Source:
CyberAgent,
2011.03

52. Pigg

53. Pigg
by
CyberAgent
• 6M
reg.
users
bring
fortunes
• $20M
in
1Q2011
• As
much
as
Angry
Birds!
• $100M+
in
2011?

54. Mini-­‐Games
for
$1M
• Each
game
generated
$1.2M
in
December
2010

55. On
Android

56. 4.
South
Korea

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

58. Online
Games
|
Key
Players

59. Revenue
&
Profits
(2010)
Revenue
Profit
1,400
1,310
Unit:
MUSD
1,200
1,000
935
800
607
600
525
427
376
400
251
243
200
111
47
0
Nexon
NHN
NC
Soz
Neowiz
CJ
Internet
(Hangame)
>50%
of
Nexon’s
revenue
is
overseas

60. 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
sAll
4.0
$300
million!
2.0
1.1
0.3
0.0
Nexon
NHN
NC
Soz
Neowiz
CJ
Internet
(Hangame)

61. 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
MulAplayer
Online
Role-­‐Playing
Game
RTS
Real-­‐Time
Strategy
FPS
First-­‐Person
Shooter
Source
:
Gametrix,
2011.02

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

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

64. 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

65. 5.
Succeeding
in
Asia

66. Defining
Success
1. Revenue
2. Profit
3. Usage
/
Brand
recogniAon
4. Development
5. Learning

67. Western
Companies
China
Japan
Korea
Zynga
OperaAons
n.a.
Blizzard
(WoW)
RockYou
EA
(FIFA
Online)
PopCap
Zynga
(w/
Tencent)
PopCap
Kabam
Licensing
PopCap
(w/
Renren)
Crowdstar
RockYou
WoW
(w/
Netease)
Playfish
Cmune
PopCap
Zynga
Zynga
Development
Playfish
Playfish
Kabam
RockYou
Cmune
Ideas
too!
The
First
Farm
Game
was
made
in
China

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

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

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

71. Blizzard
in
China
(with
Netease)
• WoW
in
China
– License
to
The9,
then
switched
to
Netease
in
2009
– Forbidden
to
run
for
several
months
in
2010
– EsAmate
4M~6M
users
– 4,000
min
prepaid
card
=
$4.5
– WoW
customer
service:
800+
staff
– Revenue
est.
around
$40m/quarter
• License
fees
– WoW:
$30m
(minimum
guarantee)
– StarCraz
II:
$4m
(id)
– Total
commitment:
$200m

72. PopCap
(now
EA)
• $100
million
in
revenue
(2010),
famous
games
– Dev.
team
in
Shanghai
since
2008
– 75
staff
in
2010,
150
staff
now
– UnAl
recently,
no
business
in
China
• Partnerships
– Japan:
with
Taito
for
mobile
social
games
– Korea:
with
NC
Soz
for
web
games
– China:
PvZ
on
Renren
• First
ever
social
adaptaAon
• Exclusive
launch
announced
2
days
ago

73. 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

74. Uberstrike
by
Cmune
#1
First-­‐Person
Shooter
on
Facebook
• Made
from
China
+
Global
reach
• Combines
East
&
West
experAse
• 500,000
MAU
=
Top
3D
MMO
on
Facebook
• Get
it
on
the
Mac
App
Store
for
Father’s
Day!
Disclosure:
I
am
an
investor
in
Cmune
|
www.facebook.com/uberstrike

75. 6.
New
Asian
Wisdom

76. InteresAng
New
Things
1.
Nano-­‐transacAons
2.
SNS
as
MMO
funnels
3.
New
social
plavorms
4.
Fourth
GeneraAon
Digital
Goods
Model
5.
Smartphone
opportunity
6.
Various
deals
&
partnerships

77. 1.
Nano-­‐TransacAons
• 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
Ame
“nano-­‐transacAons”

78. 2.
SNS
as
MMO
funnels
• Renren
revenue
more
from
games
than
ads
• MoneAzaAon
much
higher
in
MMOs
• RetenAon
is
bewer
too
• What’s
your
ROI?

79. 3.
New
Social
Plavorms
• Naver,
Nate,
Daum
Portals
• QQ,
NateOn
IM
• Ameba
Blog
plaiorm
• DeNA,
GREE
Mobiles
+
Smartphones

80. 4.
Fourth
GeneraAon
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)

81. e.g.
ZT
Online
2
• Giant
InteracAve
no
longer
sells
items
in
ZTO2!
– Trading
is
main
revenue
model
– Reward
acAve
users
with
items
– Let
users
decide
on
the
right
price
– 5%
commission
on
transacAons
• Benefits
– Capture
secondary
market
– Avoid
“one-­‐price
for
all”
for
digital
goods
– Ensure
fairness
– MoAvate
users

82. 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
sAll
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

83. 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)
– Sobank
invests
in
Japan,
China,
Korea
• Korea
– Various
M&As
– Some
investments
by
Nexon
in
US

84. More
about
us
• We
helped
Kabam
with
market
entry
• We
helped
IMVU
with
best
pracAces
• We
helped
CiAbank
with
digital
currencies

85. Danke
Schon!
More
about
“InnovaAon
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
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