The latest on digital goods in Asia presented at the Virtual Goods Summit in Berlin in May 2011.

1. Digital
Goods
in
Asia
“Not
all
Asians
are
Virtual”
@benjaminjoffe
|
CEO,
Plus
Eight
Star
Virtual
Goods
Summit
|
Berlin,
May
2011

2. Hatsune
Miku:
Virtual
Singer
on
Tour
Powered
by
Yamaha’s
Vocaloid
SoPware

3. VIDEO
hRp://www.youtube.com/watch?v=DTXO7KGHtjI
(Hatsune
Miku
will
have
a
concert
in
California
in
July
2011)

4. Survey
Have
you
been
to
Asia?

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

6. Quiz!
Who
is…
• The
#1
social
gaming
company
in
the
world?
• The
#1
social
network
in
revenue?
• The
most
profitable
virtual
world?

7. “Mister
Asia”
–
Mike
Butcher,
TechCrunch

8. 4
years
1
year
6
years

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

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

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

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

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

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

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
somekmes
different
regula>ons
6. Highly
compe>>ve
(and
of
course:
language)

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

18. 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
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

19. 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

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

21. What
is
this?

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

23. #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
(2010,
35%
from
games)
– NHN
Group
(Naver,
Hangame)
$1.3
billion
(2010)
– NC
Sob
$525
million
(2010)

24. Social
Networks
• 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
“ackve”
accounts
as
of
2011.05,
depending
on
sources

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

26. $18
billion
Digital
Goods
&
Currencies
in
Asia
Online
Games
Social
Plazorms
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

27. Digital
Labor

28. Social
Plazorms
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

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. Educakon
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
KingsoP
NetDragon
CDC
The9
Renren
Game
World
Interackve
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
KingsoP
NetDragon
CDC
The9
Renren
Game
World
Interackve
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
targekng
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.
mulkple
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
Associakon,
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
Associakon,
2010.07

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

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

47. GREE
Service
Adver>sing
-­‐
Banners
&
>e-­‐ups
GREE
top
page
Adver>sing
20%
banner
Avatars
-­‐
Customiza>on
with
various
items
(clothes,
accessories,
etc..)
Digital
goods
Social
Games
80%
-­‐
Integrated
with
SNS
func>ons

48. GREE
Games

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

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

51. Who
Pays?
Social
apps
users
spending
per
plazorm
according
to
age

52. Social
vs.
Virtual
Graph

53. Benefits
of
Virtual
Graph

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

55. Payment

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

57. Pigg

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

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

60. On
Android

61. 4.
South
Korea

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

63. Online
Games
|
Key
Players

64. 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
SoP
Neowiz
CJ
Internet
(Hangame)
>50%
of
Nexon’s
revenue
is
overseas

65. 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
SoP
Neowiz
CJ
Internet
(Hangame)

66. 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
Mulkplayer
Online
Role-­‐Playing
Game
RTS
Real-­‐Time
Strategy
FPS
First-­‐Person
Shooter
Source
:
Gametrix,
2011.02

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

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

69. 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

70. 5.
Succeeding
in
Asia

71. Defining
Success
1. Revenue
2. Profit
3. Usage
/
Brand
recognikon
4. Development
5. Learning

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

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

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

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

76. 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
SoP
for
web
games
– China:
PvZ
on
Renren
• First
ever
social
adaptakon
• Exclusive
launch
announced
2
days
ago

77. 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

78. Uberstrike
by
Cmune
#1
First-­‐Person
Shooter
on
Facebook
• Made
from
China
+
Global
reach
• Combines
East
&
West
experkse
• 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

79. 6.
New
Asian
Wisdom

80. Intereskng
New
Things
1.
Nano-­‐transackons
2.
SNS
as
MMO
funnels
3.
New
social
plazorms
4.
Fourth
Genera>on
Digital
Goods
Model
5.
Smartphone
opportunity
6.
Various
deals
&
partnerships

81. 1.
Nano-­‐Transackons
• 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
kme
“nano-­‐transac>ons”

82. 2.
SNS
as
MMO
funnels
• Renren
revenue
more
from
games
than
ads
• Mone>za>on
much
higher
in
MMOs
• Reten>on
is
beRer
too
• What’s
your
ROI?

83. 3.
New
Social
Plazorms
• Naver,
Nate,
Daum
Portals
• QQ,
NateOn
IM
• Ameba
Blog
plamorm
• DeNA,
GREE
Mobiles
+
Smartphones

84. 4.
Fourth
Generakon
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)

85. e.g.
ZT
Online
2
• Giant
Interackve
no
longer
sells
items
in
ZTO2!
– Trading
is
main
revenue
model
– Reward
ackve
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

86. 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
skll
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

87. 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)
– Sobbank
invests
in
Japan,
China,
Korea
• Korea
– Various
M&As
– Some
investments
by
Nexon
in
US

88. More
about
us
• We
helped
Kabam
with
market
entry
• We
helped
IMVU
with
best
prackces
• We
helped
Ci>bank
with
digital
currencies

89. Danke
Schon!
More
about
“Innovakon
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