South Korea’s Gamevil, which is the maker of iOS hit Air Penguin and RPG franchise Zenonia, said its smartphone revenue in the first quarter more than tripled from the same period a year earlier.
Gamevil’s net income declined 26 percent year-over-year to 2.5 billion South Korean won ($2.3 million) from 3.4 billion won ($3.1 million) in the first quarter of last year because of increased expenses on business investments and hires. Revenues were roughly the same at 6.4 billion won ($5.9 million). Gamevil says that although net income declined, it still has the highest profit margins in the Korean mobile gaming industry at around 40 percent.
The company plans to release nine new titles this quarter for both the iOS and Android platforms. Its big hit this quarter has been Air Penguin, a title we very positively reviewed and recommended. The platform-style game, which has a chubby penguin bouncing across ice floes, was developed by a tiny South Korean studio called Enterfly and was at the top of the paid charts for about a week. The intellectual property for Air Penguin is co-owned by both companies.
Gamevil has a blended approach mixing the premium paid app model with in-app purchases. Both of its better-known titles Air Penguin and Zenonia 3 cost $0.99 and $4.99 respectively. But they also come with in-app purchases of currency that range from $0.99 cents to $49.99.
In the long-run, the company might gradually test out more free titles. “Free games are much easier to market and we also don’t have to be frustrated by piracy,” said Kyu Lee,the vice president of Gamevil’s U.S. division, who added that about half of its users are “hack users” with pirated or unauthorized copies of games.
On Android, Lee said that ratio is worse. “If you look at the Korean online gaming market, the reason it went to a server-client business model is piracy,” he said. “The same thing is happening on mobile platforms as well.”
Like other publicly-traded rivals, Gamevil is in the midst of a transition from feature phone games to smartphone titles after going public more than 10 years ago in 2000.
In a call last week, Lee said about 20 percent of its overall revenue comes from smartphones at this point. The company did not break out the exact figure for its smartphone revenues in English, but this would suggest that it made just over $1.1 million for the quarter. Editors Note: Lee clarified and said 40 percent of Gamevil’s overall revenue comes from smartphones now, up from 20 percent last year. The company did not break out the exact figure for smartphone revenues in its earnings statement this week, but it would probably be around 3 billion won ($2.8 million).
About 80 percent of its smartphone revenue comes from iOS, with the rest is from Android, Lee said. The fact that such a high fraction of Gamevil’s smartphone revenue comes from the Android platform is a sign of the OS’ reach in South Korea.
Google said yesterday that South Korea is the second largest market behind the U.S. for Android app downloads with 13.4 percent of all installs. “The South Korean market has many carrier stores that are very widely used and heavily promoted in TV commercials,” Lee said.
Like many other big game developers, Gamevil was among the first companies to adopt offer walls, allowing users to get free virtual currency if they download other apps. The game publisher in turn earns a cut of revenue for driving installs of other apps. Lee said that some of Gamevil’s apps are among those rejected by Apple for offer walls and he anticipates that the company will eventually take them out of all of their games. Since Gamevil has a mixed model that also uses paid apps, the slowdown in smartphone revenue will likely not be as dramatic for them as it is for other freemium developers who earn one-third of their income from these offer walls.