GREE's Eiji Araki on monetization, Japanese vs. Western players, and what makes a successful social game

There probably isn't a single game developer in the world right now that's not thinking about how they can start making mobile games. With titles like NaturalMotion's CSR Racing earning more than $12 million a month, mobile has proven itself as the forefront for both innovation and monetization. That said, no matter how successful Western companies have been, their accomplishments are still far behind what companies like GREE are doing in Japan. With net sales of more than $500 million per quarter and top grossing games that can pull in more than $26 million a month in revenue, it's clear GREE knows the mobile-social gaming market better than almost anyone else. We recently sat down with Eiji Araki, GREE International's senior vice president of social games to find out how Japanese companies are able to make the most lucrative mobile-social games in the world, and how GREE plans to bring its Japanese gaming expertise to North America. Inside Mobile Apps: What do you think makes social games so successful, social and profitable in Japan? Eiji Araki, senior vice president, social games, GREE international (pictured right): I think there are many definitions of social games, but I think that one of the big differences between the US market and Japan’s is that in Japan there are many games in the mobile-social industry [and they have] many integrated social features. Not just gifting or adding friends, but competing or cooperating to achieve a common goal. I believe deeply connected social features encourage the player to continue to play with their friends and pay money to compete against other players or help their friends. That helps Japanese social games be successful. IMA: Do you think there is any fundamental difference between Japanese and Western players? Araki: No. I think they’re the same. Features are implemented differently. Japanese mobile-social games are much more advanced in terms of how they integrate social features. IMA: So is the difference in monetization between Japanese and North American games is essentially just about the level of Japanese expertise used in North America? Araki: Yeah. That’s what we did as a trial for Zombie Jombie. That is very basic in terms of games in Japan. That game actually has much better monetization than the general US market games. IMA: Can you share any specific numbers? Araki: I can’t say, only that its 8-10 times the average. IMA: Have you noticed there seems to be a difference in the conversion rate between Japanese and Western players? Araki: I think it’s different because there are some differences between the platforms. In the Japanese market the friction around payments is much much lower. Players can purchase goods through carrier billing. It doesn’t require the player to enter credit card information, its very easy, and people are used to that system. We started to develop mobile-social games in 2007, so the audience there has had more time to get used to them IMA: Do you see difference between average transaction sizes? Araki: No, it’s the same. As long as the game mechanics are the same, and as far as we can compare the Japanese market to the American market it’s not that different. It depends on the country but in terms of US, Canada, Australia, those countries are pretty similar. IMA: Are you seeing the same lifetime value for players as well then? Araki: The lifetime value depends on the country and game genre. IMA: A lot of Japanese social game companies like Gloops and KLab are starting to come to North America now as well. What do you make of that move? Araki: I assume that in the next six months many, many mobile-social game developers will be here. Although the Japanese market [for mobile-social games] is still growing, we already have about 40 percent market share, so those developers are now looking at the global market. IMA: Do you think that’s good for GREE that these companies are coming over? Araki: That will be an interesting competition, but I think in general it will be a good thing for everyone because they’ll expand the size of the whole market. IMA: Competition is good, but its not sustainable for smaller players. How much consolidation do you see happening in to the mobile market in the next year or so? Araki: I think that one year later and two years later there will be just two to three huge successful companies only. IMA: Like the traditional gaming space? Araki: That will happen in the next one to three years. IMA: How has the kompu gacha phase-out affected your operations in Japan? Araki: We don’t disclose the actual numbers and we cannot assess the direct level of impact because kompu gacha is a very complicated monetization mechanic to define. We can’t say ‘there is this much revenue from kompu gacha and this much revenue from other mechanics’. I think it will affect us a bit. IMA: So maybe not as much as has been reflected in the stock market? Araki: I think in general there will be some reputation effect, but there is also some overreacting. There will be a mixed impact from those issues. IMA: One of the things that's been mentioned a lot recently is real-money gambling. Are you concerned that there will be more regulations in the US like in Japan? Araki: At this moment I cannot say much about that. We’ve been developing content that doesn’t violate regulation or laws but that also maximizes customer satisfaction. In any case, we will follow any change [in the law]. IMA: What’s your goal for GREE’s North American operations? Araki: As a whole company we’re aiming to develop a platform and the games that will be used by a billion people. Just for our US aspirations we plan on becoming the number one social gaming studio in the US. IMA: That is a very lofty goal. Araki: I think that we’re making good progress. For example last weekend we had I think three or four titles in the top 30 or 40 grossing [chart on iOS]. I think GREE was the only company who had 3 or 4 titles there. IMA: Who do you see as your competition in North America? Is it DeNA or Zynga or somebody else? Araki: Yeah, Zynga, DeNA, many emerging developers -- on the other hand there are companies like EA, which sometimes do very well. We are competing with everyone.

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GREE's Eiji Araki on monetization, Japanese vs. Western players, and what makes a successful social game

Kathleen De Vere

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Kathleen De Vere