Ngmoco's Neil Young on Rage of Bahamut ARPDAU, redefining No. 1 on top grossing charts

Ngmoco founder and CEO Neil Young says that the Mobage platform will redefine what No. 1 on the top grossing charts means with a range of new games married to proven data from Japan. A a Mobage Media Day event in San Francisco, DeNA's U.S. developer and Mobage platform operator walked an audience of reporters from business and video games media outlets through a presentation outlining the as-yet-untapped potential of the mobile-social games market outside of Japan. Young stated that Japan sees $4.5 billion in social-mobile game revenues coming from gamers in a population of just 120 million. Extrapolating those numbers against those of the developed Western world, Young estimates that the global social-mobile game market could be as high as $30 billion -- with just $5 billion of that coming from Japan. To tap that market, ngmoco and its parent company, DeNA, are aiming to bring a range of new games to the Mobage platform in its four regions (the U.S., Japan, South Korea and China). These games come in four flavors: first-party games out of DeNA's owned and operated studios, hit Japanese games localized for new audiences, third-party originals ported to new audiences in other regions and proven game systems married to Western IP. Ngmoco will be announcing entries in that fourth category later this week and next, but already we know the most prominent example of a Japanese hit ported to Western audiences to be Rage of Bahamut, developed by third-party studio Cygames. After the presentation, we spoke with Young to get more detail on just how well Rage of Bahamut is performing after 16 straight weeks in the No. 1 spot on iOS and Android charts -- and for some more context on how Japan's knowledge can feed social-mobile growth in the West. Inside Mobile Apps: We know you won’t give us a specific number for the average revenue per daily active user, but does $7 sound too high...? Neil Young: It would be awesome if ARPDAU was $7. We don’t actually talk about those numbers. What we’ve said before is that ARPDAU -- for us, that’s average revenue per daily active unique -- on Rage of Bahamut and a few of the games on our service are much higher than industry norms. There are three tiers in the mobile games industry right now. There’s scaled casual -- that’s sort of in the 1-, 2-, 3-cent ARPDAU range. Then there’s mature social/mobile game companies -- somewhere between 15- to 20-cent ARPDAU. And then there’s a very, very small group of companies of which DeNA are certainly one of that are able to drive ARPDAU that’s significantly higher than that, by like 3 to 6x. We don’t talk specifics about Rage of Bahamut, but the range is very good. We really think about lifetime value. That’s the basis for all our calculations. The LTV on these games are well above the cost of acquisition, so that sort of monetization expertise is essential to succeeding in the market today. It’s just going to be increasingly difficult for developers, especially in mobile casual, to do any meaningful marketing. Their marketing is going to be partnership promotions with one of the platform holders, or with a viral channel they establish themselves, or word of mouth. I think it’s going to be more complicated for even mature social mobile game companies in the 15-cent range because the cost of acquiring customers is going up. You do have to focus on monetization so that you can get the scale of audience so that the marketing equation works. IMA: What about conversion rates by game genre? Rage of Bahamut appeals a “hardcore” audience that we’ve heard other developers claim is more likely to convert to paying users than casual gamers. Young: It’s grown for us. When we first switched to free-to-play as ngmoco, we were doing 0.8 percent paying, the average transaction was $2.79 for our first free to play games Eliminate or Touch Pets. Both games were in those range. IMA: So genre didn’t matter? Young: Not at that time. There were a couple of things that were going on. One is market maturity -- Eliminate was the first game that had in-app purchasing. At the time we made the shift, the whole business was oriented around paid downloads and customers were trained [to spend] on paid downloads and not on virtual goods. At the peak of We Rule, it was doing 15- to 20-cent ARPDAU and the average revenue per paying user was around $10 and we would see on average 2 to 2.5 percent of the audience paying. Where we’re at today is significantly beyond that. My sense is that a combination of one, the customer getting comfortable with it; two, us getting better at implementation; and [three], as we get better at implementation with the core audience of people that are [using in-app purchasing], you sort of broaden that audience and then game designs and genres actually matter. You can look at the market today and see that certain game types appeal to certain audiences that have a propensity to monetize. Certain game designs have a propensity to monetize. You can look across a range of games and see a variety of what they generate and how they generate that money. Our job is to make sure that the games that have the best monetization come to Mobage or are made by our studios. Then, for folks that are good but not great, work closely with those developers to help them get to great, help them improve ARPDAU. IMA: Let’s talk about platform splits, then. Do you see better monetization for Rage of Bahamut on iOS or Android? Young: The iOS version shipped a little bit after [the Android version]. In terms of revenue split today, it’s about fifty-fifty. Right now, there’s a few more [users] on Android, but they’re pretty comparable. I think that’s been a big surprise for people. One of the errors in how we all think about grossing charts is that we think of them as static -- that number one is a static position. But it’s really not. The daily revenue that Rage of Bahamut delivers on Android today is two times what it delivered when it first became number one 16 weeks ago. What we think the opportunity is to not just to get to number one, but to redefine what number one is. As we start to build more and more momentum as an industry and our company and other companies become more adept at delivering on the full potential of the business, we’re just going to change what it means. A year from now, number one on top grossing is going to be very different from what it is today. I think it’s going to look almost non-linear. [Like], “how could it jump from there to there?” And it’s going to be a function of games’ scale and games’ monetization. IMA: What about where your competitors are at right now? GREE is going all-out on industry events and big promotions; EA is still recovering from a dramatic reorganization that slowed down its mobile business; and Zynga is trying to transition to mobile game publishing as its Facebook growth flags. What does that landscape look like from your perspective? Young: Those are all formidable competitors. We enjoy sparring with them in the market, but we try not to spend too much time thinking about them. If we look at our competitors -- like GREE going to E3 and saying “We’re going to make a big splash!” then we might’ve [gone to the show] too. But we know, because we’ve been in the business a long time, that going to a traditional console game venue and having a big giant footprint to tell the world that you’re here... One, you’re talking to an echo chamber. And two, right next to you there’s really, really big screens showing really, really great graphics that’s hard to compete with on a little tiny handheld. So we just want to march to our own drum. IMA: Earlier this year talked with first-party studio VP Doug Scott about the marriage of East and West in ngmoco’s game design philosophy. To be fair, we’ve heard the East-meets-West story in other industries. What is it about the mobile-social video games industry that makes the marriage somehow new and different? Young: I don’t know if it is necessarily new and different. I think that DeNA is unique. The culture of the company is very different from other Japanese companies I’ve interacted with before. It’s run essentially by five us -- I’m one of them -- and we’re all about the same age, not chain-smoking 80-year-old Japanese dudes. We’re all really focused on making something great and we have high hopes and aspirations for our games, our platform and for DeNA. I’m not sure that we would’ve agreed to be acquired by a Japanese company other than DeNA. I think another factor is it’s so easy to dismiss Japan as a Galapagos Island. “Oh, they’re just different. I’m a Westerner and I can’t understand the language. I don’t know how they think or how they process entertainment...” But in our industry, there’s a huge component driven by data. When you strip away the cultural difference and you just look at the data -- sessions per day, minutes per session, what motivates people to stick around, what the retention rates are -- things that are measures of human behavior... they are basically the same. What’s different is that in Japan, the teams and companies have had an opportunity to live in this market for a while and get a whole bunch of learning and knowledge. IMA: But the environment in which a Japanese gamer interacts with their game is different from what a Western gamer experiences, right? They tend to spend more time on trains commuting and have better, more reliable internet connections... Young: I think that’s a factor, but we walk around with our heads in our phones. If you look at the minutes per user of customers in the West in 2010, 2011 and customers in Japan 2006, they’re pretty analogous. Environmental factors can matter, but human factors override those things. We enjoy these devices, we enjoy these games. Nothing’s going to stop us from playing them.

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Ngmoco's Neil Young on Rage of Bahamut ARPDAU, redefining No. 1 on top grossing charts

AJ Glasser

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