With DeNA’s Mobage platform finally coming to iOS this month, the company says its mobile gaming platform has now seen 160 million app downloads across Android and iOS.
We checked in with Neil Young, who is leading the Japanese gaming giant’s expansion in Western markets. A former EA executive, Young co-founded Ngmoco, the early mobile gaming company DeNA acquired 1 1/2 years ago for $303 million plus a $100 million earnout. Ngmoco’s mandate is to help get DeNA’s international revenues and profits at parity with the company’s performance in its home market of Japan by 2014.
That’s no small feat. DeNA brought in 34.2 billion Japanese yen ($420 million) in revenue last quarter alone, which — just for perspective — is more than the $311 million in revenue Zynga pulled in during the same period. Now with the domestic market saturated, DeNA and rival GREE are looking to duplicate their model abroad on the back of smartphone adoption worldwide. However, Western consumers have a long way to go in matching the spending habits of Japanese mobile gamers.
“Obviously, there’s a big disparity between where the West and Japan are today. But we think we can narrow that gap,” Young said in an interview. “Just so we can benchmark, on a given day in Japan, you might see 10 to 15 percent of your audience pay money. In the West, you would feel successful if you saw 3 percent of users pay.”
Spending is starting to pick up among English-speaking smartphone and tablet owners though. Young said when Ngmoco started out, perhaps 0.5 to 0.75 percent of the company’s users would pay with an average transaction price of $2.79. Now they’re seeing about 1.6 to 2 percent on a daily basis with an average transaction size of $12 to 13.
He said that while revenue per user in the English-speaking markets might never catch up with Japan, the overall market size is so large that DeNA could bring international and domestic revenues to parity. “There’s 10X the population of Japan in the Western developed world,” he said.
Android’s in-app billing system is also improving dramatically. “On an absolute basis, Android is pulling in less revenue than iOS. But it’s only because in-app purchases and billing on Android trailed iOS for over a year from an implementation standpoint,” he said.
Launching the Mobage platform in the West
The big challenge both DeNA and GREE face in coming to English-speaking markets is whether their business model and games will translate well for Western audiences. Both companies operate distinctly from American platforms like Facebook because they are dual platform providers and game producers. Not only do they support third-party games, they also produce their own original content. Facebook and Apple, in contrast, would never make their own games. Young said DeNA is aiming for an eventual 50-50 revenue mix between first-party and third-party content.
After DeNA acquired Ngmoco, it took longer than originally anticipated to roll out Mobage in English-speaking markets. There were a few kinks during the beta because DeNA made consumers download a special Mobage app before getting the games they wanted. That hurt pick-up, so Ngmoco quickly changed its approach.
“We made some good discoveries. We had to shift from requiring the download of a primary mobile application to a more disaggregated model,” Young said. “In October, we reached a point where we were comfortable with the metrics. We needed to make sure that there was no friction in registration and payments services. We’ve now had four to five titles in the top 10 on Android.”
Now Mobage has seen 160 million downloads of the platform’s apps across iOS and Android, including games tied to Ngmoco’s original Plus+ platform. Young said most of the games on the Android side are seeing between 1 and 5 million downloads. That’s not crazy high, but it’s not in the low thousands like last fall when venture-backed competitors like PapayaMobile criticized Ngmoco’s model.
On Friday, Ngmoco brought the Mobage platform to iOS with three titles including Ninja Royale, Putt Putt Penguin and Blackjack! for Mobage.
Young argues that the value-add Mobage brings is in additional distribution and monetization. The platform’s revenue share starts at around 15 percent following Google Android or Apple’s 30 percent platform cut. For games or ports that Mobage finances, that share goes higher.
What about the competition?
“The momentum you saw from GREE is the same momentum you saw for DeNA in prior quarters. It’s really a function of GREE getting much better at yield management,” he said. “The second thing is — candidly — we were out of card collecting games. You’ll see a turnaround.”
But in the U.S., Young said GREE doesn’t keep him awake so much at night — at least compared to Zynga.
“Zynga is a far more formidable competitor than GREE,” he said. “They’ve got really great management. They have a scaled audience. They really understand the Western audience. So here in the West, Zynga is far more formidable. GREE can buy billboards. But they’re going to end up bringing over Japanese games, which won’t work.”
Zynga is shifting into publishing with the recent re-launch of Zynga.com as a destination off Facebook, which will eventually include games from developers like MobScience (inFamous Anarchy), Row Sham Bow (Woodland Heroes) and Sava Transmedia.
Facebook also doesn’t really concern him. The social network has effectively ceded the mobile gaming market by pursuing HTML5, which is going to take years to be competitive with natively designed games.
“Facebook has a really important role to play in being the canonical identity provider,” he said. “But how is Project Spartan doing? HTML5 is interesting, but it will take time for it to be viable.”