What the U.S. Can Learn from China in Mobile Social Gaming

Editor's Note: Chris Shen (pictured) is VP of Chinese online game developer and operator The9. He is also the general manager of the company's mobile business unit. In this guest post, Shen outlines the convergence of social and mobile gaming in the West and how it compares to China's experience. The9 recently updated Inside Mobile Apps on the growth of Game Zone, its mobile-social games platform. With billion-dollar purchases of mobile companies like Instagram by Facebook, it’s very clear social companies are taking mobile seriously. Gaming is no exception, as evidenced by U.S. social powerhouse, Zynga. The online social games company has been creating more mobile titles in addition to buying OMGPOP, maker of sensational mobile game Draw Something, at the height of its popularity -- only to see user numbers plummet shortly thereafter. Other social gaming companies, like CrowdStar, have declared they’re moving away from online to focus entirely on mobile games. In order to understand how social gaming can effectively jump to mobile, U.S. companies need only to look east. As social gaming struggles to find itself in the U.S., China’s mobile social landscape is flourishing. Why? China has already been there. Social gaming made the jump from online to mobile a few years ago in China, and now foreign developers are looking to tap into this profitable market. Just as popular PC game franchises like Warcraft have moved from the single-computer downloadable model to online networks, mobile games will become more profitable as they become more social. While Chinese-developed games are showing impressive monetization numbers, foreign developers are realizing the need for an insider’s knowledge -- to tap into China’s existing social gaming frameworks and understand its virtual purchasing habits. The primary hurdle for mobile game monetization in China is piracy -- a resistance to pay for downloads of even the most popular games. The Chinese app market is a confusing and fragmented one, with numerous third-party channels rather than the reigning Apple App Store that exists in the U.S. market. With nearly unlimited access to free pirated copies of games, mobile users are disinclined to pay for downloads. In moving to free-to-play gaming models, Chinese developers have taken a stand against piracy, a rampant problem in the country. If games are free, with other methods of monetization, they can’t be stolen. And at the same time, this model encourages profits -- Analysys International predicts a 75 percent increase in revenue from mobile social games in China over the next year. China’s mobile gaming revenue spike can be attributed to an effective social layer, coupled with high-quality gameplay. For monetization on mobile, Facebook has been concentrating on bolstered advertising, but maybe it needs to focus more on its Payments platform -- and on promoting games that have high user-retention and promote virtual goods sales. As Facebook’s relationship with its gaming partners becomes rockier, more developers will be looking to China -- the biggest growing mobile market with one billion users. According to research firm Ovum, global virtual sales in games -- including PC, mobile and console games -- will jump to $53 billion by 2016. That’s more than a 100 percent increase from last year. In China, the games showing this kind of profit are largely those linked to social networks. The two most profitable games in China last year were distributed by Tencent, China’s largest Internet service portal with 700 million users. Other Chinese companies -- The9, NetDragon and PapayaMobile, to name a few -- have also seen success localizing and distributing games, both Chinese and foreign, to the Chinese market through social means. But things get tricky when non-Chinese developers attempt to distribute their own games in China and aren’t familiar with this different app marketplace. According to Analysys, 43 percent of Chinese gamers who have paid for mobile games did so in free-to-play games by purchasing virtual goods. By contrast, only 27 percent paid to download a game in the first place. For example, Australian games studio Halfbrick teamed up with Chinese Android developer iDreamSky to distribute its hit game Fruit Ninja in China. A key aspect of this partnership was integrating Fruit Ninja with an in-game transactions platform and with China’s social networks -- bringing in $6 million of revenue for Halfbrick in 2011. China’s mobile gaming market is a burgeoning gold mine that Analysys anticipates will hit revenues of $4.5 billion by 2015, and it will be interesting to see how many U.S. developers try their luck in the Chinese mobile gaming market as the Facebook-Zynga relationship plays out.

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What the U.S. Can Learn from China in Mobile Social Gaming

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