[This post was written in Chinese by Netease’s journalist Snake Chen, a three-time participant at Infinity Venture Summit (IVS). He covered the start of Rekoo in China firsthand, as well as the opening of the three major platforms in Japan, the growth of GREE, and Zynga and Playfish’s entry into the market. The English post is translated by Moy Hau and Dan Ciez and published in StartupsWatch report September issue. ]
More and more Chinese social game developers are turning their sights on the Japanese internet market. It’s giant in terms of scale and space, and relatively mature. It has good users who are ready to pay for product, much more profit per user potential than the Chinese market, and it’s relatively closer to China not only geographically but also in terms of culture and user needs. We’ll be focusing on the three major Japanese online social platforms in this issue, as well as the state of Chinese teams’ entry into the fray.
After gaming and SNS became connected in Japan, we saw some amazing enterprises come to the forefront, among them the three big players: GREE, DeNA, and Mixi. DeNa currently has a market valuation of 4.121 billion USD, GREE 3.356 billion USD, and Mixi 802 million USD. The three companies are listed on the Tokyo Stock Exchange. Together, they are close to half of the combined valuation of America’s EA and Blizzard.
Most Users: GREE
GREE has exploded onto the Japanese scene recently, experiencing the fastest growth among the big three. It currently has about 100 employees.
GREE was established at the end of 2004. It listed on the Tokyo Stock Exchange at the end of 2008 with 10 million registered users. As of July 31, 2010, the company had 21.25 million registered users, making it the largest platform in Japan. As of last quarter, its revenue was 127 million USD, up 113%. 104 million came from direct user expenditure, and the remaining 23 million from advertising.
GREE’s products include a social network with avatar and advertising income streams, and Flash Lite social games forming a strong virtual income channel. 98% of the traffic comes from mobile phones. In June of this year, GREE imported 40 third party games from traditional players such as Sega and Nancom, as well as some Chinese developers.
GREE’s userbase consists primarily of the 15 to 30 age bracket with a more or less equal sex distribution. Most of the friend relationships on the site are virtual, The platform focuses on entertainment. GREE is aiming to expand into China as well as the American and European markets, as well as onto the iPhone and Android platforms. GREE’s iPhone site is already in live beta, with a complete version due out soon.
Highest Valuation: DeNA
DeNA is Japan’s largest social player in terms of both operating income and valuation, with more than 400 employees. Founded in March 1999, it went public in 2005 on the Tokyo Stock Exchange. Mobage-Town is DeNA’s flagship mobile entertainment platform, with a userbase of 20.48 million as of July 31, 2010.
DeNA’s products include mobile social networks, mobile services, and mobile social games. Approximately 80% of its income comes from the social games area. Mobage-Town opened its platform in September 2009, accepting a number of third-party games, a ring into which China’s Rekoo quickly threw in its hat. The most popular game on the platform was developed by DeNA and is similar to Mafia Wars.
Mobage-Town’s users also form relationships that are not grounded in face-to-face connections, and it is also entertainment-focused. Of the major players, DeNA is the one with the most overseas development experience. The company already has subsidiary enterprises in both China and the United States, having bought IceBreaker in the United States and a controlling interest in China’s Tianxia (check our previous coverage).
In order to break into the iPhone platform, DeNA has bought a 20% stake in Aurora Feint, often referred to as the “Xbox Live” of the iPhone platform. DeNA put five of its games on the platform, including its Mafia Wars clone. DeNA is also working on Android products. Additionally, the company is working with Yahoo! Japan to come out with a PC games platform in October of this year. DeNA wants to bring its products onto the global stage in a big way.
Super Social: Mixi
Mixi (check our previous coverage How to enjoy Mixi) is the site that most closely resembles Facebook. Most of the website’s design borrows concepts from Facebook, and most connections between users are based on offline relationships. It was established in June 1999, and listed on the Tokyo Stock Exchange in September 2006. It has 313 employees, 21.02 million registered users, and an active userbase of 14.3 million.
Mixi has a more or less even sex distribution, with slightly more females. Most users are in the 18 to 30 age bracket and live in Tokyo and other larger cities within Japan. It opened its PC platform in August 2009, and its mobile platform in October of the same year. There are more than 800 applications for the PC platform and about 400 for the mobile one.
With is open platform, overseas 3rd party developers have entered into their network. Reku’s Farmville clone has been massively successful on the platform, with about 5.1 million users. Active developers include Rekoo, Yicha, DeNA, Cybird, HappyElements, Drecom, Kaiying, Rockyou, 5Fen, and others.
Mixi established a subsidiary in Shanghai in 2008, called MixiU. Mixi has also recently invested in a number of Chinese enterprises, pulling them in to develop games for their Japanese platform. Mixi has an iPhone app, Mixi Touch, and there are also a number of 3rd party Mixi clients listed in the Japanese App Store. Unlike GREE and DeNA, however, Mixi has yet to produce any games of its own.
Other Social Platforms
Facebook only has 1.33 million users in Japan currently, a relatively small number. Twitter, however, is spreading like a wildfire, with even the most basic of mobiles integrating its functionality. As of February of this year, it already had 5 million users.
DeNA is working with Yahoo! Japan to form a completely new social network, Yabage-Town. Yahoo! Japan claims 24.11 million active users, but third party analysis points out these are mostly from older demographics.
CyberAgent’s Ameba has 10 million active users, most of which use their blog platform. The company also has a virtual world service, Pigu, and a microblog service.
Korean game company Hangame’s Japanese subsidiary announced 32.39 million registered users, but analysis has pointed out that there are a very large number of duplicate accounts on the service.
Zygna took an investment of 150 million USD from Softbank Capital for a joint-venture to distribute social games in Japan. Zynga also purchased Japananese social game developer Unoh in August to help its entry into the Japanese market.
The Internet Social Circle in Japan
Besides Mixi, DeNA, and GREE, there are a number of Japanese firms actively investing in overseas development, including Infinity Venture Partners, one of the investors in Rekoo and Qpod which was recently acquired by Groupon.
The biggest event in the Japanese scene currently is IVP’s Infinity Venture Summit (IVS), which takes place twice a year, once in the north and once in the south of Japan. It brings together industry luminaries from both Japan and abroad.