APAC mobile gaming brands are becoming mainstream. Not only are they setting trends globally, they are also winning big when it comes to revenue. What’s next? After achieving huge success in their home territories of China and South Korea (and to a lesser extent, Japan, as it’s long had a Western presence in mobile), the next step for these lucrative APAC gaming companies points to the West.
Case in point: Chinese video game giant Tencent, the world’s largest game publisher, is investing heavily in the Western market. Mobile Marketing magazine reports that up to 40% of Tencent’s investments are outside of China: Just look at its deals with Epic Games, Supercell, Ubisoft, Frontier Developments, and Rovio Entertainment. Other Chinese companies, including Jagex, Outfit 7, and Netease, have shares in development studios. To further strengthen their foothold, these companies are also pursuing global game releases, international partnerships, and M&A. Additionally, we are seeing big APAC companies buying smaller gaming studios — Tencent recently acquired Swedish indie dev studio Sharkmob, so they will embark on several joint new projects, VentureBeat disclosed.
As we see an increasing number of APAC companies disrupting advertising in the U.S. and Tier 1 markets, we ask what this means for global advertisers and what they can learn from their APAC counterparts. Whether you are a mobile gaming developer or advertiser, here is what you need to know to help grow your gaming app.
Charting the expansion of APAC’s top gaming markets:
China
- While China has been the fastest growing gaming market in the world, it was just recently surpassed by US in a new report from Newzoo. Despite being dethroned, China is still a major powerhouse in the games industry. Millennials are the biggest group of internet users who have led the country’s payment revolution, with 70% of mobile users completing their payments via one app, WeChat (Financial Times).
- The value of the China mobile games market has expanded by 250% since 2015. Chinese games generated $40 billion in revenues in 2018, says market researcher Newzoo. According to Niko Partners, China’s mobile games revenue will surpass $25 billion by 2023, having grown 28.9% year-on-year, despite a nine-month licensing freeze from the government in 2018. The tough crackdown regulations limited the release and monetization of new games for nine months and caused revues to slip in Q3 for a number of players, including Tencent, and which prompted them to shift their focus more on enterprise services than consumer-facing games. Although China lifted the decree in December, there is continuous pressure from the government for developers to promote Chinese culture and “core socialist values” abroad. Additionally, the Chinese government is blaming gaming for bad eyesight in children. Studios are complying where they can, by limiting screen time for minors, for example; however, iResearch expects that they would look to publish their games in a less controlled environment, way out West.
- According to intelligence firm iResearch, casual games generated about $3.82 billion in 2017, which is about 17% of the mobile gaming market in China. While successful types are role-playing games, RTS and strategy games, action games, simulation games, adventure games, and social casino games, the least successful genres in this market are Board, Trivia, Family and Sports.
- Analysts say that the approval process in China will become even more stringent — meaning that companies will be facing more delays and fewer game releases. Smaller indie devs will likely suffer the cost more than top developers (Forbes). Therefore, Chinese developers are expected to advance into Japan, Southeast Asia, Europe, and North America. To do this, they will likely set up dedicated units for design and distribution of games for overseas audiences.
South Korea
- South Korea is the fourth-largest mobile games market in the world and has the highest smartphone penetration rate. More than half of South Korea’s population play games on their smartphones, and they spent $5.6 billion on mobile titles in 2018, according to Newzoo. The South Korean mobile games market made a total of $3.2 billion last year.
- In South Korea, 53% of the population play mobile games at least once a month. Role-playing mobile games are the most successful, generating 90% of all revenue. Casual games are also popular. Most of the games succeed through messaging app KakaoTalk. (report cited: Newzoo and Mintegral 2019)
- Similarly to China, South Korea also has regulatory challenges to overcome, as the government targets loot boxes and restricts gaming time to protect young players. Gaming studios must strictly comply to regulations, which has undermined the competitiveness of local developers, and would explain why developers seek to expand and publish their games abroad.
Japan
- The global market for game content expanded roughly 20% in 2017 to $98.5 billion, according to Famitsu game magazine publisher Gzbrain. The Japanese market equals $14.2 billion, nearly 70% of which is mobile games. Players spend more per person on smartphone games than anywhere else.
- Japanese companies are still going strong, but there seems to be greater difficulty and a longer time frame (up to three years) to produce new hits. Its most popular games — Bandai Namco Entertainment’s Dragon Ball Z: Dokkan Battle and Gungho Online Entertainment’s Puzzle & Dragons — are more than five years old, which has made ROI a big challenge, impacting on local developers’ profitability. This proves a good opportunity for Chinese companies who are now expanding in the region: Asia Review reports that NetEase came fourth in mobile game sales in 2018, in a market usually dominated by domestic companies. Their game Knives Out recorded 40.4 billion yen ($365 million). South Korean smartphone games like Lineage 2: Revolution and PlayerUnknown’s Battlegrounds are also growing in popularity in Japan.
What can we learn?
Having helped a number of trusted APAC developers within the casual gaming vertical run their mobile campaigns in Tier 1 countries, we can confidently state that there is no one-size-fits all. In order for a game to become successful, there is constant trial-and-error involved. However, there seems to be some common approaches that can be applied:
Target your marketing efforts
As mentioned, Chinese company NetEase is rising through the ranks in Japan with a number of games. What helped them break into Japan’s notorious domestic-dominated market? A strong marketing campaign that resulted in this growth, since NetEase was Japan’s top ad placer for smartphones by volume in the half-ended September, surpassing Japanese companies, according to Tokyo-based Video Research Interactive. In addition, Chinese studios are riding on the wave of their plentiful capital and using it to establish thoughtful development systems: for example, as part of their marketing strategies, many developers improve their games based on user feedback and ideas.
Also, targeting the right users at the right time is crucial. This rise in mobile gaming leaves consumers reachable by brands and advertisers when they’re in a comfortable environment. According to research by Tapjoy, consumers are more likely to pay attention to ads in mobile games (41%) than more ‘traditional’ ad placements on the internet (17%), in magazines (15%), and on billboards (15%). Despite consumers usually finding digital advertising annoying and intrusive, mobile gamers understand the role of ads in enabling games to be free – with 72% saying they actually enjoy interacting with ads in exchange for in-app rewards or content.
Build a strong community of high-value users
Traditional marketing and user acquisition campaigns may not be enough to stand out in this competitive market. Let’s take Tencent as an example: they dominate the esports scene in native China. Their initiatives engage users and bring them together — both online and offline. In APAC, there is already a strong focus on gaming communities, with tournaments being hosted regularly. Now they are expanding into hosting big gaming competitions in cities like Los Angeles and New York, helping their games make a splash in the U.S. too. To provide fans with a richer experience, developers are creating arenas that are designed for pro gaming, putting North America on closer footing with the east, where e-sports centers are prevalent – reports the New York Times. It will also be a perfect spot for advertisers to reach their target users. South Korean studio Com2Us announced this week that the Summoners War World Arena Championship 2019 will be taking place this August in Paris, France, with a prize pool of $210,000.
Another way that can help increase engagement is to create a social competitive environment within your games, where users can engage with fellow players. In APAC, there is an appetite for role-playing games, so it makes logical sense for players to fight each other within the game. Popular games like Tencent’s Z Day: Hearts of Heroes are player-vs.-player games that attract active, engaged gamers and which are based on “alliance” — fostering the engagement within the in-game and outside game community.
Meanwhile in the U.S., casual games — Candy Crush Saga on Android and Donut Country on Apple Store – were the most popular in 2018. While they can be played individually, you should find a way to encourage gamers to play together and share the in-app experience to impact engagement. We will see more of this with the rise of apps like Bunch, which enables gamers to play together through video chat on a smartphone.
Execute a targeted UA and campaign strategy when entering new markets
APAC companies have a strategic and targeted way of running their campaigns, when dipping their toes into a new market. For example, a Chinese gaming company may employ these steps when looking to branch out overseas:
- 1st phase: They run campaigns in Taiwan/Hong Kong as they are still Chinese speaking and culturally similar.
- 2rd phase: They target Singapore and Indonesia. In Singapore, 40% of people speak Chinese so it’s a good market to try launch a same-language app; however, the culture is not so similar.
- 3rd phase: They run campaigns in the U.S. and Western markets, outside of Asia.
Between each phase, which could last from one to four months, they pick up on feedback from each market and any insights to improve their game, as they go along. This means that once they launch in the U.S. with an English version, they are confident that the game will perform well and they will acquire new users. Beijing-based company FunPlus, for example, are generating most of their revenue from games like Guns of Glory and King of Avalon in the U.S, where the average revenue per user is highest.
They also follow the logic of expanding to the closest countries first. Generally speaking, they prefer to test games in Tier 2 and 3 countries and observe the retention and churn rate, before opening up the game to Western markets. This specialized and targeted approach can be different from the US, where developers may focus solely on the English market before diving into APAC later. In essence: don’t rush it. Keep testing until you get consistent and positive results, then localize later.
Work with influencers to promote your games
Influencers have a stronger impact on mobile users than celebrities. According to HubSpot, 71% of consumers are more likely to make a purchase after seeing a product reference on social media. Moreover, 60% of users seek out and discover new products on Instagram, and 75% will typically take action, like visiting a website and visiting the app store.
The stereotype of the “gaming nerd” is no more, with gaming influencers being celebrated within the gaming scene on channels such as Twitch, YouTube and Stadia. In the US and Canada, it’s estimated that 1.3 billion people watch YouTube.
While making interesting content can be daunting, that’s exactly where influencers can be most helpful: when you collaborate with these influencers, you can get access to this highly engaged audience and your content earns credibility due to the friendly rapport these influencers have with their fans.
Sven is a seasoned ad tech expert and serial entrepreneur, having founded over 25 companies — including WeQ, Browsergames, AdEx, Onlineversicherung.de — across 15 different industries, with a range of these firms benefiting from extremely high profits.
