CES: Mobile Games, Upwardly MobileMobile gaming is one of the biggest growth areas in gaming, and at CES a panel convened to discuss trends in mobile gaming had plenty to talk about. The panel was moderated by Michael Cai, VP of the Games & Technology group for Intepret, a market research and analysis firm. Panelists, included Peter Dille (formerly with Sony), Chief Marketing Officer for Tapjoy (mobile advertising and discovery network); Olivier Delfosse, VP of Interactive, Mobile and Digital Content for Fremantle Meida Enterprises (the production company responsible for TV shows like American Idol and Family Feud); Dane Holewinski, Business Development for Greystripe, a division of ValueClick (a mobile advertising network); Simon Jeffrey, Chief Publishing Officer for mobile game developer ngmoco; and Chris Tanquary, Head of Mobile Gaming for Samsung.
One thing all the panelists could agree on is that the mobile gaming market is growing rapidly, and changing as it grows. Michael Cai led off the discussion by asking “What are the top two-three trends in mobile/social games?”
Olivier Delfosse noted the change in the standard business model. “We launched Price is Right successfully as a pure paid download in 2008. Having a brand in the iTunes App Store makes a gigantic difference. I think right now where we stand is that either you're going to pay marketing dollars to get into that [best-seller]chart, and that's what determines the success of your game, or you're going to have a brand. What we've seen for us is the transition of business model from the paid download to the freemium model. It makes a gigantic difference in terms of revenue and it's affecting our strategy.” Which led Cai to inquire “Do you need to pay at all for marketing with a major brand?” Delfosse was quick to answer “Much, much less. That's not just on mobile; when we launched our Facebook games Family Feud and Price is Right the cost per install for those games was dramatically lower, and that was told to us by Facebook. We know that on mobile, I can't say exactly how much we spent for promoting Family Feud, but it was almost 100% quiet growth.”
Simon Jeffrey has a more basic change in the marketplace that he had observed. “The last 12 months we've really gone from the smartphone market being people hanging on to their Blackberries to people adopting iPhones, to the massive adoption of tablets and Android devices. I think if you look back 12 months there's been quite a change in consumer behavior around smartphone applications.”
Some figures on the mobile market were provided by Dane Holewinski. “There are about 100 millon smartphones in the US, which is about half of all connected phones, and that's expected to double again in two years. When you think about this device, it's no longer just a phone, it's a gaming device. Currently 88% of consumers are playing games weekly on their smartphones. The reason we're all so excited about this is that it's a huge addressable market. By our count, 70% of the top-grossing game apps in 2011 were free-to-play. The tremendous growth of the Android platform is just crazy, to think about more than half a million devices being turned on a day, that's crazy.”
Androdi may be growing swiftly, but Cai put his finger on a key point: “Is the growth of the Android platform proportional to the revenue potential for games on that platform? There are still a lot of challenges, right?”
Peter Dille responded that “Certainly they're ahead in terms of market share, but the iOS platform monetizes a bit better now. There's less friction on the iPhone platform, Apple's got our credit card information so it makes it a very easy proposition for in-app purchase. That's starting to go away a little bit. You've also got a demographic with some economic situations where the iPhone is seen as a premium device and Google plans for Android platform to hit a wider audience. On average people are spending $21 per app, and whales are spending a lot more.”
Chris Tanquary felt that Android was improving. “I think there's still room for improvement on the Android platform. Discovery is an obvious thing, Google's doing a lot to improve that, and I think updates to the Android Market go a long way to address that. There's still some things out there to work on, but we're catching up to iOS. If you look at micropayments on Android it's still a hassle, it's going to take some time.”
The difficulties of Android were all too apparent to Simon Jeffrey. “One of the issues on Android is the disparity of the operating systems. On iOS 85% of users upgrade to the latest OS, and on Android 85% of the users have different Oses.” Which means developers have to spend a lot of effort supporting the differences in operating systems alone, not to mention all the differences between Android phones that cause headaches for programmers.
Regarding the monetization of games, Holewinki saw a clear winner. “The freemium model has really established itself as the monetization method for mobile/social gaming. On the Android side, what we have seen is that Android users, for a number of different reasons, are much less likely to spend money, whether that be to purchase an app or for in-app payments. This may change over time but in our network we've seen advertising being a real key monetization path for Android gamers, whereas on iOS we have more of a balance between advertising plus in-app payments for virtual goods and those sorts of things.”
Holewinski also added this: “Just to add something new to the mix, one other really interesting development from 2011 for me was the emergence of the mobile gaming megabrands, Rovio and Angry Birds being the clear winner here. This mobile game, that started as an iOS game, has now transcended mobile, has moved across all digital platforms and has really worked its way into popular culture. It's really establishing itself as a powerhouse publishing company, and I think we're going to see more of that.”
Cai brought the discussion around to social games on the mobile platform. “When you think about social games, you think about FarmVille, CityVille; for mobile games Angry Birds comes to mind, but for mobile social games do we have any marquee examples in the US?”
Holewinski had an answer: “I would say Words With Friends, after Angry Birds, is probably the most well-recognized application. Is that just because of Alec Baldwin? That helps.”
Cai wanted to know the secret behind the top sellers. “Why is that game so successful? What are the core play mechanics that really hook consumers?”
Jeffrey noted a key thing about mobiel social games: “Today's contemporary society is addicted to their mobile device. Games that ration out awards and incentives to go back in and play that game multiple times per day will be successful. Then, if you can socially engage those people through their social graph it feels like a community.”
Speaking as a publisher, Delfosse had a clear idea of what a successful mobile game requires. “I think the success of Words With Friends comes from the simplicity of the asynchronous play. It's just so easy to play and then shut it off, and then come back and have another play waiting for you. It's a very simple concept, and it's enormously necessary for a game to be successful. When we designed Family Feud, we thought a lot about what kind of viral hook we would put in there. It's essentially a trivia game with very simple game play, and we decided to put in a viral hook that really made the game. There's a point in the game where you go into the fast money round, which is if you've ever watched the TV show, where one member of the family comes out and they answer five questions, then they go back and another member of the family comes out and answers the same five questions. That was the break where we put in the viral hook where people would then invite their frineds to complete the fast play round. We layered in on the mobile version of the game you can invite people through Facebook, through SMS and through email. When you come into the game you see all these different people asking you to play. It's been really successful.”
Holewinski noted that the pattern of play was important. ”People pick up their phones for a very short amount of time, and they're interacting with these games for somewhere between ten seconds and a minute. A lot of these viral social games you actually can open your phone, play a game in Words With Friends, and you don't have to invest 15 or 20 minutes, you invest a minute, maybe two minutes, and I think that's really important in mobile where people are just pulling these things out of their pocket when they have two minutes in line or they're waiting for a taxi or they're in the security line at the airport.”
The subject turned to the size of the US market for mobile games. Cai found from his research that the “US alone was looking at $500 million for social mobile gaming revenue.” Jeffrey agreed; “That feels about right if you look at the number of social games made. That number will probably multiply by several times in the next year or two.”
Looking at marketing costs, Cai noted that “It used to be less than 10 cents per user to add a user, now it's more than a dollar.” Holewinski said “You're looking at between 75 cents and a dollar for a download, and that cost will fluctuate depending on the time of year.”
Looking back at the origins of the mobile game market, Cai wondered “Why did social/mobile come out of the Japanese market?”
Dille was quick to respond that “There were better handsets in Japan, and the carriers were in the position to call the shots about the operating systems the games could use. There was a massive network effect and the games became very popular.”
Simon Jeffrey had a more detailed take on the subject. “My company, ngmoco, was acquired by a Japanese company, DeNA, a little over a year ago, and they do $1.5 billion in revenue purely on social gaming in Japan. That demonstrates the global opportunity of social gaming on mobile. Most of that $1.5 billion comes from kids playing games. As Peter says, Japanese feature phones 7 or 8 years ago were kind of where our smartphones are now. Japanese consumers were used to an app lifestyle, using their phones for banking, shopping, and all these things on their phone. I think the other thing is there's a difference in culture. Our social graph is composed of people we know, so when we play Words With Friends or a game like that, we just play with people we know. That naturally restricts the number of potential social connections we can have. Japan has a very different culture. Social connections are anonymous; Japanese consumers create an avatar which is a mask they hide behind. They have many more connections because of that, and they play games with people at a similar skill level.”
