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Following Japan's Lead on Social Games

Will the mobile+social+gaming craze catch on in the US?

December 29, 2010 | Mobile | Social Media | Media & Entertainment

Social networks have become nearly universal in the US and marketers have taken notice. More marketers are spending on social networks, and according to comScore, social media display ads account for an increasing share of impressions, but the channel remains one of cheapest forms of online marketing today.

In Japan, by contrast, social networks have been slow to take off. But some have found a niche that can turn nickel-and-dime online and mobile revenues into dollars—or yen—a mix of free and paid mobile social games and microtransactions.

Traditional social networking websites have been slow or unable to catch on in Japan, but mobile social networking rates are comparable to those in the US. According to an October 2010 survey conducted by the UK’s Office of Communications (Ofcom), mobile social network penetration in both Japan and the US was at 22% of mobile phone users.

Mobile Social Network Users in Japan and the US, by Age, Oct 2010 (% of mobile phone owners in each group)

According to company reports from Japan’s three largest home-grown social networks, GREE, mixi and DeNA’s Mobage-town, in September 2010 each had between 21 million and 23 million users. All three have a strong mobile offering. GREE and Mobage-town heavily incorporate mobile social games, and both GREE and mixi see vastly more page views via mobile: In September 2010 GREE had 46.52 billion mobile and 500 million PC page views while mixi had 26.12 billion mobile and 4.62 billion PC page views. Mobage-town did not report a breakout of how users view the site, but page views may not tell the whole story of usage due to small screen size and the navigation structure of mobile sites.

GREE and Mobage-town have increased user numbers and engagement by offering hundreds of free and paid games, encouraging playing with and competing against friends, enabling microtransactions for in-game upgrades and maintaining leaderboard rankings.

As a result, profits are soaring. From July to September 2010 DeNA and GREE reported net sales of ¥27.1 billion and ¥12.4 billion, representing increases of 216% and 82% year over year, respectively. For DeNA, social games, including item billing, in-game ads, affiliate ads and avatars, represented 79.0% of total sales, while traditional display and contextual ads accounted for 6.3%. The rest consists of ecommerce and other revenues. The ratio was similar for GREE, with paid services accounting for 80.6% of total sales and the other 19.4% coming from ads. mixi, however, remains heavily dependent on advertising, and total sales are much lower than their home rivals—¥3.9 billion, for an increase of 22% over the year before. In an attempt to catch up, mixi opened its platform and has attracted outside developers including GREE, Facebook and Zynga to increase engagement and develop paid services like games.

Mobile internet and gaming are more widespread in Japan than the US but DeNA thinks that they have a solid chance of duplicating success across the Pacific, snapping up US-based mobile game developers Gameview Studios, Astro Ape Studios and ngmoco. In a December 2010 press conference, DeNA and ngmoco unveiled a new gaming platform, ngCore, which they expect to launch globally in April 2011 on the Android OS.

As DeNA takes Mobage global, what can US marketers expect? Not all trends that come out of Japan translate to the US, but gaming seems to be one exception. You only have to look at Nintendo and Sony for two of the biggest examples. And a sizeable percentage of internet users in the US are already playing casual online, social network and mobile games, according to a survey by Newzoo BV.

US Gamers, by Platform, June 2010 (% of online population)

Inside Social Games estimated that tens of millions of social network users worldwide played games on Facebook and MySpace in December 2010. As mobile games add social elements and connectivity allows for individual ad delivery, marketers’ will want to pay attention to this growing audience. Brands will be able to engage captivated gamers on the go in a variety of ways, including through the use of in-game ads and promotions, specialty service packs and sponsorships.

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Check out today’s other article, “B2B Possibilities for Mobile.”



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