App Market Globalization: The Big Theme Of 2014

According to App Annie, Japan became the biggest app market in the world last October, surpassing the United States and continuing to grow at a far faster clip. Many app vendors started reacting to Japan’s new prominence already in 2013 and the year 2014 is likely to be defined by how Japan continues to integrate to Western markets. If current trends hold, by Christmas of 2014, Japanese app revenue may top US app revenue by 30-40%. It is already impossible to become the top vendor in the world without strong Japanese iOS and/or Google Google Play market performance. At the moment, Apple Apple and Google are fighting a pitched battle in Japan, with roughly similar chunks of the overall app market.

Only two Western vendors have truly cracked the Japanese market – and both took fairly extreme measures to conquer the country. The Finnish Supercell began a cross-promotion collaboration with Japan’s app titan Gung-Ho in June 2013 and sold a 51% stake of itself to Softbank Softbank and GungHo in the autumn. The Swedish-British King kicked off a startlingly aggressive television promotion of its flagship “Candy Crush Saga” game before Christmas. Some industry observers peg the price tag of the campaign in the $3-5 M range. These measures were highly effective – recently, Supercell and King combined had three Top 10 iPad apps and two Top 10 iPhone apps in Japanese revenue charts.

A mere year ago, this level of success by Western vendors would have been inconceivable in a country that has traditionally been hostile towards Western games. US app vendors have not been able to crack the Japanese market yet, with Electronic Arts and Zynga looking notably sluggish in responding to the emergence of world’s new market leader. The share prices of Japanese app vendors have responded to the explosion of the domestic market revenue by soaring in the past two years. Even after dropping by half since May 2013 highs, GungHo still retains $7 Billion market cap. GungHo has managed to turn “Puzzle & Dragons” into a decent hit in the US market where it bobs between 3 and 60 in iPhone revenue chart. But true, blockbuster success in the West continues elude GungHo – which is why its recent tie-up with Supercell added more than $1 B to its market cap overnight.

The success of GungHo-Supercell promotion collaboration last summer triggered a race among Japanese vendors to forge Western alliances. We are likely to see many similar cross-border alliances in coming months. Last summer, the share price of KLab tripled after it announced a deal to bring one Microsoft Microsoft game franchise to Japanese market, only to drop by half in the autumn. Japanese app vendors are now demonstrating extreme volatility as investors attempt to gauge their potential success in crossing over to Western markets; these mood swings yield 100% rises and 50% declines in share prices in a matter of days or weeks.

One interesting current example of how Japanese vendors are trying to go global is CROOZ and its new ACR DRIFT game. The app is based on Auto Club Revolution, a PC title by a British racing car specialist Eutechnyx. Eutechnyx turned ACR into a substantial hit in Russia and China; it has reached 600’000 registered users globally and is on track to hit 1 M over the next year, according to Eutechnyx CEO, Darren Jobling. The PC game has achieved a respectable lifetime ARPU of $32 by offering highly detailed classic car models and emphasizing community features.

ACR - a key test of Japan-EU game collaboration

ACR – a key test of Japan-EU game collaboration

CROOZ is best known for its intricate, hard-core card battle games that have thrived in Japan. With ACR DRIFT, the vendor is making a big leap by licensing a game in an entirely new genre in a bid to crack European, North American and Asian markets. CROOZ has global distribution rights of ACR DRIFT outside Russia and China. “Our Japanese team is building the mobile version from scratch,” notes Yukihara Tomita, EVP of Global Business Development at CROOZ. The company has designed a more compact version of the game that offers shorter playing sessions and other tweaks.Early signs look promising – ACR DRIFT became Number One racing game in the Australian iPad chart soon after its test run in the country started. What’s interesting here is that a Japanese studio is revamping a Western game for Western markets. The ambition of Japanese vendors now extends beyond merely trying to tweak their own games for export.

What we are likely to see in 2014 is an expanding palette of cross-border experimentation: West/Japan marketing partnerships, Western games localized in Japan, Japanese games tweaked for Western markets, Western franchises repurposed by Japanese vendors for global markets, etc. The early moves by GungHo, Supercell, King, KLab, Eutechnyx and CROOZ are likely just an epilogue. Which approach works the best is one of the most important questions in the app industry – and the ability of vendors like Zynga and Electronic Arts to pick the right strategy could determine whether they can become leading  global mobile software firms.

“Line is a good example of a company that has done well beyond Japan without much effort,” says Rick Martin, editor in chief at The Bridge,  Japan-based bilingual site focused on technology news. “They seem to have a reactionary strategy, first recognizing traction in a certain country (especially around Asia) and then putting some marketing behind it to drive it further.”

At the moment, only King, Supercell and GungHo have delivered decent success on all corners of the Japan-US-EU app market triangle. Serkan Toto, a leading Tokyo mobile game industry consultant, has a dark view of the prospects of Japanese game app vendors: “In the mobile gaming space, essentially not one Japanese mobile game company delivered on its promise to replicate and expand its success in the local markets elsewhere. This includes giants like GREE or DeNA, which failed to establish their gaming platforms outside Japan, even though they spent hundreds of millions of dollars in M&A in the process.”

Time will tell whether the new wave of app alliances can change the dynamics.


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App Market Globalization: The Big Theme Of 2014
test of japanese – Yahoo News Search Results
test of japanese – Yahoo News Search Results

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