Editor’s Note: Welcome to our weekly Reality Check column where C-level executives and advisory firms from across the mobile industry share unique insights and experiences.
The truth is, it didn’t take Facebook to convince insiders that WhatsApp and its brethren are the social-networking and mobile entertainment future. For a few years now, hundreds of millions of worldwide users have raised their digital thumb to a host of mobile messaging apps. From juggernaut WhatsApp to other key players like Line, Viber, WeChat and Kakao, mobile messaging has swiftly proven its power to amass and retain users.
The question is one of converting that power into reliable revenue. And one of the key answers is hidden in plain sight: mobile gaming. For the world’s leading messaging app providers, profit is a simple plug-in away.
From niche upstarts to mature platforms
Facebook is fine for seeing what a couple hundred of your friends are doing and saying. But messaging apps are optimized for interactions with 20 or so of your closest friends; you can chat, play and share multiple times per day. Games have proven to be one of the best forms of entertainment to share with close friends. This is why they’re such great revenue candidates for distribution over messaging apps.
According to Flurry, in 2013 messaging app use (including social and photo sharing) grew 203%. Overall app growth for 2013 was 115%; utility and productivity app use grew at 150%; and mobile gaming grew at 66%. In the meantime, WhatsApp, WeChat, Kakao, Line and SnapChat have all seen a tripling of their subscriber base.
For many messaging apps, the transition from niche service provider to massive content platform has already taken place:
–With 450 million worldwide users, WhatsApp charges an annual subscription of $1 after one year, meaning it could generate well over $400 million annually with its current user base.
–Viber, which recently sold to online retailer Rakuten for $900 million, has 280 milion users and offers them free Internet phone service; Rakuten views Viber as an optimized platform for games and other content.
–With 340 million users in Japan, Thailand, Taiwan, Indonesia and Spain, Line saw explosive growth with the launch of its games platform.
–Tango, with 190 million users, has announced a plug-in game store to provide members with integrated social gaming experience.
–Tencent-owned WeChat boasts 300 million users and is China’s dominant mobile messaging app; score-sharing for social games has widely driven in-app purchases.
–With 130 million users, South Korea’s Kakao is that country’s go-to messaging app and delivers 5.5 billion messages per day.
–Twitter has started promoting its private messaging and photo sharing over mobile.
–SnapChat now allows 24-hour photo stories.
–Even Instagram entered the private messaging arena to gain ground as a communications platform and not just a place to log photos.
At this point, two familiar questions arise: How will key players differentiate? And where’s the money?
The answer is simple: games and more games. Or rather, games and the right delivery mechanism. Plug-in game stores offer a turnkey method for messaging app providers to connect users to the best mobile games and hundreds of millions of other players. Moreover, access to each user’s social graph sharply increases the relevance of game suggestions, which serves both to enrich the overall gaming experience for players and to differentiate total brand value for the messaging app provider.
Plug-in game stores offer one-stop solution
In Asia, games over messaging platforms have already begun to drive significant revenue. Within a year of Kakao launching its games platform in 2012, the app reached 30 million users and 400 million downloads. Three months after launch, its monthly revenue soared nine-fold to more than $35 million.
For Line, results were even better. Within three months of launching its game distribution platform, the company announced it had delivered 100 million downloads to game partners and reported 1,500% growth in revenue in one year – from $10 million to $157 million. Games are now 60% of Line’s revenue.
It’s also worth pointing out Line’s revenue above is the gross figure, before the 30% payout to Apple and Google. Logically, the question for messaging services becomes how to become their own game store without sacrificing game variety.
“Plug-in stores solve this problem,” said Renato Iwersen, VP of Strategic Partnerships at Tango. “Their massive gaming networks and relationships with leading mobile carriers and game developers enable Tango to provide new and compelling ways for customers to connect and engage with one another.”
Making friends with the world’s leading operators
Right now, messaging apps are yet another contributor to clogged networks and offer operators nothing in the way of revenue. In fact they have siphoned profits from traditional texting and intensified the general crisis over how to monetize traffic. However, as Iwersen mentioned, the best plug-in game stores come with pre-packaged carrier relationships for the purpose of supporting centralized, one-tap in-app billing that the operator manages across games. In a nutshell, plug-in game stores are an instant, cash-intense ecosystem of players, carriers and games.
“Social gaming is an important part of SingTel’s digital strategy and we have taken a proactive approach to social gaming by working with PlayPhone to launch our own WePlay branded game stores that have a plug-in messenger solution. This provides our customers with popular games and a leading-edge social gaming experience. We are gradually expanding WePlay to regional markets where we have a presence,” said Cheong Hai Thoo, SingTel’s head of multimedia, Group Digital Life.
Developers’ bonanza
Plug-in game stores also serve as a one-stop solution to multiply exposure for game developers. Each new messaging app deal offers tens and hundreds of millions of potential new gamers across continents, operators and messaging providers.
Conclusion
I’m always excited when a seemingly insurmountable problem has a simple, elegant solution. Messaging and mobile gaming are two of the fastest-growing phenomena on our mobile landscape. It’s only logical that the key to mastering both universes is to aggregate users on both sides, provide them unfettered access to each other and collect a fair toll along the way.
As founder, CEO and board member, Ron Czerny serves as the visionary and driving force behind PlayPhone’s corporate strategy. Czerny’s vast experience in the games industry has allowed him to help establish PlayPhone’s dominance in the mobile social games industry and position the company to compete and thrive on a global scale.
