Rain Rannu is the founder and CEO of Fortumo, the mobile payments company that powers in-app payments for Rovio, Facebook, Barnes & Noble NOOK, EA, Gameloft and more than 60,000 other developers.
The mobile gaming industry has grown up. Digi-Capital reports that online and mobile games made up 49 percent or $31 billion of the entire gaming industry in 2012.
A maturing mobile gaming ecosystem creates several challenges for developers, especially newcomers who will have a hard time entering the market. So, what are the challenges and how can developers overcome them?
Large studios can utilize their existing audience to cross-promote new games, which leaves less room for startups. There are less new customers entering the market, making it even harder to stand out as user acquisition costs on both Android and iOS almost doubled during 2012.
Apple boasts to have 500 million credit cards linked to iTunes, but that means they still don’t have access to 6.5 billion users. And they won’t have it any time soon: There are only 2 billion credit cards in circulation globally, and many people own several credit cards. For example, in the U.S. credit card owners use 3.5 cards on average.
On top of everything else, there are also thousands of similar apps and games for consumers to choose among, which makes standing out complicated. Google recently booted 60,000 apps from its store to combat the issue of copycats and unnecessary saturation of the market.
In total, we have five major obstacles for creating a profitable game: large companies having the upper hand, fewer users entering the ecosystem, increasing acquisition costs, limitations on revenue opportunities, and over-saturation. If this does not worry you, you are either working in one of the larger studios or taking the situation as inevitable.
The situation is not inevitable. While mobile gaming has matured in western markets of North America and Western Europe, there is still huge potential in emerging markets. As most developers have not entered these markets, the opportunity to become the early bird that gets the worm is up for grabs.
Emerging markets are fragmented. Each region has its own key characteristics, and each should be approached on a case-by-case basis. The most promising regions of growth are Latin America, the Middle East and Africa, and Asia.
Latin America is one of the most successful regions for our company in terms of revenue. The mobile gaming industry grows roughly 25 percent per year; and according to estimates, the virtual items revenue of Latin America will reach 600 million dollars by 2014.
The biggest market in Latin America is Brazil as there are more smartphones there than in France or Germany. One in four Brazilian Internet users claim to play games online. With a population of 589 million, Latin America is huge emerging market for mobile games.
Another highly promising region is Middle East and Africa. Turkey is the go-to market in this region when developing Facebook games; it is already the sixth largest country on Facebook with a million new users joining every four to five months. Saudi Arabia is notable as well as it is a country with one of the highest ARPUs in the world, with two thirds of Internet users playing games.
Last but not least, the largest emerging market across the board can be found in Asia. By the end of the year, there will be half a billion smartphones in China. That is more than Angry Birds total downloads on Google Play worldwide.
As gaming consoles are still banned in China, web and mobile games are more popular. Traditional distribution channels don’t work well here, and mobile operators control a huge part of the app ecosystem. There are more than two hundred app stores for Android alone.
These facts only scratch the surface on the potential of mobile gaming in emerging markets; but for us, the figures representing revenue generated in these regions clearly prove that people want to play mobile games across the world and that ignoring such markets is an untapped opportunity.
A good starting point for figuring out overseas markets are the analytics companies App Annie, Flurry, and Distimo. Another excellent source for mobile monetization insights is Eric Seufert’s blog. [Editor's note: We'll also be talking about mobile monetization more deeply at our MobileBeat 2013 event next month in SF, where we're hosting major players in this area, from Google, to Facebook, Millennial, Chartboost, Flurry, Tapjoy, HasOffers and many more.]
My goal is not to get anyone over-excited about these regions — they are extremely diverse and applying the same logic to user acquisition as one would do in the U.S. will not work. From our own experience, the minimum things to learn in your expansion plan are:
- Local users: Regions are varied in terms of which games are popular (e.g. China likes MMOs, Latin America loves soccer games, Africa trends toward educational games) and average gamer profiles in gender, age and income. Hardware also varies by region. India has 80 percent feature phones; China, 66 percent smartphones. In emerging markets, iOS devices can cost up to twice as much as they do in the U.S., and they are always high-end devices, whereas Android phones cover the whole price range, from costing as much as an iPhone for the high-end models but as little as $50 for lower-end models.
- Local distribution: In many countries, there are local app stores that are more popular than Apple’s App Store or Google Play. Yandex’s Store is popular in Russia; TIM App Shop is popular in Brazil; Samsung Apps has potential in most emerging markets. China boasts more than 200 different Android app stores, and only 10 percent of downloads are made from Google Play. When it comes to data charges, think small. In countries with limited data connections, users might not be able to download a 30-megabyte game — you will need to find a way to make a light version of it or partner with a mobile operator for preloading your app.
- Local monetization: In most emerging markets, premium apps usually don’t work that well. With freemium apps, it’s important to realize that charging the same amount in the U.S. and Brazil will not work either, because the purchasing power of consumers is different. Credit card-based billing may be close to useless in most of emerging markets, as most consumers don’t have credit cards. For example, in Turkey developers should accept prepaid cards sold in every gaming club. Mobile payment is another great option to reach the audience in emerging markets.
This non-exhaustive list should be useful for developers who have decided to take an alternative approach to creating a successful game and want to try something in addition to attempting to climb to the top of charts in App Store and Google Play. Best of luck!
Rain Rannu is the founder and CEO of Fortumo, the mobile payments company that powers in-app payments for Rovio, Facebook, Barnes & Noble NOOK, EA, Gameloft and more than 60,000 other developers. Fortumo’s payment coverage extends to over 80 countries through 300 mobile operators and works on all key platforms such as online and mobile web, Android, Windows 8/Windows Phone, and HTML5.
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