A report published by independent market analysts Datamonitor urges mobile operators to learn vital lessons from Japan and South Korea, to bolster and even help to reverse flagging revenues.
The report, Asia-Pacific Mobile Gaming – a study of best practice, argues that the mobile gaming strategies employed in Japan and South Korea are in fact highly transferable to operators in other geographies and can serve to increase mobile data usage, drive up average revenue per user (ARPU) and boost uptake of 2.5G and 3G networks.
Operators – look to the Japanese and South Korean model
According to Datamonitor (DTM.L), operators are not segmenting their customer bases effectively and as a result are not aware which services should be targeted at which users. In addition, the industry is not doing nearly enough to educate the consumer about the services out there or the benefits that they bring.
However, by adopting some of the strategies employed in Japan and South Korea, where mobile gaming has met with huge success in such a short period of time, operators could possibly reverse their fortunes. Datamonitor’s report credits the mobile gaming content and technology models in Japan and South Korea for having provided the ‘bridge’ to educate consumers on the value of mobile content. This has paved the way for other sophisticated mobile Internet services in the Asia Pacific region.
Today, Japan and South Korea boast a total of 49mn mobile gamers, yet just 3 years ago, the concept was virtually unknown
Japan has over 90mn mobile users (70% of the population) while South Korea has 29mn (61% of the population). Today, Asia-Pacific hosts 70mn mobile gamers. Considering that only 3 years ago, the concept of mobile gaming was largely unknown to Japanese and South Korean consumers, it is now a highly popular pastime. Indeed, Japan has 39mn gamers and South Korea has 10mn. China, however, will surpass Japan due to the sheer size of the population, with an increase from 5mn mobile gamers today to 90mn in 2006.
Wireless gaming revenues in Asia-Pacific currently total US$1.1bn. The subscription model, followed by pay-per-play, is currently the most popular revenue model. Together, though, they account for US$920mn worth of wireless gaming revenues in Asia Pacific. Sponsoring, in particular, will become more popular but Datamonitor expects the subscription and pay-per-play models to account for the majority of revenue generated in the future.
Focus on mass marketing – Mobile games can be used to test and better understand consumer demand for mobile services
Contrary to many of their European and Asia-Pacific counterparts, Japanese and South Korean operators adopted a mass-market strategy to promote mobile gaming early on. Operators focused on selected content – gaming, entertainment and ring tones – and made it readily available. Mobile gaming was not, at this stage, singled out as a premium service. The by-product of this strategy was that operators could also understand demand for mobile services better and segment their customer bases more effectively.
A focus on mass marketing, or mass targeting, in the short term has several benefits. A mass launch of mobile content will help operators quickly understand what genres are popular. Rather than staking hopes on expensive content development and investing to target particular market segments, operators spread the risk. Additionally, a mass-market launch could help operators raise brand awareness and could work as a customer relationship management (CRM) tool, by helping to populate CRM databases. It also serves to gauge idiosyncratic demand for mobile content and mobile gaming.
Need for low-key ‘informative’ marketing campaigns to educate mobile users rather than promises of compelling mobile content
European operators’ failure with WAP marketing clearly illustrates the potential pitfalls of hype marketing. One of the reasons WAP failed was because the product did not fulfil the quality promised.
Japanese and South Korean operators have avoided high profile marketing campaigns and have instead successfully launched mass marketing campaigns to educate mobile users initially. As gaming demand increased, operators then switched marketing focus and targeted hard-core gamers.
To date, the main aim of marketing campaigns has been low-key ‘informative’ advertising of selected games, rather than promises of compelling mobile content. Japanese and South Korean operators have also driven mobile gaming by marketing affinity brands, in particular well known entertainment, and often, domestic brands. Japanese and South Korean operators have successfully used domestic brands, in particular, for sponsored mobile games, especially if the content is associated with encouraging store visits or consumer activity.
Co-operation, rather than competition is crucial in the short to medium term
The industry should again look to Japan and South Korea for examples of revenue sharing that have worked. In the early stages, Japan enjoyed some subtle but significant differences in the wireless content business model that many have overlooked. NTT DoCoMo (9437q.L) dominated relationships with handset manufacturers and content producers. This enabled DoCoMo (9437q.L) to dictate the kind of systems and services it wanted, reducing its risk and increasing efficiency. However, as the mobile content market gradually developed, the two other large operators, KDDI (9433.F) and J-Phone (9434.F), benefited from this market standardization. Most aggregators and portals in Japan are therefore interoperable with all operators.
NTT DoCoMo’s (9437q.L), and indeed all other Japanese operators’, ‘hands off’ approach has paid off in the sense that there is an abundance of content available and operators can focus on marketing and customer segmentation activities to push uptake, rather than getting involved with content themselves.
The lessons to learn from Japanese and South Korean operators on the supply-side suggest that industry co-operation, rather than competition, is crucial in the short to medium term. This may involve a slight danger of cartel building, but Datamonitor believes that industry co-operation nevertheless holds the key to create a thriving development community. It will be very difficult for an operator to drive mobile gaming alone unless it has a very dominant position and/or a huge subscriber base.
Clearly, though, operators must drive mobile gaming in the early stages and assume the responsibility for encouraging content development by both industrial agreements and by offering financial incentives.