China Social Games

Guest Blogger: Zhou Hao is the Founder of Winzone, which developed the browser game “Dark Agreement”（黑暗契约), which is now in Open Beta. Zhou Hao has four years of experience in the gaming industry, built a payment system that allows users to pay cash at Internet cafes in exchange for virtual goods, and is an expert blogger on BloggerInsight.com.

“Happy Farm” is exploding in China and the developer Five Minutes raised USD 3.5 million from DFJ (Draper Fisher Jurvetson). It begs the question: how can developers capitalize on the growth of social games in China?

Social games are a blessing for Chinese social networks. The revenue model for social and web games is proven. The alliance of gaming and advertising will generate the majority of income on social networks. Tencent’s Qzone now proudly says, “No, we don’t display any ads from third parties. We use all our advertising to promote our own games!”

But this does not mean that all Chinese social game developers will benefit from these trends. To move from individuals or small teams to serious and profitable companies, developers will have to overcome three significant obstacles.

1. Standardize Social Games; Creativity Carries High Risk

In China, web games are now part of a long industry chain. On the one hand, this is due to China’s enormous population (which brings countless young game players); on the other hand, it benefits from its successful industrialization. You can create a profitable web game as long as you have the following elements: various mature components and designs; fashionable graphics; and effective promotion channels. A little creativity in the details helps, but it can even be done without any creativity at all. [Read the rest of this entry...]

In June 2008, VentureBeat wrote: “The good thing is that PopCap’s games are well known in China. The bad news is that most retail versions are pirated.”

1.5 years later those words still ring true, but PopCap remains upbeat. PopCap is a patient pioneer: “PopCap prioritizes taking the time to get it right – whether that’s building a new game or approaching a new market. We’re investing in China as a market for the long term, we’re not looking for short term gains,” said Giordano Contestabile, Senior Director of Business Development for the Asia/Pacific, in a recent interview with China Social Games. On Twitter: @giordanobc

Cute and China-safe graphics

PopCap has two advantages in China: 1) its games are already wildly popular; and 2) its games are family friendly, suitable for the China market. PopCap’s big disadvantage is that its primary monetization model, “try and buy” downloads, is a loser in pirate-infested China. The real challenge in China is developing a new business model, not new games.

Zuma: treasured by Chinese pirates

Popular with Chinese Pirates

“When I meet someone in China and introduce my work, I often hear, ‘Ohh, my grandma, mom, and I all play your games.’ Possibly 100 million people play Zuma in China, but we’ve sold virtually none of the copies,” said Mr. Contestabile.

PopCap’s “Plants vs. Zombies” (Chinese: 植物大战僵尸), a charming cross of Tower Defense and Happy Farm, is another smash hit in China. The recently released title costs 20 USD and is not officially sold in China, but the pirated copy is available for free from a number of major Chinese download sites. The translated Chinese text is so professionally integrated into the game that I first believed it to be a genuine Chinese edition by PopCap (it’s not). [Read the rest of this entry...]

The Chinese social game market is still in its infancy, but growing up fast. The first smash hits, Friends for Sale! Parking Wars, and Happy Farm are just over a year old in China. Here are 5 predictions for 2010:

1. Social Games Displace Web Games

Social games have a superior distribution model for reaching unprecedented demographics, including females and middle-aged users. These users are open to casual gaming, but unlikely to seek it out on 3rd party websites, as required by web games. Social games go viral by using existing services (social networks) and trusted references (friends). Social games are more than a fad.
Moreover, in-game social interaction has only scraped the surface. At the moment, it’s very limited: players can visit a friend’s game and leave a footprint (steal crops, play with pets, decorate a room). Once more games offer synchronous gameplay and allow friends to chat, expect social games to become more popular still. Casual web games don’t connect friends in the same way.
As a result, social games enjoy unprecedented numbers of users. In China, Happy Farm has an estimated 23m daily active users across all platforms. On Facebook, FarmVille has blasted past 27m daily active users in only 6 months. Explosive growth will continue in 2010 and web games will be left in the dust.

2. Consolidation of Game Developers

The days of a few friends developing a hit from the dorm room are over. The Facebook market has already seen consolidation on a colossal scale, with huge paydays: Playfish (300m USD merger with EA), Zynga (180m USD funding), RockYou! (70m USD funding), and Playdom (43m USD funding). Production values are rising in China too, with RenRen Restaurants (copy of Playfish’s Restaurant City) and Happy Pet (copy of Playfish’s Pet Society). Developers will need more resources, serious teams and finances, to develop the next hit game.
China’s consolidation will be on a miniature scale compared to Facebook though. In fact, it has already begun: Five Minutes, developers of Happy Farm, scored 3.5m USD from Draper Fisher Jurvetson on Dec. 1. And Rekoo, developers of Sunshine Farm, received 1.5m USD from Infinity Venture Partners.  China will follow Facebook developers here: expect more consolidation in 2010. [Read the rest of this entry...]

The Chinese government seeks a harmonious society. But it’s Facebook’s social games that are cooperative, while China’s closer resemble the Ultimate Fighting Championships.

9x as Competitive as Facebook?

Of China’s top 10 social games, 9 feature competitive actions that hurt other players (see graphic); the one exception is Renren Restaurant, an exact copy of Playfish’s Restaurant City on Facebook. Of Facebook’s top 10 games, only 1 features competitive actions. Chinese players cherish intense competition.

[Read the rest of this entry...]

High-Margin Virtual Goods are Generating Very Real Profits

Chinese technology companies have a reputation for lacking innovation and original products. Yet upon closer inspection the industry is brimming with ideas. Despite the fact that Taobao resembles eBay, Baidu searches like Google, and RenRen looks very similar to Facebook, these businesses are not simply knockoffs. The “Copy-to-China” label grossly underestimates the power and ingenuity of China’s internet ventures.

Identical Western replicas do not work (there is a reason why no large multinational internet business is a leader here). Instead, local companies are innovating to serve the Chinese market better, creating products and services that appeal to the needs of the consumer. This is also true of other Asian markets, and the region is now a global leader in virtual goods. So much so that the businesses in Silicon Valley and elsewhere are starting to take notice.

For the unbelievers, there are enticing examples of the rewards to be had. Internet heavyweight Tencent recorded revenues of USD 1 billion, at a profit margin above 40 per cent, by selling virtual goods across its multiple online platforms for RMB 10 (RMB 1 = approx. USD 0.14) at a time. Home to China’s most popular instant messenger QQ, Q-Zone social network, and related game sites, it is one of a number of domestic internet sites making a very real profit from something “virtual”. [Read the rest of this entry...]

Are Chinese More Addicted than Westerners?

The Top 10 Social Games in China (a new report released by BloggerInsight) details the exploding social gaming market in China and analyzes how game companies can compete to succeed.

Parking Wars received a lot of attention for its initial success but has since been outpaced. Happy Farm hit next and still continues its mainstream popularity, now reaching 27m DAU in China and basically matching FarmVille’s 29m DAU on Facebook. China’s enthusiasm for social games at least matches and arguably exceeds that seen on Facebook.

China’s social games are similar to those on Facebook in terms of themes: the top 10 includes farming, aquarium, pet, and restaurant games. However, further analysis yields some unique characteristics in terms of the developer industry, competitiveness, and popularity.

#1 Happy Farm

It’s hard to overstate Happy Farm’s popularity. In addition to the real deal, there are countless copycats and countless games have adopted the addictive mechanics.  Chinese versions are more competitive than their Western counterparts: they allow users to steal and add worms and weeds to friends’ farms.

[Read the rest of this entry...]