Mobile advertising, and not in-app purchases, will be the main monetization model for game developers targeting the Southeast Asian market because of the lack of convenient carrier payment methods in the region currently, according to one Gree executive.
Tatsuo Tsutumi, partner at Gree Ventures, the Japanese mobile social network operator's venture capital arm, told ZDNet Asia on Tuesday that in-app purchases has been the main money-making model for mobile games developers in markets such as Japan and United States.
In fact, 90 percent of Gree's Japan-based revenues come from in-app purchases while only 10 percent is generated from mobile advertising, Tsutumi revealed. In the U.S., the ratio is 60 percent in-app payments and 40 percent mobile advertising, he added.
However, he noted that mobile advertising will be the way to go for game developers looking to establish themselves in the Southeast Asia market.
One of the reasons for this is because the region still lacks a mature carrier payments infrastructure. Using Japan as an example, the executive said telcos there provide convenient carrier billing services which help facilitate easier in-app purchases but such services are still lacking here.
This is why Gree, which has Japanese mobile operator KDDI as one of its stakeholders, is in talks with regional operators to better monetize mobile services such as mobile-based games and introduce payments systems.
Tsutumi also noted many game developers in the Southeast Asia region have only started out within the past two years and are financially weak. They have problems monetizing their games too, so mobile advertising could be one method of mitigating these challenges.
"These companies have many downloads but the users are not paying. The games have nice designs but there is no monetization engine," the executive pointed out.
The different countries individually pose challenges too. For instance, Indonesia's mobile market is big but the smartphone sector is dominated by Research In Motion's BlackBerry devices, which Gree does not develop for. He believes this could be a similar story for other developers.
Branching out overseas
The Japanese company is also looking to grow its business by investing in overseas markets, after local growth had stalled, he said. In January 2011, it set up its U.S. subsidiary while the Singapore office began operations in a year later.
Gree's a venture capital arm was established in November 2011 armed with US$25 million for investments. Tsutumi said 60 percent of the funds will go to Internet startups based in Southeast and East Asia, while the rest will be ploughed into Japan and South Korea.
There are plans to set up game development studios in Southeast Asia as well and the company has sounded out a few in Singapore already, he added.