Published on Wednesday, July 21 2010 by Sung Hwan Ahn
An interesting round table was hosted by Bloter.net on 15 July, 2010 regarding the future of social game market in Korea and where it is heading to. The following article is the translation (by Sung Hwan Ahn from Rubicon Games Inc.) from Bloter.net blog post for those who are interested to see what’s on Korea’s most influential social game experts have in their mind. Three experts in this industry were invited;
Young Eul Kim, Head of Open Platform for Nate/Cyworld at SK Communications
Andy Kyoseok Song, Manager of team Hedgehogs at AhnLab
Charles Pyo, CEO of Rubicon Games Inc. and Wizard Works Inc.
Host: Reporter Lee and Joo from Bloter.net.
*Picture reference, “http://www.bloter.net/archives/35162“
Lee: Social game seems like the rising issue these days. Before we start, let’s define what social game is.
Kim: Usually social network game (SNG) is called ‘social games’ in short. There are two ways to look at this; is this a network that took off from games or game that took off from a network? As we can see from Facebook, social games originated from social network service (SNS), which means it is not a game for heavy gamers. One distinct character of social game is that it is viral. Every user’s action spreads across the network. Another distinctive character is that there is no set story line within the game. It’s the users that write the story themselves.
Lee: I understand that Rubicon Games is a social game company established by Wizard Works Inc. What attracted you to this market?
Pyo: Because this industry is receiving a lot of spotlight these days. (laugh) Recently CJ Internet declared to invest on social games and many VCs are jumping in this market. We are, thankfully, one of the early starters. If you ask me to start a company now, I probably won’t. (laugh)
Lee: How many companies or developers are there in social game industry?
Kim: Currently there are about 50 developers registered in Nate AppStore. According to a VC, there are approximately 100 of them.
Lee: Isn’t Nate AppStore the first social game platform in Korea?
Kim: Yes it is. Most of the early birds are the ones who started off in Nate.
Lee: Hedgehogs is one of the early starter as well, right?
Song: Our initial service date was April 2009. At that time, flash-base games have just begun to merge. After seeing few games, we thought we could make something like that, but later we found out we were mistaken. (laugh)
Lee: What kind of mistake was it?
Song: We didn’t have a full understanding of how to utilize viral or revisit factors. In the beginning, gamers liked it, but after a while, many of them left. At that time Farmville have just came out and Zynga didn’t have that much of a hit game. We thought we were competitive but now the gap is big. However, we are prepared now and things will change.
Lee: It seems like you have learned a lesson as an early starter. Could you please tell us more about what you could have done better back in that time?
Song: We were a bit naive, in a sense that we thought we knew a lot, but it turned out to be not. For example, we were not prepared on users leaving. There were thousands of users coming in per day, but we didn’t have enough revisit factors to keep them engaged. Nowadays we are more interested in game life cycle.
Number of Nate AppStore users marked 2.7 million recently. We predict that 10% of them are active users. These users try whatever new app is released and therefore, if a game is good, it is not difficult to accumulate 200,000 users. But then the next problem is that current social game life cycle seems to be only 6 months.
Lee: Is the trend similar in other countries?
Kim: Relatively, foreign countries are in a better position. Facebook, for example, has a user interface (UI) that shows other people’s contents first and then mine, but in Korea, it’s the opposite. People first see their own page and then other’s. Platform grows with new contents and in that sense, Nate AppStore has many problems to solve.
Lee: Isn’t that platform provider’s share of work?
Kim: Yes it is ours. Contents are important but what is more important is to develop a platform that could spread the game quickly. We still have a lot to learn from foreign platforms.
Lee: Social game developers must have benchmarked successful foreign games. What do you think is the reason for their success?
Song: In my personal view point, Playfish has introduced many innovative ideas in their games. They had a good philosophy and fresh ideas. Zynga had a good insight to combine the successful elements of a social game and applied it well to a business model.
Kim: Playfish had a fresh impact on the social game market, whereas Zynga already secured enough seeds to spread their game faster than its competitors. The common factor of success in foreign market is “speed”. I also think the consensus of starting a venture start-up in Silicon Valley has contributed to their success as well.
Lee: You mean not only social games are important but also the venture incubating culture has a great effect on success? In other words, is it possible to apply foreign success stories to domestic market?
Pyo: According to my experience, you need time. It is not an issue whether you have game or web developer experiences. Hedgehogs could do so much because of their accumulated experience since 2007. If game developers simply jump into social game industry, it would take some time for them to catch up with early starters. I realized after running Rubicon Games for a while, that no matter how good of a developer you work with, you will go over the same mistake that Hedgehogs and Sundaytoz went through. I could stress no more how important experience is in this industry. In this sense, if a startup think that they could catch up easily, it wouldn’t be too easy. We too, first had that misleading confidence but we are thankful that we were mistaken relatively earlier. (laugh)
Song: You’re being too modest. I personally think within a studio, there must be at least one expert who has good knowledge and insights for social games. Game developers take social game way too easy and most often pay too much energy on the quality of the game. Social game is a game but also a communication tool. It must contain some kind of an interaction with friends.
I once sorted out all the successful game titles. Most of them were ‘adjectives + noun’ and social games had cute, warm words. Most social gamers are not hardcore gamers who play strategy simulation or MMORPG. Many of them are female users or light users. The existing social game developers might stumble if they try to imitate Playfish or Zynga with a shallow plan.
Lee: What difficulties do you have as a platform provider?
Kim: There are many. (laugh) First we didn’t have too much experience with platform business. We are still in infancy level. There were not that many architectures that we could benchmark and since we built a system based on our existing network API, we strongly felt the need for technical and managerial knowledge. At the same time it was appealing since we could satisfy both developers and users.
Lee: Although there 100 developers out in the market, isn’t it at its premature state?
Song: Regarding only the size, yes it is. It’s hard to call a 1 billion KRW market big. But from the developer’s point of view, it is important when you enter the market. If you enter too early, you will drain out from only investing, and if too late, competition would be fierce. In this perspective, the speed of growth of social game market is attractive with great deal of potential.
Lee: Is there a decent revenue model for developers?
Pyo: If you look at the statistics from Nate AppStore, the periodic cycle of revenue growth(by 100 million KRW) is shortening. Number of AppStore users continues to increase. But I also have a concern that Hedgehogs may become like Zynga and gain more negotiation power with Nate. However, on the other hand, this is one of the reasons why we jumped in the market because we saw the potential.
Lee: I heard the Nate’s accumulated revenue marked 1 billion KRW recently. Do you think the growth is fast?
Kim: Yes I think so. In the beginning the stats didn’t meet our expectations but these days we see a lot of potential. Since many new developers with good understanding of social games are appearing, the stats started to soar.
Lee: Many SNS experts worry that foreign corporate are slowly gaining more share in Korean market. One of them is app’s dependency to platforms. Do you have any similar concerns?
Song: We do. 2 years ago, we also wanted to start a platform business but then we switched over to application development. Many people wondered why Ahn Lab gave up its platform business and went into application development business. We understand that apps are dependent to platforms and we also have similar worries. But platform providers are also increasing and other range of platforms such as web, mobile, internet TV are expanding as well. We project that environment for app developers will improve, thus dependency to platform is unlikely to occur.
Lee: Are VCs interested in social games?
Pyo: Until early 2010 there were many but they soon turned their backs away. Nowadays, they are coming back, especially after hearing news about Softbank and Google’s investment. But not too many VCs have actually invested. Many new platforms are coming out and more success stories are prevailing and we expect more developers to receive investment in the future.
Lee: Do you have any pressure making profit from Nate AppStore?
Kim: Not at all. Our primary goal is not making profit. The board of directors also share the same view point. Our main goal is to provide “reasons” for users to use Nate.com. We even launched a commercial recently. What we continue to emphasize is the “ecosystem”, which could benefit everyone. We still have a long way to go though.
Lee: I hear news about Naver launching their own platform. Similar news from Daum as well. What is Nate’s reaction to all these new competitors?
Kim: We welcome everyone! The market could only grow when there are many players. Assume there’s only one search engine. The search engine market couldn’t have developed as it has today. We look forward to other portals to jump into this market but feel sorry for the delay.
Lee: It looks like many successful games are from similar genre. Isn’t it important to diversify the genre for successful games?
Song: We recently published a game called “Happy Idol” where the user has to manage a trainee to become a big star. We tried to come up with a unique idea. We were satisfied with our game but also worried. It’s either a big success or a big failure. (laugh) It seems to us that social gamers in Nate are matured enough to accept new type of games.
Kim: When we look at Nate AppStore these days, it seems like users are actually waiting for new games to release. An app with a good storyline receives immediate attention from the users. If the quality is guaranteed, I think the game could be at least a “medium hit” if not a big hit. In conclusion, success of a social game depends on its story. How good the story is decides whether it will be successful or not.
Lee: In that sense, social games for Nate should be differentiated from that of Facebook.
Song: Of course. For developers, it would be good if they could publish their games in Facebook and Mixi but it is not easy due to the difference in culture. Facebook is little better since there are many users worldwide like U.S., Europe, and Asia. It could be a strategy to target that niche market as well.
Lee: Let’s hear about Rubicon Games’ future plans.
Pyo: It’s been 6 months now. We are not trying to overtake Sundaytoz or Hedgehogs. It’s okay for us to be in the best five. What we are striving to do is to advertise the success stories of domestic venture startups to foreign countries. Foreign VCs are also turning their eyes from U.S. and Europe to Asian market. If we are successful, I’m sure there would be plenty of opportunities in front of us.
Lee: What is the future plan for Nate AppStore?
Kim: We recently launched a photo album API and now we are about to release NateOn buddy API. This would enable developers to utilize two categories within one game; NateOn buddy and Cyworld friends list. If developers utilize the NateOn buddy API, it will enable users to play games with friends real time. What is important for NateOn is whether the friend is connected now. Games such as chess or baduk requires real time game environment and we are trying to provide vital information for more variety of developers. I heard that Naver AppStore is planning to introduce three containers for Me2day, blog, and community clubs.
Lee: Now to conclude this round table, Hedgehogs, please give us an advice for venture startups.
Song: Hedgehogs is a venture startup from Ahn Lab. We understand that many big corporate are planning its own startup like us. If I meet them, I would advise them to be patient for three years. First year, they will encounter many drawbacks, second year, they will gain a bit of taste, and third year, they slowly start to move forward. We are now 3 years and 7 months old. Despite of all the hardships, I would like to express my gratitude to all my fellow employees for waiting with me patiently.