The Korean Fortress – What’s keeping them away from Korea?
Cyworld, the biggest SNS in Korea is often referred as the Facebook of Korea. Many social games company from Facebook such as Playfish, PopCap, Rekoo, RockYou have knocked the door on Nate AppStore but most of them are in slow progress compared to their success in Facebook or other SNS around the globe. Some of you might already be confused by the term “Cyworld” and “Nate Appstore”. To give you a brief idea, “Cyworld” is a micro-blog SNS service provided by a portal called “Nate” and Nate AppStore is the social game platform provided by Nate.
Looking at the size of the market and the number of users for each game, actually it’s a bit hasty to evaluate their success. Currently there are about 2.7 million users using Nate AppStore out of 21 million users of Cyworld. Within this small pool of market, each foreign company has accumulated the following amount of users:
**Statistics taken from Facebook and Nate on 30 July, 2010**
Just by looking at the numbers, the market size is relatively unattractive; Nate (2.7M) vs Facebook (500M). This may discourage foreign developers from publishing their successful games in Korea since their intial cost may exceed its short term profit. Moreoever, it may be easier for them to concentrate on acquiring more Facebook users than jumping into a whole new market carrying risks. In reality, RockYou didn’t even publish their most successful Facebook game “Zoo World”, which has accumulated more than 6.7 million users in Facebook. Zynga, Crowdstar, and Playdom have not yet established their based in Korea. Why is this so? There could be few reasons for this.
Firstly, localization cost. Localizing the game into Korean is not as simple as one may think. Not only it requires a good translation, but also a good understanding of the culture itself. The cultural difference can make the game look fresh, but also foreign too. We will cover the characteristics of Korean social game market and its user behavior in depth, later in other posts.
Secondly, the payment system. Using a Paypal system is not yet familiar in Korea. Koreans rather use direct credit card payment or most often times use phone bill monthly payment to purchase cyber cash. In order to purchase virtual items in social games, “Dotori” is required, which cash credit unit for Nate. Dotori can be purchased in many different methods as listed below. The problem foreign developers face is that it is hard for them to get the payment up for themselves without going through Cyworld or third party publishers.
Thirdly, the Game Rating Board (GRB). Every game published in Korea needs to get approval by the GRB, an organization that rates games before it is published. Rates are categorized into “all age usage”, “over 12”, “over 15”, and “over 19”.
The problem with the rating system is that it discourages developer’s efficiency and it prohibits many explicit contents. Recently released StarCraft 2 was originally rated as “over 15” usage but right before it was released back in April, it was hold back since GRB changed its rate to “over 19” use due to its violent graphics. After modification, it was able to release its open beta version with “over 12” rating. As such, foreign game developers have difficulties fulfilling GRB’s requirements.
Fourthly, lack of information on the Korean social game market. Currently, there are not many information about the Korean market both online and offline. At the moment, Nate does not provide any detail statistics such as user gender ratio or ARPU per game. Also there are no regular report about market analysis, thus holding back foreign developers as well as VCs from entering the market.
Last but not least, the Cyworld wall. Unlike Facebook’s wall interface, cyworld allows users to hide their walls from others. Moreover, more and more Cyworld users are hiding their blog contents from others, which discourages viral.
Another difference in platform is what each platform shows on first page. Facebook, for example, shows what other friends are up to on its first page. Cyworld, however, shows personal page first, thus relatively harder to pay attention to what other friends are up to. In the end, Cyworld needs to come up with a better solution to solve this viral problem for their Nate AppStore to quickly spread.
In conclusion, Korea is yet a market with many entrance barriers. However, the market is still in its infant stage with numbers growing steadily. As mentioned in our previous post, Nate AppStore’s revenue is quickly increasing and Naver, Daum launching their new platforms could be the bright side of the picture. Local “foreign game” publishers, which there is none notable yet, could also be a solution for foreign developers. By minimizing initial costs and taking care of localization process, local foreign game publishers could also be the next successful business model in Korea.
