10 Feb 12Bernard Moon
Bernard Moon is co-founder and CEO of Vidquik, a new web conferencing and sales solutions platform. A serial technology entrepreneur who co-founded 4 startups and raised over USD50m, previously, he was at iRG, a boutique investment bank in Hong Kong, where some of the largest online gaming companies, such as Nexon and NHN/Hangame were his clients. He serves as a mentor to Mucker Lab, a startup accelerator in LA, and advises a few other startups.
Recently, Cowan and Company reported that Zynga’s latest release, Hidden Chronicles, reached only 710,000 daily active users (DAU) after 12 days compared with the 5m DAU reached by their two prior releases, Castleville and Empire and Allies, during the same period. This signals a few trends and questions that I’ve been recently discussing with people in the gaming industry:
¤ Has Zynga’s casual gaming user base reached its plateau?
¤ Is 'mid-core' (the midpoint between casual and hardcore) gaming the next stage of social gaming?
¤ Can Zynga diversify its portfolio and succeed in mid-core gaming?
Zynga’s DAU decreased by 6% during Q4 2011, reflecting its year-to-year decline since 2010. It seems the company has already saturated the online casual gaming market. The question for shareholders and competitors might be whether Zynga can make the transition into mid-core games?
Mid-core games are more engaging and competitive, unlike Farmville-type games which I consider 'lazy interactivity' or 'click for coins'. Also mid-core games require more creativity in the game development process and difficult to incorporate 'click for coin' behaviour. It’s interesting to note that Hidden Chronicles is a mid-core game and can cast doubt upon Zynga’s transition into a more highly competitive and hit-driven segment of the gaming market. Also this segment is occupied by more established gaming companies in Asia.
If you’re living in the US, it’s easy to forget that Asia has anywhere from 60% to 80% of the global online gaming market, and the majority of the games are either mid-core or hardcore (ie first-person shooters, MMO, role-playing).So, if Zynga has reached a plateau with its current user base and wants to make a stronger international push, especially to Asian markets, does it have the capability to do so?
One comparable to look at is South Korea’s Nexon. While Nexon’s growth hasn’t been as explosive (founded in 1994 and launched the first online game in 1996) as Zynga’s growth, the performance metrics and financials are much stronger. In 2010, Nexon’s 77 monthly active users generated USD903m in revenues.For Zynga, in 2010, Zynga’s 232 monthly active users generated USD597m in revenues. Also Nexon’s users per game had longer engagement periods of up to six times Zynga’s, a larger percentage of paid users, and revenues per user. A major driver of these differences is the fact that Nexon’s game portfolio is primarily mid-core.
So, it’s almost backwards or myopic to state that the future of social gaming is mid-core games since it’s been around for years before Zynga’s rapid rise, but it seems this is where the growth of online gaming will be even in the US.The question for the US. market is how many of those casual online gamers will transition to mid-core games and how many hardcore gamers, who are attached to their gaming consoles, will transition or diversify their game play to a browser-based environment?
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