Monetization of Social Network Games in Japan and the West

Abstract: Social Network Games (SNGs) first appeared in Asia in the latter half of the 00s, and soon became a widespread phenomenon all over the world. In the West, US developer Zynga quickly rose to fame with their hit title FarmVille, and now enjoys a nearly monopolistic position among games on Facebook. In Japan as well, the SNG industry has grown at an exceptional pace since its birth and is predicted to keep growing. Most SNGs use a business model called free-to-play, which allows the player to play the game for free unless the player chooses to pay for some virtual item available in the game. This makes it important for games to monetize their users by providing players with incentives to pay a small fee to enhance their experience. It has long been known that SNGs in Japan are more profitable than Western ones when it comes to revenue per user. The accepted explanation for this has been that special characteristics of the Japanese market make it easier to monetize users on the Japanese market, as they are more willing to pay for games. However, as the Japanese SNG market is becoming saturated, several developers are going global, and 2012 saw a storm of Japanese SNGs being released in the US and other Western markets. Far from all of these games were successful, but some of them are performing very well. In particular, the card battle role playing game (RPG) Rage of Bahamut quickly reached the top position of highest grossing apps on both the iPhone App Store and the Android Google Play Store in the US. Moreover, the game’s publisher reports average revenue per daily active user (ARPDAU) which is twenty times higher than the US market average. Several other Japanese developers with titles released on the US market are reporting similar numbers, which has led to speculation that perhaps the success of Japanese SNGs is not only due to market differences. The purpose of this thesis is to further understand if and how Japanese SNGs monetize better than Western games. The study seeks answers to the following research questions: 1. How do the game mechanics differ between Japanese and Western SNGs? 2. What game mechanics affect how much a player is willing to pay? In order to do test this, twelve SNGs, six Japanese and six Western, are tested and analyzed using an analysis model. The analysis model is based on research on game design as well as on gamification; a field which is closely related to SNGs. Using the analysis model, game characteristics which could affect monetization are identified. In addition to the comparative game study, a market analysis is performed for both markets, in attempt to find information about the markets which cannot be easily obtained only by testing the games hands-on. The study found that Japanese and Western SNGs differ in several ways. For each market, five unique characteristics are identified and explained. Whether the five characteristics found for Japanese SNGs are directly related to the games’ monetization or not is difficult to tell without access to the games’ KPIs. However, information gained in the market analysis suggests that some of the identified characteristics are indeed what makes Japanese SNGs monetize better.