The biggest mobile game market may still be the US, but the real Wild West of gaming continues to be China.  The Chinese games market is diverse, chaotic, and evolving in ways that no one would have predicted even a year ago.

Yet the most interesting trend is this: East and West are converging into a single, global games market resembling more than Chinese than US model; and it’s exemplified by Yodo1’s announcement to expand from Chinese localization services to global game publishing.

But more on that in a moment.

Based on the excellent panel moderated by Kim-Mai Cutler of Techcrunch at Casual Connect: San Francisco last week, “Mobile Gaming in China: Challenges and Opportunities” (see list of panelist at bottom of this article*), the Chinese games market continues to grow like crazy.  

There are over 400 million activated smart phones in China already, and 15 million new activations happening every month.  Unlike last year, you can actually make money in China now.  But, the market has evolved in ways completely than different than in the West.

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Image via Yodo1

For one, Apple and its dominant iOS platform was not mentioned once on the panel.  I wrote about the fact that Android is crushing iOS last year when I visited China and met with awesome folks at CocoaChina, but in my book, it’s officially over for Apple in China.  By focusing on the tier-one cities (e.g., Shanghai) and the wealthiest 1% of the population, Apple has ceded the remaining 99% to Android.

And yet, the victory is Pyrrhic for Google.  By taking a stand against the man in China (the government), Google has opened the door for hundreds of Android App Stores which use its operating system, but don’t pay Google a single yuan.

Just as interesting, it is the poor and not the rich who are paying for items in games.  Owners of high-end phones are less willing to pay for items in games than players with less disposable income who own low-spec phones.  

One panelist speculated that poorer people are less educated and don’t realize that they can play and earn items for free.  Another more politically correct explanation is that the wealthy spend their money on real items (like Ferraris) instead of virtual items in games. Nonetheless, the most lucrative market in China is centered around low-end, tier-two and three cities with lower-spec Android handsets and higher bandwidth constraints.

Other interesting tidbits from the panel:

  • The most popular games in China now are the old Western mainstays, like Temple Run and Fruit Ninja. But this situation is changing fast. A new wave of Korean and Japanese games are entering the market, marrying Western game quality with a true appreciation of Asian culture.  Western game companies who are not in the market within the next year may find themselves crowded out of the market forever.

Ski Safari makes the jump from West to East

  • It’s not just enough to localize games into Chinese language. Game developers need to culturalize the games.  A perfect case study is how Yodo1 published a Chinese version of Ski Safari that swapped out the Yeti character for a panda and changed the music to incorporate a popular fairy tale tune that all Chinese players know and love.  The result was 25 million downloads within 6 months.  
  • Piracy is still rampant in China but smart operators are actually embracing it to make money.  A common practice is the “pirate update trick,” where Chinese game companies track the most popular pirated game apps, sign a deal with the legitimate owners, and localize it.  When they update the app, they automatically convert the millions of pirated versions into their legitimate versions. Another panelist shared the story of an 18-year old kid who wrote and admitted that he pirated the game, but now that he has a job and earns money, he wants to pay.  Whereby Western game companies tend to view pirated games as theft of IP, Asian game companies seem to have more empathy for their players that don’t pay.
  • A big difference between the F2P models in China and the US is that in the China, people are very willing to pay for an advantage in gameplay.  In the US, there is no glory in paying for an item that gives you an advantage.  

This may be changing in a big way.  I met with Henry Fong (Founder/CEO) Jung Shu (VP, Global Publishing) of Yodo1 the next day.  According to Henry, traditional core gamers in the US are loath to pay for items in games and will call each other out for such behavior.  Casual gamers, who are often playing their very first game ever on their mobile phone (e.g., all your friends bugging you with Candy Crush updates and invites), don’t have this hang up.  

As casual gamers take over the US gaming market, their behaviors more closely resemble Chinese gamers than their native core gaming counterparts.  The US and Chinese game market become one and the same.

Cavemania will be Yodo1’s first publishing effort

This is one reason why Yodo1 announced that they are becoming a publisher. There first game is BonusXP’s Cavemania (as previewed by Gamezebo here).

As paraphrased loosely from the Cracker song Teen Angst, “what the world needs now, is another game publisher, like I need a hole in my head.” But Yodo1 could be offering something completely different. While a typical publisher provides marketing services (and claims to provide F2P monetization expertise), Yodo1 plans to work with the source code and offer a games as a service partnership.  

With F2P games, a lot of the monetization occurs with constant updates every 1-2 months. This is cost prohibitive for most game companies.  Yodo1 has an office of 100+ developers in China who help out with this constant updating, as well as localize the game for the Chinese market (its bread and butter).

As the mobile games market becomes more flat, Yodo1’s global and vertically integrated approach may represent the future of mobile game publishing.

 

*Panelists included Jeff Lyndon (idreamsky), Henry Fong (Yodo1), Fernando Pizarro (Papaya Mobile), Linda Jyiang (UMENG), and Janis Zech (Sponsorpay).