Google taps app market in effort to close Apple gap
Though Google Inc.'s Android is the most popular smartphone software, the company lags behind Apple Inc. in generating revenue from mobile applications. Now Google is turning to a white cat and a gang of monsters to catch up.
Google, which sells games and other media through its Play online store, is boosting support for developers in Japan to take more of their apps overseas. Companies such as Colopl Inc. and Square Enix Holdings Co. have successful products in their home country and have the opportunity to do even better abroad, said Chris Yerga, Asia head of Google's online store.
Google, which takes a 30 percent cut of sales through Play, is offering translation support in Japan, providing more analytics and expanding its own staff to help market content abroad. Colopl, which makes Shiro Neko (or White Cat) Project, and Mixi Inc., developer of Monster Strike, helped turn Japan into the biggest app market in the world in terms of revenue, despite having far fewer mobile users than the U.S. or China.
"Japan has always created great content," Yerga said in an interview. "For the longest time it was only available on certain consoles. Now, with a platform like Android, we want to open that content to a billion people."
Revenue Lags
Google is also expanding its teams in Seoul to better help developers in South Korea.
Google's Android has become the dominant mobile operating system, in part because it's available free to phone makers such as Samsung Electronics Co. and Sony Corp. The software was used on 78.6 percent of smartphones shipped in 2013, according to data compiled by Bloomberg Intelligence based on research done by IDC, compared with about 15 percent for Apple's iOS.
Still, Google trails Apple in mobile revenue. Though neither company discloses precise figures, the numbers can be estimated from the amount they pay out to developers, who typically get 70 percent of total revenue. Google Play paid developers more than $5 billion in the year ended June, Google said during an earnings call July 17. Apple paid almost $10 billion to developers who sold apps through its online store in the past year, Chief Financial Officer Luca Maestri said in July.
Japan could help trim the lead because developers there have figured out how to get people to pay for games as well as extras, like additional clothes or weapons for digital characters. Japan is the biggest app market and Tokyo-based GungHo Online Entertainment Inc. generated the most revenue last year, according to App Annie.
Gap Closing
"Google Play may be able to narrow the gap with Apple's App Store by focusing on Japanese game makers," said Hiroshi Naya, an analyst at Ichiyoshi Research Institute Inc. in Tokyo.
Square Enix, maker of games including Dragon Quest VIII, rose the most in a week in Tokyo trading, closing 1.8 percent higher at 2,340 yen. The game rose to No. 1 for paid applications in Japan on Apple's App Store today, according to researcher App Annie Ltd.
Colopl fell 3.7 percent as the Shiro Neko game was ranked 12th in the Apple store, according to App Annie.
GungHo, started by Taizo Son, the younger brother of SoftBank Corp. Chairman Masayoshi Son, built Puzzle & Dragons into a huge hit in Japan by offering the title for free and charging users for in-game purchases like magic stones that extend life. The game has been downloaded more than 30 million times there, which works out to almost a quarter of the country's population.
China Wall
GungHo has expanded overseas, offering the game in 20 new countries in July to bring the total to 33 nations and regions. Still, its success so far is well short of that in Japan. In the U.S. and Canada, for example, Puzzle & Dragons has been downloaded 4 million times.
To avoid the fate of other mobile game developers who stumbled after one big hit, GungHo is seeking to build the prize title into a broad brand similar to Angry Birds as it releases new games and seeks overseas deals, Chief Executive Officer Kazuki Morishita said in June.
Google's prospects in China are limited, though. While Android is the leading operating system for smartphones in the country, too, the Play store isn't available there. That means apps are typically sold through wireless operators and third- party stores, and Google doesn't get its usual 30 percent cut. Apple has a China-specific online shop that features apps for its iOS system.
Gaming Tradition
Yerga declined to comment on any specific Play plans related to the China market or the potential for partnerships with Chinese technology companies such as Tencent Holdings Ltd., Alibaba Group Holding Ltd. or Baidu Inc.
"I agree that it's a huge market, but beyond that I can't really comment," Yerga said.
Japan, which last year overtook the U.S. as the biggest app market, generated over 80 percent of its revenue from mobile games this year through August, according to App Annie. Besides GungHo, the top 10 ranking app companies last quarter included Japanese companies Line Corp. and Colopl as well as South Korea's Gamevil Inc.
There are about 500 mobile game developers in Japan, in addition to individuals and small hobby groups, and their biggest challenge is acquiring new users globally, according to Serkan Toto, the Tokyo-based founder of consultant Kantan Games Inc.
"It's common knowledge among game developers that Google Play users in general are not generating as much money for in- app purchases and for paid apps when compared to iOS," said Toto. "The gap has been famously closing over the last few years but there is still a gap."
Among the services Google is providing in Japan are face- to-face meetings with developers, while the company has set up programs to develop entrepreneurs in South Korea.
"Japan has a great, rich tradition of gaming," said Yerga, as he showed off a limited edition Space Invaders wristwatch, based on the arcade game developed in the 1970s in Japan. "For developers who don't have a lot of experience with selling globally, they might not even know where to get started."