Getting the message

Mobile messaging was one of the huge social network trends of 2013, riding high on a combination of explosive Facebook-like viral propagation, strong credentials as a free but more functional alternative to SMS and, increasingly, close integration with add-on services such as games.

The leading networks, such as Kakao, are now generating hundreds of millions of dollars per annum in games revenues, spawning the latest hypergrowth market and all its accompanying hype. This month I want to explore what opportunities this booming market actually present to games developers.

Mobile messaging is simply the latest evolution of instant messaging services that began life on desktops in the ‘90s. While usage fell away during the ‘00s in the West, in Asia companies such as Tencent built out the concept, adding games, music and shopping functionality. Tencent’s QQ messaging platform became a social network in itself, amassing some 800m active users.

The most commercially successful mobile messaging platforms such as WeChat, Kakao and Line appear to be striving towards a similar goal with messaging at the heart of a broad set of communication, commerce and entertainment functionality.

Although these three platforms’ userbases are predominantly Asian, all are growing outside of Asia, often exploding in popularity in specific countries once they reach a critical momentum tipping point – as has happened in Spain with Line. However, there are also numerous Western platforms that have amassed vast user bases outside of Asia.

USA-based WhatsApp and Tango boast 500m users between them, with the former now topping the free app charts in many European countries. And let’s not forget Facebook, which has 870m+ monthly mobile users, has launched a custom messaging app.

A MARKET IN WAITING

However, both Facebook’s mobile messaging app and WhatsApp have little or no support for fully integrated games, relying on the appeal of their communication service alone to drive revenues (via advertising and, less convincingly, an annual charge respectively).

The game-phobia of these two Western market leaders contrasts starkly with the sophistication of many of the other messaging services such as Tango. Platforms like Tango make use of users’ connectivity to offer synchronous and asynchronous multiplayer gaming, player challenges, leaderboards, avatar and chat customisation and gifting – all of which open the door to a range of games design and monetisation opportunities.

Competition is forcing the Asian services in particular to develop at an incredibly rapid pace as they continually seek to differentiate themselves and add new revenue opportunities. This should open the door to developers but there are challenges on these emerging platforms.

Firstly, all games on the major platforms are strictly curated and chosen by hand. This heavily controlled approach became outmoded years ago in Western mobile gaming because it stifled innovation. This may well have to change if these platforms wish to maintain any long-term international momentum in future.

Developers may also need more of an incentive than a sub-50 per cent gross revenue share to join the platform, although this is little different to dealing with a mobile publisher. And there is a cultural question about whether messaging games are as acceptable in the West as they are in Asia. The early figures from Tango and others suggest this may not be an issue.

There is a degree of déjà vu to the mobile messaging games market. It shares many similarities to Facebook gaming, a market that evolved as a later stage of the social network’s development (and despite its founder’s reputed indifference towards gaming) but became a lucrative adjunct to its core communication service. With rapidly growing take up and usage often taking place within concentrated social (demographic and geographic) groupings in the West, mobile messaging games is, in our view, also a multibillion dollar market in waiting.

Whether it achieves this potential and, more relevantly, whether this offers developers a solid commercial opportunity, are different matters. Despite the huge growth rates and the more international nature of the Asian mobile platforms, we think that opportunities will remain limited as long as the Western market leaders remain so games-phobic and closed.

It is unlikely that this status quo can last, however, and when it changes, these platforms could deliver access to hundreds of millions of users. Until then, keep your powder dry.

Nick Gibson is a director at Games Investor Consulting, which provides commercial check-ups, strategy and data to games, media and finance companies.
www.gamesinvestor.com