The Rise of Japan’s GREE

According to Superdata Research, the global mobile gaming market is expected to generate revenues of $21.1 billion this year. It is projected to grow to $28.2 billion by the year 2016. The research study also says that mobile games account for more than a third of monthly spending among digital gamers in the US alone.

GREE International’s Offerings
Japan-based GREE Inc was founded in 2004 by current CEO Yoshikazu Tanaka who wanted to use the Internet to develop a new community that would transform the way people communicate. Soon enough, GREE was founded as a mobile-focused social networking service. They were a pioneer in Japan for invitation-based social networking service. GREE also realized the importance of monetization and began hosting mobile advertisements. By 2007, GREE had launched their first mobile social game Tsuri-Sta. The positive reviews for the game from the market led to other revenue sources including sale of virtual goods. GREE also opened their platform to third party game developers and app publishers. Within a few years, GREE expanded their gaming presence internationally with new title releases focused on the global market.

They expanded their operations through several gaming-focused acquisitions. In 2011, they acquired mobile social gaming platform OpenFeint for $104 million. OpenFeint provided a plug-and-play mobile social platform for smartphones that helped deliver services such as leaderboards, virtual currencies, and achievements. They strengthened their portfolio with a $210 million acquisition of another mobile social game developer Funzio. Funzio was known for developing games like Crime City, Modern War, and Kingdom Age.

Earlier this month, GREE also entered into an agreement with KDDI Corporation, Japan’s second largest mobile operator. As part of the deal, GREE and KDDI will work together to publish mobile games in Japan by targeting app markets including KDDI’s au SmartPass, Google Play, and the App Store. KDDI will also invest in the development costs of some new games and promote the release of new titles on their 11 million strong subscriber base.

GREE’s Financials
Today GREE is a leading provider of gaming solutions for Japan’s mobile social network. They offer more than 7,500 game applications for smartphones to over 190 million players worldwide. For the recently ended quarter, GREE saw net sales fall 4% over the year to ¥25.4 billion (~$0.22 billion). They ended the quarter with an operating income of ¥6.4 billion (~$0.06 billion). They expect to end the current quarter with revenues of ¥23.6 billion (~$0.2 billion) with an operating income of ¥4.1 billion (~$0.03 billion).

GREE trades on the Tokyo Stock Exchange and is currently trading at ¥819 (~$7.05) with a market capitalization of ¥195.7 billion (~$1.68 billion). It touched a 52-week high of ¥1,365 (~$11.74) in December last year.

Like all mobile gaming companies, GREE is also facing the challenge of maintaining interest in their gaming titles. New titles have been released, but have not attracted as many users as estimated. The waning interest has led them to re-evaluating game titles and shutting down development and operations of titles that are not delivering.