As The9 sees its mobile business grow, competition heats up

The9’s Chinese social-mobile gaming platform The9 Game Zone now has 685 titles from 500 developers in its roster, and will offer players more than 1000 games by the end of the year.

Originally a PC gaming company that licensed and ran massively multiplayer online games in China, the company established its mobile business in 2010 after losing the highly lucrative World of Warcraft license. The company set up The9 Game Zone in April 2011, licensing OpenFeint to power the platform. Still in what vice president Chris Shen calls “a very strategic phase,” most of the Shanghai-based company’s revenue — $16.9 million in 2011 for a net loss of $45.2 million for the year — still comes from PC gaming.

The mobile side of the business is growing, however.

According to Shen, The9’s mobile division now employs 15 percent of the company’s 1000 person-strong workforce, and is built around three key strategies.

First is the The9 Game Zone itself as a mobile-social network and marketing tool for the company’s roster of games. Shen did not reveal the network’s total user numbers, but did say it has doubled its userbase every two months since it was launched. Next there is  桔子 (Juzi) or in English, Orange, which is the platform’s in-game advertising service. Described by Shen as similar to Tapjoy, it serves both traditional ads and incentivized installs.

Finally, and most importantly, are the games themselves. Acting as part developer, part publisher and part service business, The9 develops its own games for the platform and provides what Shen calls a one-stop solution for Western developers looking to enter into the Chinese market. Of the 685 games The9 Game Zone offers, half are from western developers.

“We do the localization, repackage the games, integrate the required SDKs, promote and market them. We work with developers case by case on how they can monetize in China and distribute them to more than 50 app stores,” he says.

The9 typically splits revenues with developers 50/50, but each deal depends on the specific negotiations with the developer, and how many of the company’s services are used. The more work The9 does to bring the title to market, the higher its share of the revenue.

Although there are now more than 1 billion mobile phones in China, determining how to monetize a game in a highly fractured market where users don’t have a history of paying for mobile content is by far the hardest part of entering the Chinese market, according to Shen.

“It’s a market with a lot of potential, but its also very risky. There are a lot of issues – many app stores, piracy, figuring out how to monetize a game,” he explains. “For Western developers, its important to have a partner like The9 to help provide these solutions.”

However, The9 isn’t the only company seeing the benefits of China’s booming mobile gaming market. Competition comes from homegrown competitors like Tencent and PapayaMobile, and from offshore competitors like DeNA, which has been busy in China. In the past four months, DeNA has announced deals with Huawei, Baidu, NetDragon, Kaixin001 and Weibo to promote its Mobage platform. However, according to Shen, the interest in the Chinese mobile-social gaming market is actually a good thing — for now.

“I think the ecosystem in China is still in a situation where we all need to work together to grow the market — to make sure there’s good content, payment solutions, ways to fight piracy, to monetize and to work with government regulations,” he explains. “We need to work together to do that now. In the future there will be competition.”

Publish date: March 23, 2012 © 2020 Adweek, LLC. - All Rights Reserved and NOT FOR REPRINT