Chinese Internet startups head to
overseas market By Sherman So
HONG KONG - China's Internet industry, led
by the likes of Tencent, normally maintains a
domestic focus. Younger companies such as social
gaming outfit Rekoo are now changing that by
looking to overseas markets.
Tencent, the
country's largest largest Internet company, has
thrived by relying on Chinese customers for its
instant messaging service and online games. It is
bigger than eBay in terms of market
capitalization, yet outside China its services and
even its name are mostly unheard of.
By
comparison, Beijing-based Rekoo, founded as
recently as 2008, maintains 90% of its 400 staff
in China but has built up
such a following that it is
now the leading social game developer in Japan's
top social network, Mixi. It is also very popular
in Gree, a mobile social network in Japan. Rekoo's
popularity among mobile users is set to grow after
the company recently agreed to cooperate with
KDDI, Japan's third-largest mobile operator, to
setup a mobile social game platform together. At
present, the Chinese company's social games have
2-3 million visitors every day in Japan, its
revenue from the Japanese market is several
million dollars a month.
Like many of the
Chinese entrepreneurs, Rekoo founder Liu Yong
started with the domestic market, but soon found
it much easier to develop in the overseas market.
"The problem with the Chinese market is that the
social networks are game developers themselves.
There is a conflict of interest. If your games are
popular, they [the social network companies] will
not help you, and even squeeze you out," said Liu.
There are at least four popular social
networks in China - Renren, Kaixin, Tencent's QQ
and 51.com - each with its own rules. In 2008,
their platforms were not completely open for
third-party game developers. Kaixin, in
particular, depended on its self-developed games
to build its popularity and was not ready to open
its platform for other game developers. Moreover,
users did not want to pay. "Chinese game players
have been playing online games for over 10 years.
They are spoiled. They won't pay easily," said
Liu.
Rekoo's fortunes turned when it
looked outside China's borders. In March 2009, it
started to land on Facebook, the world's most
popular social network, and soon found it had hit
a gold mine. By the third quarter of 2009, Rekoo
was among the top 10 game developers on Facebook
with hits such as Sunshine Ranch and Animal
Paradise. It had 3 million daily visitors on the
network and was earning revenue of US$1 million
per month. At the same time, it had 10 million
visitors per day in China, but only 1 million yuan
(US$150,000) in revenue per month.
Rekoo
entered Japan in August 2009. "In June 2006,
Japanese social network Mixi got listed. We know
each other and I thought it was a good
opportunity. Our games work in Facebook, and they
should work in Mixi," said Liu. Sunshine Ranch and
Animal Paradise were launched, then Sunshine Deep
Sea became very popular.
Liu found out the
Japanese market is as big as the US and not only
were people as willing to pay but there was much
less competition. In third quarter of 2009, Liu
decided to focus on the Japan market.
"We
are a small company. We could not spread our
resources over too many places," said Liu, "It is
easier for us to understand the Japanese culture.
Many of us grew up reading Japanese comic books
and we know their culture and aesthetic standards.
For the US market, most of the time, we can only
guess what they like," said Liu. Strong rivals in
the US, such as Zynga, also made Japan appear more
attractive to Rekoo.
In one indication of
Liu's determination to succeed in his target
country, he started to learn Japanese. Rekoo built
up its local presence in Japan to where it now has
a 30-person office there - most of the staff being
game designers and producers, or involved in
customer service, marketing and business
development.
Even smaller Chinese startups
are having success overseas. Beijing-based
Happylatte developed a shooting game called High
Noon with only 15 people over a nine- to 10-month
period. The iPhone game created quite a fuss in
markets such as Singapore and Hong Kong and has
picked up fans in Britain, France and elsewhere.
So far, it has 2.4 million downloads and about
100,000 people play the game every day.
"Every now and then, we see our traffic
shoot up in a particular market, said Happylatte
founder Bjorn Stabell. "We don't know the reason.
Our guess is a core group of players pick it up
and soon it spreads in a particular country. The
game is quite contagious."
Papaya Mobile,
founded in Beijing by former Google executive Shen
Si, is also focusing overseas. Before leaving the
Internet search company, she was responsible for
Google China's development for mobile
technologies. When the iPhone became very popular
from 2008, the new platform attracted Shen's
attention and she believed it was time to form her
own company. Its aim was to develop social games
for mobile phones, and iPhones seemed the perfect
platform.
Papaya Mobile, with about 40
employees, has in the last two to three years
built more than 10 social games for the iPhone and
attracted more than 10 million registered users
for its games. Most are from the US, Western
Europe, Canada and Australia. On average, its
paying users spend about $30 per month.
"In 2008, the most ready mobile platform
for game developers was the iPhone, so most of our
users are from overseas," said Shen. IPhones did
not become officially available in China until
2010.
Still, in spite of success overseas,
most of these entrepreneurs have not forgotten the
China market, which has the largest number of
Internet users. Both Shen and Liu plan to expand
their Chinese business.
"Android phones
will be growing fast in China," said Shen,
referring to the Google-developed mobile-phone
operating system. "We have developed Android
versions of our games for the China market, and we
have also established a mobile social game
platform, and opened it for third-party
developers. So far, it has over 200 third-party
games."
Last year, social networks in
China became more cooperative with third-party
developers, and Liu's Rekoo formed a close
partnership with Tencent. With the promise of
cooperation from Tencent, Liu expected its Chinese
users to surge rapidly, from the current level of
5 million visitors per day to tens of millions per
day. And he expected revenue in China to grow from
current level of 1 million yuan a month, to US$1-2
million a month by year-end.
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