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Saturday, February 27, 2010

2010 iGaming Asia Congress Summary

I had the opportunity to attend, speak (Online Game Ecosystem) and chair a session at the iGaming conference in Macau this year. I attended the Asian conference to get a better understanding of how Asian iGaming compared with online gaming activity in North America and Europe. The attendance at the Asian conference was a great follow-on to my attendance and review of the ICE conference in London in January.

Anyone that has followed my blog over the past year knows that I believe the Asian gaming community is the primary innovation engine for new game development and virtual currency/goods transactions. Much of what is being implemented in the US today has already been done in Asia and yet to be implemented in Europe. With this bias in mind I dove into the Asian conference looking for confirmation of this trend. I came away with a much deeper understanding of Asia's gaming market and the underlying reasons for its character and direction.

Asian Game Market Diversity - The Asian gaming community is not homogeneous. Asia requires a number of marketing plans and strategies depending on country, region and target audience. The cultural, geographical, historical, legal, political, linguistic, network backbone and economic diversity of the region require developers and marketing managers to take each country/region individually and craft an appropriate strategy. China. Korea, Japan, Philippines, Malaysia, etc. all require special attention.

Online Game Popularity - The numbers and growth of online gamers in Asia dwarfs anything that is happening elsewhere in the world. It is the place to launch and monetize games if a company understands what a particular market likes and can support. For example, the proliferation of high bandwidth land and mobile networks in Korea and Japan is yielding high numbers of mobile gamers playing graphically sophisticated social networking games. In China mobile and land based broadband networks are just starting to emerge making it difficult to offer bandwidth hungry gaming applications. Consequently, China's growth is being fueled by light weight games that are primarily focused on the desktop or laptop platforms. even with this lack of high bandwidth access the Chinese online gaming market is resulting in very high player volumes.

Gaming Law And Regulation- In many Asian countries online gambling is outlawed. However, that does not mean that the laws are enforced. For instance, in Malaysia online gambling is illegal. However, if an operator pays the authorities the proper stipend then the operator is allowed to do business. This may seem questionable from a westerner's perspective but it is the way business is conducted in many parts Asia. A business is expected to engage in this kind of activity and it is not considered shady.

In China it is illegal to gamble online. However, many Chinese regularly gamble online. It is all about the matter of degree relative to other issues the Chinese government is dealing with.

Virtual currency trading is big business in China. China specifically prohibits the exchange of virtual currency for conventional currency. Despite this law virtual currency trading persists as long as it does not reach a certain level attracting the attention of the Chinese government. The danger for an online gaming operator is that at anytime the Chinese government may crack down on these practices. Chinese business owners are very familiar with this cycle. When the crackdown occurs they cease operation for awhile and then reappear with a slightly modified business model.

In the Philippines online gambling is legal. However, due to the low Internet adoption rates in the Philippines the online gamer numbers are relatively small. So the Philippine gaming operators have decided to target Chinese gamblers. They are doing very well with this focus.

The Games - Online Asian game developers produce a wide diversity of games. They range from sophisticated 3D virtual worlds on mobile phones in Korea and Japan to very basics casual games in China. The games in Korea and Japan are particularity interesting because of their simplicity and technical sophistication. These markets are using the latest Flash mobile front ends allowing developers to create really good looking games.

The primary gambling games that Asians play are different relative to what is played in the US or Europe. Asians are table game focused and not slot or machine game oriented. Within the table game category the Chinese are partial to just a couple of games. Baccarat and Sic Bo rule in the Chinese community.

Online Poker In China - I overheard an interesting comment by someone at the conference. The individual indicated that Texas Holdem is perfectly suited for the Chinese audience. He indicated that the types of games played by the Chinese contain dynamics also found in Poker. The social aspect in particular was mentioned as well as the simplicity of the game. This obviously means that there is a great opportunity for launching a successful online poker operation in China if the game includes subtle changes that address the language(localization) and particular Chinese interaction preferences.

Social Networks - Asian game developers and operators are integrating with social networks and in some cases creating their own social gaming networks. Asians are not using the popular and common social networking names found in Europe or North America. Facebook, Bebo, Hi5, etc. do have a big following in Asia. Remember Friendster that so called first and failed social network. They are alive and well in the Philippines and Malaysian. Asian have many of their own social networks (QQ) that are unknown outside of Asia. The close integration of gaming and social networks is creating the large concurrent player numbers we are witnessing in Asia.

Social Media - Using social networks as business promotion and communication mediums is still not fully developed in Asia. This is in stark contrast to the US were businesses understand how important it is to use a coordinated social media approach to attract and retain consumers and customers. I am not exactly sure why this is the case. However, I suspect eventually Asia will catch on.

Demographics - Online game players are young in Asia. This is due to the fact that access to the Internet is relatively recent skewing Internet traffic to the younger side. This has a big impact on the type of games, amount of time spent playing games and the growth potential for gamers in Asia.

Advertising - Generating revenue from online advertising is underdeveloped in Asia. It is not a significant source of revenue for online game properties. This is the result of the domination of online advertising by big brands. Consequently the inventory of advertisements is low compared to North America and Europe. It is also a reason for the emphasis on monetizing games with virtual currency and virtual goods.

Virtual Currency/Goods - Micro-transaction monetization of games from virtual currency sales and good purchases is the primary revenue driver for online games in Asia. Asia leads the world in this regard requiring traditional gambling sites to evaluate their methods of monetization in Asia. In Asia a combination of micro and macro transactions combined with gambling or macro-transactions may be imperative to lure players up the ladder from the predominant monetization environment.

Macau's Land Based Casinos - Although the conference was an iGaming conference I could not help from taking part in the Macau gambling scene. I have spent plenty of time in Vegas playing games and working with casino operators. I had to see what Macau had to offer.

First of all, Macau is magnificent from a building and development perspective. It exceeds Vegas in terms of money being spent gambling. The casinos are big, even bigger than Vegas in some cases. They are also well run. The gaming floor composition is noticeably different than Vegas. There are very few slot machines and many Baccarat and Sic Bo (dice game) tables. There were a few roulette and crapes tables but I did not see a single blackjack table.

The attendance at the casinos was interesting. Some of the casinos were sparsely populated and others were very crowded. The Venetian was particularly jammed. This is saying something because the gaming floor is the size of several football fields. I asked the locals why the difference in attendance? Was it the odds, the accommodations, the service, etc.? The simple answer everyone gave me was marketing. The Venetian was doing a better job at contracting junket operators and giving out handouts on the ferries running from Hong Kong and other places to Macau. Macau is a big day gambler venue due to the close proximity of Macau to big population centers such as Hong Kong (7 million people). Hong Kong is an hour ferry ride away from Macau.

Conclusion - Asia is a diverse region with a growing population of gamers being driven to online games as the Internet becomes more accessible. Asians have a culture of gaming and gambling naturally leading them to participate in this activity online. Virtual currency and virtual goods gaming related revenue is a major driver for high cash flow generation in casual social games. The appetite for online games is growing creating a demand for new online games and the conversion of traditional games to the online environment. This trend is an opportunity for existing and new game operators to grow their Asian businesses potentially rivaling gaming operations in North America and Europe.

For more details on the Asian gaming market or help in setting up gaming operations in Asia please contact me at kflood@gameinlane.com.


Yoad M Dvir said...

Interesting indeed. Anymore insights about online Poker in China from the conference?

Kevin Flood said...

I believe that launching a Chinese localized poker platform is an obvious winner and great business opportunity. It was mentioned at the conference and I am sure that the traditional poker operators are considering this. TO my knowledge no company has actually done so yet. However, I am not aware of all of the activity in China given the legal ans censorship challenges that online gaming companies face.