As Gree Moves Aggressively Into the U.S., It Breaks Out Its Revenue Here

For the first time since entering the U.S. more than a year ago, Japan’s second-largest mobile game network is disclosing how it is performing here.

Gree plans to announce today that U.S. revenue totaled $16.9 million in the second quarter, due in large part to the May acquisition of Funzio, a San Francisco mobile game developer.

On a worldwide basis, the revenue represents only a drop in the bucket.

On Tuesday, the company reported a global profit of $500 million on revenue of $2 billion for its fiscal year, ended June 30.

However, the company did not disclose its bottom line in the U.S., and no doubt its losses are significant.

Over the past year, Gree has expanded aggressively here, purchasing two U.S. companies for a total of $300 million. It also has been spending millions more on other moves to catch attention. For example, at E3 this spring, it hosted one of the biggest booths on the show floor, and threw a glitzy party that became one of the most coveted tickets at the event.

In an interview yesterday, Naoki Aoyagi, Gree International’s CEO, said that entering a competitive market like the U.S. takes a strong commitment.

“A year ago, we decided to make a huge bet. Many companies from Asia just set up an office in California and had a few people,” he said. “But it’s very difficult to compete with local players, so we believe that we need a strong team here. We really believe there’s a huge opportunity and we are doing the right thing.”

Indeed, the company does have a strong team — one might call it a small army.

It has around 400 employees today in San Francisco, and is on track to hit 500 by the end of the year. It has also been spending heavily on advertising its games, including multimillion dollar ad buys, according to several industry sources.

Aoyagi admits that the buys were unconventional, but says they were justified.

“When we were first launching games, we needed to evaluate the performance [of the various ad networks], so we bought all the inventory we could buy, which is much more than the usual marketing campaign,” he said. “We learned a lot, and now we understand the performance of each channel, and now we can optimize the marketing spend.”

There are indications that some of the investments have started to pay off.

So far, Gree has signed up multiple publishers to be a part of its mobile games network when it launches sometime later this year. The games are routinely listed among Apple’s 25 top-grossing applications.

When its platform does launch, Gree’s goal is basically to become the social network for games on mobile, like Facebook has done on the PC for social games. It will connect the players, and then charge developers a portion of their revenue for having access to the network.

Aoyagi said the company is forecasting worldwide revenue to hit $2.5 billion in its fiscal 2013 ending June 30. Of that, he said, they expect about 10 percent — roughly $250 million — to come from outside Japan. While some of that revenue could come from multiple countries, it suggests a very rapid growth rate in the U.S. that far exceeds what the company is seeing today.

In the U.S., revenue increased 38 percent in the second quarter, compared to the prior quarter (which is essentially up from zero a year ago).

Does Aoyagi believe the U.S. has the potential to generate the same kind of revenue figures in the U.S. as it sees in Japan?

He thinks so, based on how the games are performing over the past few months. He said Funzio’s titles are already generating 23 perent more revenue under its leadership, and that two of its titles are grossing $1 in average revenue per daily active user — at the game’s peak performance.

“That is pretty good compared to the U.S. industry average,” he said, which he estimates is around 25 cents per daily active user. “With high-end content and with Japanese monetization models, then we can achieve that.”


Latest Video

View all videos »

Search »

I think the NSA has a job to do and we need the NSA. But as (physicist) Robert Oppenheimer said, “When you see something that is technically sweet, you go ahead and do it and argue about what to do about it only after you’ve had your technical success. That is the way it was with the atomic bomb.”

— Phil Zimmerman, PGP inventor and Silent Circle co-founder, in an interview with Om Malik