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The Ultimate Question of Life…

Feb 27, 2012 | By:

Ever since learning the answer to the “Ultimate Question of Life, The Universe and everything” from “Hitchhiker’s Guide to the Galaxy”, I’ve embarked on a quest to find the answer to the next “Ultimate Question”; This question has torn me from the mind-numbing, but relatively well paid comforts of old-world tech consulting, and launched me into the wild wild east of the Smartphone gaming industry in China; A question that is on the minds of every western games developer and one that I have temporarily devoted my life to answering… “How to monetize Smartphone games in China”

As the first step upon the road to finding the answer, I decided to tackle the problem through a process of elimination. Before I could take a shot at answering the ultimate question, I needed to first discredit a number of hypotheses that would prevent me from getting to the answer.

A commonly voiced hypothesis that I’ve repeatedly come across in this industry is that “People don’t pay for games in China”. From the musty halls of GDC Shanghai, to the hip suburban game studios of San Francisco, I hear stories of monetization challenges for games developers vying to get a piece of the China action. Why then are so many companies still so keen to get into China?

On the surface, the answer this question seems simple, China is already the biggest market in the world by Smartphone shipments and is still set to grow at triple digit % rates (<link to data points here>), but the real answers I suspected, lay deeper than the assumption that 500m downloads = a $1.2 billion valuation.

As I set out to find more answers, a snappy Google search brought me to this article quoting a couple of interesting statistics from the Chinese General Administration of Press and Publication (one of a number of entities governing the China gaming industry). “China’s online gaming market topped US$6.79b in 2011, a 32.4% YoY increase”. At the same time, the mobile gaming market in China grew 86.8% YoY to reach 1.7b yuan (US$302m) in 2011.

Always one to be distrustful of official statistics, I then set out to gather some empirical data from my “trusted” industry sources (trusted = shared at least one beer with). Reaching out to an associate working at “China Mobile Game Base”, the official mobile game distribution arm of China’s largest mobile carrier, I learned that their revenue from mobile games reached 2.2b yuan in 2011 (US$350m) and projections for 2012 were expected at 3.4b yuan (US$540m).

After ignoring the big “?” I had on how China Mobile Game Base managed to generate revenues bigger than the total mobile game market and making the assumption that a big chunk of their revenue was from non-game related MVAS (Mobile Value Added Services), I got the warm bubbly feeling inside that I had gotten one step closer to my goal. If Chinese people DO pay for games, then my quest for the ultimate answer will not be in vain.

Stay tuned for future random raving as I continue to peel away the answers to the “Ultimate Question”.

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