Mobile Game Profit Model in China

With the rapid development and widespread adoption of 3G networks in China, many internet-based applications have transitioned to mobile platforms. Among these, mobile games and social networking sites have emerged as the hottest commodities in the mobile internet market.

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Market Landscape

According to foreign reports, companies like Funzio from the U.S., known for mobile games such as Crime City, have recently earned $50 million USD from Android applications. Similarly, other social mobile games from companies like Zynga, GREE, DENA, and Kabam have also reported substantial profits. These successes have spurred companies to expand aggressively, capturing new players in what is becoming a highly competitive mobile game market.

Profitability Challenges

Despite the explosive growth of mobile games, profitability remains a significant concern for publishers. Data from iiMedia Research indicates that by the end of November last year, mobile app publishers in China grossed approximately 1 billion RMB, but actual profits only accounted for 13.7%. The majority of profits were derived from in-app advertising (with Tencent being a prominent example) or from smaller publishers, while losses accounted for 64.5%, averaging around 20.8%.

Revenue Models

Currently, the primary revenue models for social mobile games in China include upfront downloads, in-app purchases (IAP), and in-game advertising (IGA). Each revenue model yields different profit margins, with IAP currently being the most lucrative. This model is crucial for increasing ARPU (Average Revenue Per User), popularity, and the longevity of a game, particularly for users transitioning from traditional online games.

Advertising Trends

Advertising embedded within applications is also gaining traction. Unlike the paid download model on iOS, Android apps are mostly free, relying heavily on in-game purchases and advertising revenue.
Challenges and Future Outlook
For professional game publishers, neither copyrights nor profits are guaranteed strengths. This presents a challenge that the Chinese mobile game market has introduced, which may not be easily overcome in the short term. However, strategic partnerships and advocating favorable government policies are steps some publishers are taking to navigate this competitive landscape.

Conclusion

The popularity of smartphones and tablets in China has made the mobile game market exceptionally vibrant. However, achieving profitability remains a formidable task for publishers. Understanding and influencing user payment habits through effective monetization strategies will be crucial for the future success of mobile games in China. The upcoming iiMedia Research Group conference on digital entertainment and mobile applications in Beijing will likely address these challenges and opportunities, offering insights into how publishers can enhance user engagement and drive profitability in this dynamic market.

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