What Are Mobile Game Publishers Doing With Facebook Apps?

Dev Rank = developer's rank in terms of MAU across all Facebook apps. MAU = monthly active users. DAU = daily active users.

In light of all the insanity about Zynga and lots of rhetoric from mobile games publishers about diversifying into social gaming online (er... Facebook games), I decided to take a look at what the mobile guys were actually doing on Facebook. First, let me tell y'all that after spending far too long digging through titles, it's abundantly clear that that platform is jam-packed with even more cr'apps than Android Market. Fortunately, consumers clearly ignore most of this junk... but I'm sure it's damaged overall perception of the product on offer. Many of these are blatant infringements on other folks' IP... which makes me wonder if corporate grown-ups at content owners/creators are really paying enough attention. Also, I've gotta mention that the two sources of Facebook application information, AppData & Facebakers are pretty shoddy (but free). The former seems to have better data, but a super-clunky interface (e.g. search is useless), while the latter is slicker, but with more questionable data. The data here comes from AppData.

So what did I learn? Well, Zynga is still the undisputed king of gaming on this platform, with 49.5mil daily active users of its titles and 217.5mil monthly active users... and despite all the blah-blah not much is happening with the mobile games guys. The only once pure-play mobile publisher that appears to be creating a meaningful presence on Facebook is Digital Chocolate. EA, GameHouse (RealNetworks), PopCap & I-play are probably running these initiatives more as a function of their established online casual businesses, than what they do in mobile. Glu Mobile, which launched its first Facebook title, Atom Blast, last Fall has now apparently bailed entirely from the platform. Meanwhile Hands-On is leveraging its last piece of premium IP, under a pseudonym no less, to try make of a go of it. Is anyone aware of anything else going on out there with the mobile publishers?... let me know. The next question, of course is how much money D'Choc et al are making from this platform... any thoughts? I'm sure it's billions :-P

Hypothetical SWOT Analysis For DeNA Roll-up of Glu Mobile, Hands-On & Digital Chocolate

As I've been blabbing about for months, the established publishers in the mid-tier of mobile games are languishing under the new smartphone app store paradigm, as the two biggest players (EA & Gameloft) have consolidated power, and nimble newcomers (Firemint, Lima Sky, Chillingo) have seized marketshare. The competitive advantages these guys once enjoyed (carrier sales teams, the ability to port to a thousand devices, licensing relationships), have become expensive burdens, and most lack the resources to make wholesale changes to their businesses. In light of this, I've often wondered if it would be feasible for a company, with some vision and cash, to roll-up a few of these guys in the interest of unseating the top players and creating a true smartphone games powerhouse. For fun, let's imagine a scenario wherein Japanese social mobile gaming powerhouse DeNA, with its $530mil in revenues, almost $400mil in cash & ambitions to put a stake in the ground outside Japan, considered buying Glu Mobile, Digital Chocolate and Hands-On Mobile (for like $100mil, right?). What would a SWOT analysis for this "Newco" look like?

Strengths (Internal)

• Combined annual revenue of ~$125mil puts Newco within striking distance of Gameloft
• 98 Paid iPhone Apps featuring quality franchise titles like Deer Hunter, Glyder, World Poker Tour, Kitten Cannon, Brick Breaker & Tower Bloxx
• Interesting leadership potential... The icon: Trip Hawkins & the upstart: Niccolo de Masi
• All global HQs are in Northern California
• Studios in Finland, China & US
• Global distribution capability
• Healthy balance of original & licensed IP

Weaknesses (Internal)

• Cash... DeNA would have to fix that
• Re-branding would be required, none of these brands is perceived as a winner or has meaningful consumer cache... plus there's no combination that doesn't sound X-rated
• With over 500 employees... there would need to be some downsizing/consolidation
• $20+million in debt
• Reconciling investors & boards won't be a job for the faint of heart
• Scale sometimes leads to inertia

Opportunities (External)

• Unify all games with OpenFeint's social gaming/app discovery platform (in which DeNA has a 20% stake)
• Build in-app purchases into as many titles as possible to maximize longterm revenue potential
• Historic carrier relationships might become valuable again as Verizon, AT&T, et al take a larger role in managing Android Market
• Take all components of Newco private, clean 'em up and then spin it back out as an IPO when market conditions improve
• Take cue from Zynga in terms of marketing on social, new & traditional media

Threats (External)

• Platform consolidation and platform dependency (when Apple changes the rules, it hurts)
• Continued price erosion
• Competition with other forms of gaming & entertainment for consumer discretionary dollars
• New, well financed, market entrants

I'm sure Newco would appreciate your unpaid consulting, in form of comments. I'll add to and adjust this over the next few days based on your input and my own random inspiration (brain farts).

Less Rush, More Rollercoaster for Digital Chocolate

Wow, what a difference a day makes...

Yesterday MobileGamesBlog reported that Trip Hawkins' mobile (and now social network) games publishing company Digital Chocolate had "secured several millions of dollars" in financing from Bridge Capital Holding and had upped their longtime studio chief Ilkka Paananen to President of the company (UPDATE: apparently Trip had announced this promotion back in February on his OMG Blog). The story indicated that this was an equity investment on top of the $43.8mil the company had received previously... which to my mind represented a meaningful market driven endorsement of the viability of the company and its prospects for growth. Big industry news for several reasons: 1) funding has hardly been flowing into the mobile games space; 2) insider buzz (driven in part by the company's recent, atypical, quietness in the press) is that Digital Chocolate has been struggling, like many of their mid-tier peers; 3) folks like and respect Paananen (founder of games studio Sumea in 1999, acquired by D'Choc in 2004) and his elevation seemed like a super-smart move to bolster management ranks and provide counter-balance to the venerable, but notoriously mavericky Hawkins as the company prepared for growth. All good stuff. After reading the story, I asked in a tweet (as I am wont to do),"at what valuation... anybody know?" and sent Paananen a congratulatory IM... to which he didn't respond.

Well the picture painted this morning in Mobile Entertainment's coverage of the story, and MobileGamesBlog's followup, may explain why I didn't hear back. Apparently the funding is actually a "multi-million dollar revolving line of credit" to be used for "general corporate purposes"... which sounds a lot more like a cash lifeline than an endorsement. To make matters worse, it now turns out that Paananen will not be taking a larger roll going forward, but instead will be leaving the company. I don't think either pieces of news, or how the messaging was managed, bodes particularly well for the company... and I suspect industry buzz may turn even more negative.

Of course this situation begs the question, what is the path forward for Digital Chocolate and the other key players in the struggling mid-tier of mobile gaming... specifically Glu Mobile, Hands-On & I-Play? I must say I'm pretty skeptical about them all piling into Facebook gaming... which is the popular strategy du jour. I have an idea that I'll share in an upcoming post.

Readers Don't Believe Glu Mobile Is Stuck On Hands-On

Inspired by my January 5th post, in which I advanced a theory about why Niccolo de Masi jumped ship from Hands-On Mobile to Glu Mobile (GLUU), I asked readers the question: "Will GLU Mobile & Hands-On Mobile Combine In 2010?" The poll only ran for 5 days because I wanted to close it in advance of Glu Mobile's earnings call tomorrow. Based on comments I received (on and offline) to my original post, I guess I'm not entirely surprised to see that a 63% majority of responders believe that this deal is not going to happen, while 37% indicated that it would. I did not vote in this poll, but I do still think a deal makes sense and probably should happen if Hands-On still has some cash in the bank.

Is Glu's de Masi Move Part Of A Hands-On Hook-Up?

I've been racking my brain for the last couple of days trying to make sense of the news that Niccolo de Masi is leaving Hands-On Mobile, after just 3mos as its CEO, to run Glu Mobile. My first thought was that Hands-On was in such disarray, and so late to the smartphone game, that the restructuring I hoped was afoot turned out not to be worth pursuing in the end. My second thought was that Glu got so desperate in their protracted CEO search that they put more money on the table than a 29 year-old could possibly refuse... 'til I read their latest 8-K. Then I had a conversation today with an industry veteran who posed a novel, and ultimately, more interesting theory. What if de Masi is bringing Hands-On with him? What if this move is the precursor to a merger between the two companies?... now that's juicy!

From Glu's perspective this could be attractive because Hands-On allegedly still has a pile of cash left in the bank from the $29mil sale of its Korean division to EA in May 2008. For public Glu, with a depressed stock price vacillating on either side of $1 and a healthy appetite for cash, this could be an attractive fix. Glu would also benefit from Hands-On's valuable World Poker Tour license, which has been a cash cow since 2005, and its legacy Guitar Hero licenses (also big earners), which would be a nice complement Glu's newly launched Guitar Hero 5 title. For the investors in Hands-On, including Executive Chairman Dan Kranzler, this could finally be a way to go public... like they've been planning since the mobile paleolithic. It would also give Hands-On much improved smartphone capability (an area where Glu is finally getting its shit together) and restore its once impressive international distribution capabilities. Moreover, this move could create a real competitor, another $100mil+ (or close to it) game publisher, in an industry segment that's recently looked a lot like a two horse race between EA Mobile and Gameloft.

What do you readers think?

Breaking: Niccolo de Masi Named Glu Mobile CEO

Whoa! Former Monstermob wunderkind, and most recently Hands-On Mobile CEO, Niccolo de Masi has just been named President and CEO of Glu Mobile. This is shocking since he was just named to the head post at Hands-On Mobile this past October. It makes one wonder what on earth is happening at that long-struggling publisher. More to follow... Meanwhile according the Glu Mobile press release:

Niccolo brings to Glu a strong background of senior management and executive experience in the mobile gaming and content sectors. Most recently, Niccolo served as Chief Executive Officer and President of Hands-On Mobile, a mobile technology company and developer and publisher of mobile entertainment. From June 2006 to February 2007, Niccolo was the CEO of the London-listed mobile entertainment company Monstermob Group PLC, and prior to being named CEO, he was responsible for formulating and implementing Monstermob's growth and product strategy. Prior to joining Monstermob in 2004, Niccolo worked in a variety of corporate finance and operational roles within the technology, media and telecommunications (TMT) sector, beginning his career with JP Morgan on both the TMT debt capital markets and mergers and acquisitions teams in London. Niccolo has also worked as a physicist with Siemens Solar and within the Strategic Planning and Development divisions of Technicolor. Niccolo holds B.A. and M.A. degrees in Physics, and an MSci. degree in Electronic Engineering—all from Cambridge University.

In connection with the appointment of Mr. de Masi as Glu’s new President and CEO, the Compensation Committee of Glu’s Board of Directors awarded Mr. de Masi a non-qualified stock option to purchase 1,250,000 shares of Glu’s common stock pursuant to Glu’s 2008 Equity Inducement Plan, which is a non-stockholder approved plan. This stock option was granted to Mr. de Masi on January 4, 2010 and has an exercise price equal to the closing price of Glu’s common stock on the NASDAQ Global Market on such date.

10 Most Read Cabana Mobile Posts of 2009

1. How Much Money Do Mobile Ad Networks Make?
2. KongZhong Got It Goin' On
3. Fish Broth: The Plot Thickens In GetFugu Investment Drama
4. If The Top 10 Generate $700mil Can Mobile Games Really Be A $5.4bil Business?
5. Palm Pre Demo From D7 Is Better Than Porn
6. Updated: Top 10 Mobile Games Publishers WW
7. MOBshop Speculation Is Red Hot
8. Update: GLUU Volume Stays High As Boards Buzz About Changyou & Other Theories
9. Will de Masi & Kranzler Finally Get Hands-On To Realize It's Potential?
10. Report: At AT&T Motricity is Jen & Amdocs is Angelina

Some Predictions For 2010

• The Nexus One and myriad other Android devices will launch with varying degrees of fanfare, but the Google devices in aggregate and the Android Market will continue to pale in the shadow of iPhone/iTunes as a consumer event due to inconsistent marketing, klugy app billing and OS fragmentation

• Mobile marketing will graduate from the experimental stage, and become a core strategy component for several enlightened global brands

• Several established mobile games publishers will either be acquired or file for bankruptcy protection... companies that could be in play during 2010 include: Hands-On Mobile, I-Play, Twistbox, Digital Chocolate and perhaps Glu Mobile

• Apple will finally strike a deal with Adobe that will allow iPhone users to access content built in Flash through the browser, creating a boon for Hulu, Vevo, YouTube, MovieClips, et al

• Apple will make eBooks and eMagazines available through iTunes for their upcoming tablet... but they will also be available for iPhone and touch

• Nokia will scrap it's Comes With Music offering, will continue to struggle to make Ovi a meaningful consumer proposition and will see declining market share as it gets squeezed by Apple, RIM and Android devices on the smartphone front and by low cost Chinese manufacturers in developing markets

• LTE & WiMax services will continue to roll out slowly, but 4G won't be a significant consumer event during 2010

• Google Googles will move beyond Android and quickly establish itself as the world's most popular augmented reality application... leaving companies like Layar & GetFugu in its dust

• The current Top 5 companies in my Cabana Mobile Entertainment Top 20 by Revenue (Zed, Index Mobile, UMG Mobile, MobiTV & Buongiorno) will all see mobile revenues decline during 2010. Smaller App-focused publishers will see the greatest revenue gains

• Carrier-based App stores will make consumers yawn, but on a positive note they'll benefit the coffers of several advertising and identity/design agencies

• An application developer, a credit card company and a major retailer will collaborate to launch the first commercial in-store mobile transaction service in the US

More to follow throughout the day...

Mandalay Trying To Get More Game With Schaaf & $35mil World Poker Tour Bid

Not only is Mandalay Media (MNDL) clearly not heeding my advice to focus on adult mobile content, rather than trying to become a major player in the crowded mobile games space, it looks like their gaming ambitions run much deeper than mobile. Yesterday they announced that former Sorrent (now Glu Mobile) and Navio executive Ray Schaaf, a guy they characterized as a "mobile gaming veteran," has taken a position as company President. They followed that today with an announcement that the company has made a $35mil cash & stock bid to buy World Poker Tour (WPTE), at a 54% premium over its stock price and a 23% premium over an offer that's apparently already on the table (and pretty close to being done) from a company called Peerless Media. I don't have a clue where Mandalay is getting the cash for this audacious bid for a company, that at first glance, looks to be in better (if not equally not good) financial shape than it's in. But what I do know, is that if this acquisition is successful, it will radically realign and diversify the media holding company beyond mobile porn and games. That said, on the mobile front it would give Mandalay (and its Twistbox division) access to a proven, powerful franchise that's been shepherded for many years, under license, by Hands-On Mobile... who can't like this one bit.

Will de Masi & Kranzler Finally Get Hands-On To Realize It's Potential?

PocketGamer.biz is reporting, and the company's website is confirming, that Hands-On Mobile's President (and former Monstermob wunderkind) Niccolo de Masi has taken over as CEO of the San Francisco based mobile games publisher, replacing David White. I've also heard rumors recently that Dan Kranzler, who founded the company back in 2001 (when it was known as Mforma), may be planning to take a more active role in its management, after years of being a very passive Executive Chairman (and peacing out with the Dalai Lama).

Does this mean there's a massive restructuring in the works? Hopefully... because Hands-On, the poster child for unrealized potential in mobile entertainment, is long overdue for a shake up. This is a company that raised $63mil in venture funding in 2004, was on an IPO path in 2005, was an early content rockstar in China and at various times over its 5 year history has employed some of the smartest folks in mobile and controlled some of the most powerful brands in gaming (Marvel, Guitar Hero, World Poker Tour, etc.). Hands-On could have been, should have been, a global mobile gaming powerhouse like Gameloft or EA Mobile, but instead in 2009 they're a tertiary player that doesn't even make my Top 10 Mobile Games Publisher list.

So what's to do? According to PocketGamer they've been diversifying into platforms like PSP Minis, DSiWare, Facebook games and, get this, iPhone (where they currently have 8 Paid Apps, none in the Top 100)... hmm, but that sounds like what all the other kids are doing. Perhaps they should be really alternative and focus on the carrier business... oh, and while they're at it change the company name back to Mforma (which is cooler and more potential-ly). We'll see. Let's just hope the re-emergence is in process, the rumors about Kranzler are true and that he and de Masi have a few more rabbits (and a bunch of cash) in their hats.

If The Top 10 Generate $700mil Can Mobile Games Really Be A $5.4bil Business?

Back in March FierceMobileContent and others reported that widely respected telecoms & media analyst Juniper Research had estimated that the worldwide mobile games market had reached $5.4bil in 2008. That's crazy good, right?....or, perhaps it's just crazy.

As I've mentioned recently, I'm generally pretty cynical about big numbers from analysts, pundits, etc...especially when they just don't feel right. As part of the process of digging into this further I recently put together a Top 10 list of mobile games publishers worldwide. It's missing some numbers and the order may need some tweaking (audience participation, please), but I'm very confident about the Top 3, and pretty sure that Namco and G-Mode belong on this list. There could be a place for Capcom Mobile or maybe Konami, but I have no good data on their mobile operations... and I think I may be being generous to Hands-On (which has kinda dropped off the radar recently). Anyway, here's what I came up with (#s are annual revs or 4 most recent quarters):

My feeling is, that if I fill in the blanks here, that the total revenue for the Top 10 comes out to about $700mil. Soon after this list (and some of the companies I mentioned above) the revenue drop-off is pretty steep, with a bunch of companies generating low single digit $millions. If I make a small leap and assume that this group of industry leaders represents 70% of the wholesale revenue in the business...then the wholesale (before distribution channel) value is $1bil. If publishers are keeping 60% of the retail (consumer) price blended across all distribution platforms then the retail mobile games business is worth close to $1.7bil...not anywhere close to $5.4bil. Even if this group represented 30% of worldwide wholesale revenue (which is absurd!) the business would still be over a billion dollars short of the Juniper estimate. (As usual, let me know if there's something I'm missing!)

So what's my point here? I believe that those of us who are vested in mobile entertainment have an obligation to aggressively scrutinize the numbers associated with it, in the interest of clarity and accuracy. It's impossible to properly assess the opportunities in its various sectors (like games), or measure success within them, without proper industry metrics. Hyperbole and froth have not helped this business...in fact they've exacerbated the numerous (too numerous for a young business) boom and bust cycles we've all experienced since the late 90s and fueled substantial skepticism about mobile entertainment amongst those who are generally motivated to invest capital or intellectual property in new media.

Let's Do The Time Warp Again: Top 10 Games At The Big 3 US Carriers

I was beginning to feel that the mobile industry's (as well as my own) obsession with the iPhone was getting positively unhealthy...so I decided to take a look at what was going with mobile games in the US carrier "app stores." Wow, so much has changed in the last year...not! The following list is based upon the Most Popular or Top Selling titles on the respective carrier websites. Unfortunately T-Mo USA requires a log-in to see this data...so they won't be included for the moment (a little help please). While putting this together I must admit that I had a bit of a chuckle, at Verizon Wireless's expense, when I noticed they still attribute all their EA Mobile titles to Jamdat....which EA bought way back in late 2005 (and which ceased to exist as a brand shortly thereafter). But as you can see, this anachronism almost seems appropriate...

Which Established Mobile Games Publishers Are Most Aggressive on iTunes App Store?

Cabana Mobile Entertainment Top 20 by Revenue

Revenues are in US$ and are based on latest annual reports or industry estimates. The range of revenue on this list goes from a low of ~$50mil to a high of ~$550mil. Total revenue for the Top 20 is ~$4bil.

Please let me know if you think I'm missing a company or if you think I might have the order wrong.

Are These The Top 20 Mobile Entertainment Companies By Revenue?

I think so...but I could be wrong. Who am I missing? Anyone on this list who shouldn't be there? Any issues with the order? I'll adjust and re-post based on feedback.

btw -- this list obviously includes mobile entertainment divisions of companies that are not exclusively involved in mobile or mobile entertainment. Also it does not include the mobile operators or divisions of traditional entertainment companies, such as the studios, networks & music companies.

Artificial Life | The New Hotness In Mobile Games?

Artificial Life (ALIF) reported super-strong Q1 2009 earnings yesterday. The LA/HK based mobile games and applications publisher announced that they had ~3.5mil java/BREW + 1.2mil App Store downloads in the quarter...making it their biggest earnings quarter ever (significant since these guys pre-date the Moto StarTAC).

Revs = $7.1mil ^71% from Q1 2008

Net = $2.7mil ^9% from Q1 2008

The company was particularly excited about the iPhone App Store (like everyone else) where they currently have 3 paid and 2 free Apps. 3 titles are promo Apps...2 for Red Bull and 1 for BMW. A mixture of free and paid games/apps tied to major brands is the sweet spot for these guys. My guess is that not all of these titles are licensed in the classic sense...in some instances they are probably being paid as a marketing vendor (which isn't a bad model in the current environment).

I've gotta admit that I was (as is my nature) super-skeptical about these guys and some of their licensing/promo relationship choices...Braveheart, Tokio Hotel, Red Bull, etc. They seemed like a fluffy mobile marketing company (the type that approach studios/networks daily). But looking at their numbers (and some of their game reviews) I am happy to concede that I was wrong. These guys are on the fast-track to becoming a revenue leader in the 2nd tier of mobile game publishers, which features companies like I-play, Hands-On Mobile & Digital Chocolate...and to becoming more profitable than any mobile game publisher in the 1st, 2nd or any other tier!!! Sweet!...love to see some energy/excitement in the mobile games category.