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).

Digital Chocolate Set To Announce Groundbreaking Virtual Goods Platform?

D'Choc CEO Trip Hawkins is delivering the keynote to kickoff Engage! Expo in San Jose next week entitled "A New Approach To Virtual Goods." Organizers promise he will "announce and explain a new game service that gives a virtual item 'platform power' across a variety of games, networks and devices." I'm eager to hear the full details... anyone out there going to this conference?

The idea that one could purchase a virtual item (a weapon or an outfit for your avatar) within one game and use it in a host of other games would be unique in mobile and ostensibly compelling for Hawkins' "omni" gamers (casual, social, time constrained) that he believes dominate the mobile games market. Based on the success with this form of monetization on mobile in certain Asian markets, particularly South Korea (enuring to the benefit of publishers like Gamevil), the financial opportunity of such a platform could be substantial. There's been a lot of industry buzz about this in the Europe/Americas... and microtransactions for virtual goods within Apps was one of the most highly touted features of iPhone OS 3.0... but I still haven't seen any groundbreaking implementations outside of Asia. Perhaps that's about to change.

Trip Hawkins Claims D'Choc Is #1 Games Company on iPhone

According to an interview on CNBC today, Digital Chocolate CEO & games industry legend, Trip Hawkins claims that his company is now the #1 games publisher on the iTunes App Store platform by virtue of its 20mil downloads to date. As a corollary, the company is also claiming to be responsible for a full 2% of all iPhone App downloads (20mil =2% of 1bil). Wow! As I expressed in a post last month about a similar Digital Chocolate claim, I'm kinda skeptical (it's my nature)...unless, the overwhelming majority of downloads are of free versions of their Apps (12 of 25 D'Choc games live in the US App Store are free). Also, I would really be interested to hear what Gameloft, Glu Mobile, et al make of these claims!!! But, perhaps I'm wrong, perhaps they're moving a huge # of paid Apps and Digital Chocolate is poised to burst into the top-tier of mobile game publishers with triple-digit revenue growth in 2009.