Last week, GREE released its financials for the Q1 2013 fiscal year. GREE generated revenue of $466.7 million for the quarter, representing an annual run rate of over $1.8 billion. GREE also had a profit for the quarter of $111.5 million, which extrapolates to about $450 million in yearly profits. I am not a professional (or even amateur) stock analyst, so rather than predict—or try to predict—GREE’s future performance, I will highlight its impact on other social and mobile game companies.
The numbers showed GREE’s dependence upon the Japanese market. Unlike DeNA, which I wrote about a few weeks ago, GREE does not yet have a major success in North America (outside of the Funzio games it acquired). It does, however, have significant costs in its efforts to grow internationally. GREE’s cost of sales increased 123 percent year-over-year, which GREE attributed to its aggressive international expansion.
GREE’s financial results overall were not nearly as strong as DeNA’s but a much more positive sign for the industry than Zynga’s results. They reinforce you can generate high revenue (a $1.8 billion run rate in sales is not bad) and profitability by primarily selling virtual goods. They also show how one or two hits in a portfolio of over 50 games can move you from good to great (Rage of Bahamut probably accounts for most of the difference between DeNA and GREE) and are the difference between success and failure in global expansion. Next quarter, the results may be the inverse and probably would not make one company better than the other. Overall, though, it is great to see multiple social gaming companies with strong revenue and profitability.
Earlier this week, the Japanese-based social mobile game company DeNA announced its results and the numbers show that great opportunities still exist in the social gaming space. I have written several times about the importance of DeNA (and its Japanese competitor, GREE) in the social gaming ecosystem, in particular that they are better industry bellwethers than Zynga. DeNA is best known in the US as the parent company of ngmoco:), which it acquired in 2010 for $400 million.
DeNA’s results for the quarter that ended in September show the health of the social gaming and free-to-play business. For the quarter, DeNA generated $627 million in revenue and $254 million in profits. At that run rate, DeNA would see about $2.5 billion in revenue and $1 billion in profits for a twelve month (one year) period. The quarterly numbers also show a 45 percent increase in revenue and 38 percent increase in profits over the same period from the previous year.
The other interesting result in DeNA’s report was the revenue per daily active user (ARPDAU) it is generating from some of its titles in the US and Europe. Continue reading “DeNA’s results show the opportunity in social mobile”
I find it interesting that the two largest social game companies, GREE and DeNA, generate virtually no press, while you can’t avoid articles about the third largest social game company, Zynga. I believe that because they are Japanese and not US companies they do not generate the same level of attention, but that is unfortunate. People do not draw conclusions about the viability of the airline industry by looking at Spirit’s performance or determine whether the auto industry is rebounding by analyzing Audi, so why look at the third largest game company when assessing the social game industry? If you are an investor, entrepreneur, engineer, etc., and trying to judge the opportunities in social gaming, it makes sense to benchmark against the biggest and best, and that is DeNA and GREE.
Continue reading “GREE and DeNA, the real companies to watch in social gaming”