Authors

Mark RansonMark Ranson

DeNA launches new social messaging service, Comm

OVUM VIEW

Summary

DeNA, the Japanese operator of the successful Mobage social game platform, has joined the competitive mobile social messaging market with its new service, Comm. DeNA sees the Comm social messaging app as a way of further strengthening its presence in the smartphone platform market, and hopes that it will help grow its user base through the viral spread of social messaging services. The marriage of gaming and messaging is mutually beneficial, as it will help grow customer engagement with the gaming platform and provide a sound business model for the messaging service. In addition, messaging will also help aggregate DeNA’s non-gaming businesses, including its e-commerce offering, Bidders, into a one-stop mobile portal.

From social gaming and messaging to content platforms

The Mobage platform has over 45 million users in Japan alone, and DeNA’s games-related revenues reached $512.5m (JPY42.2bn) in 2Q12. The introduction of Comm will allow the company to offer a greater suite of services to its smartphone users. DeNA’s main rival in Japan has traditionally been another social game platform operator, Gree, but both now face competition from the increasing number of strong content platforms in the region. DeNA is not the first service to take steps towards becoming a content platform: messaging apps KakaoTalk and Line have each diversified into the role of mobile content platform. These providers will be two of the largest threats to DeNA and Gree, because both have large existing social messaging user bases and are transforming into diverse content businesses (with a strong focus on mobile gaming).

Messaging will make gaming services stickier

The inability to monetize the service is the primary obstacle that most messaging companies face. However, messaging services are usually very popular with consumers, and tend grow virally. A good example of this is the growth of WhatsApp. Mobile gaming companies, on the other hand, have a strong business model in place, whereby in-app purchases are accelerated through a social context. The marriage of messaging and gaming will be mutually beneficial, as messaging will make the gaming service far more sticky, and gaming will give messaging the business model it requires to become profitable.

The addition of Comm means that DeNA is able to offer a social messaging service, bringing it into line with KakaoTalk and Line. It should enable the company to move its large social gaming user base toward a more diverse range of content offerings. Messaging providers have already entered the gaming space, and we expect to see a number of gaming companies venture into the messaging space as well. KakaoTalk for instance, launched its game center in South Korea in late July 2012, and by October 2012 its revenues had already reached $36.8m (KRW40.0bn). Emoticons and the affiliate marketing service Plus Friend have also been significant revenue streams for the KakaoTalk platform; it recorded its first profitable month in September after only 31 months of operation, and has stated that 2012 will be its first profitable year. Meanwhile Line’s revenues from emoticons and advertising alone were $9.7m (JPY0.8m) in 3Q12. Messaging should remain a core part of the KakaoTalk and Line platforms, as it is a key way to create stickiness.

Providing a holistic social experience

The addition of messaging to a gaming platform takes the service one step closer to providing the consumer with a comprehensive social offering. Providers should aim to strengthen the social component through instant messaging and other social services, particularly in markets where social gaming is not based on social networks, but instead on a gaming network with social components. DeNA and Gree are prime examples of gaming-led providers, and in the past they have been known to work with social networks to create a social experience. However, as the intensity of competition increases in this sphere we will see more service enhancements to make the platform itself a holistic social experience.

APPENDIX

Author

Neha Dharia, Analyst, Consumer

neha.dharia@ovum.com

Mark Ranson, Associate Analyst, Consumer

markranson@ovum.com

Further reading

On the Radar: DeNA (October 2012)

On the Radar: NHN (September 2012)

Counteracting the Social Messaging Threat (July 2012)

Digital Games Outlook 2011–16: Asia-Pacific (March 2012)

Disclaimer

All Rights Reserved.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior permission of the publisher, Ovum (an Informa business).

The facts of this report are believed to be correct at the time of publication but cannot be guaranteed. Please note that the findings, conclusions, and recommendations that Ovum delivers will be based on information gathered in good faith from both primary and secondary sources, whose accuracy we are not always in a position to guarantee. As such Ovum can accept no liability whatever for actions taken based on any information that may subsequently prove to be incorrect.