·Web and digital habits

A lot of Asian games, especially free to play, are built on platform portal websites running best on Internet Explorer, which is the incontestable #1 browser in Asia. Habits in Europe are very different : in most countries, Firefox has 30-40% market share at least, and up to 50%+ in some countries. Overall, it is now above Internet Explorer in Europe. Chrome has also been growing a lot in the past years, reaching close to 20% market share. So having a website accessible only or optimised for IE is a big mistake in this part of the world. Fortunately, it’s not as frequent as it used to be, but as an example, Silkroad Online’s website is still not accessible through Chrome today. For the same reason, it’s out of question to use ActiveX controls for downloads or game start, as many Asian game portals do.

SEO-wise, Google is hugely dominant, so it’s useless to use Yahoo or Bing-specific techniques. Running a game site as an iframe inside a portal page, or doing everything in Flash, are both going to impact your SEO very negatively.

Website design also responds to different norms in Europe and in Asia. Europeans generally don’t like heavy, slow Flash sites, loathe animated intros, and even for gaming websites, pay attention to the text and wording. Most European users dislike when there are too many menus, or when a link opens a new tab or window, and they hate pop-ups and pop-unders with a passion. A big no-no is also auto-playing of video or music, like for example NHN USA’s portal ijji.com does. And most users prefer clear pages with minimal information. Displaying anything after the fold, obliging users to scroll down, is also detrimental in Europe.

Forums are generally presented differently, using thread-based presentation rather than multiple replies on different topics on the same page. Users also tend to se less smileys, and much less elaborate ones.

Europeans are also very much reluctant to dowloading and installing anything. They don’t like registereing either, so Facebook Login is pretty much compulsory nowadays.

Security software can be a problem too : Many EU users are very put off by GameGuard, X-Trap or Hackshield. However, if the original version of the game has been developed counting on this kind of solutions, it’s generally difficult to bypass it (the users don’t like bots and cheats either).

Finally, the whole open source software culture is much bigger in Europe than it can be in Asia. European online game developers preferably use Linux servers and LAMP environments.A sizeable part of tech-savvy users see Microsoft as « evil ». Experienced Windows server engineers are difficult to recruit in the games industry, as there aren’t that many.

·Marketing/PR

The gaming media in many Asian countries, especially Korea, are very consolidated and established, with few outlets commanding very high advertising prices. Ads seem to be bought mostly CPM or CPC, with the publisher taking on most of the risk in the acquisition process. On the contrary, the media in Europe are very fragmented, blogs and community sites are a huge part of it (and the boundaries between official media and blogs are very blurry, with many blogs having a huge audience, and many journalists of official media allso working wor blogs on the side) and most free-to-play campaigns are either Adwords or CPA banners purchased via ad networks, where the risk is shared.

Facebook is also becoming more and more prominent in marketing for online games in Europe, when it may not be so much used in some parts of Asia (whereas others such as Indonesia and Philippines have embraced it). Some Asian companies seem keen on buying fans on Facebook : generally, the numbers get impressive but the users are very low quality (and generally not from Europe). We don’t recommend that practice, it’s money very badly spent.

In many parts of Europe, Twitter is still not a good medium to communicate with a gaming audience : the demographics are older and rather corporate. It’s fine for corporate communication/talking to journalists though.

PR-wise, it seems customary in Asia to hold most of the game’s information until closed beta, and then suddenly communicate a lot in order to generate interest. Such a strategy is in most cases likely to fail in Europe: gamers are used to slow reveal of information over time, interviews with developers, developers blogs, etc, in order to build the hype.

·Local content needs

Europe is hugely fragmented, and there will be a lot of need for custom and reactive local content. It is generally a bad idea to have a centralised web team at the Asian headquarters that only updates the content on request, as it can impair reactivity and local initiatives. CMS systems such as Expression Engine, Drupal or Joomla are widely used and can offer flexibility. The local teams will also need dedicated tools to manage the shop and local events.

·Means of payment and fraud

Prepaid cards have not met such a wide acceptance in Europe compared to the US, and credit/debit cards are not necessarily widely held and used online depending on the market. SMS are a popular and widely accessible, but the payment companies/carriers are taking huge margins compared to most Asian providers (generally about 40-50%). Fraud for some means of payment such as credit card or ELV is also very high compared to countries like Korea, where accounts are generally linked to an individual’s social security number.

As a result, it is not a good strategy in most cases to open offices in Europe but expect the web, marketing, PR, and billing to remain driven by the head office in Asia. Giving the local teams freedom to operate on their own market is necessary for success.

As the recent game announcements have been multiplying, Mobile is the new frontier for online games and MMOs. The technical constraints have been mostly overcome, and the apparition of a hardcore audience playing mostly from home has made the main problem (good enough ping) less painful. The possibility of free apps with in-app purchases have finally make the business part of it sensible. It’s thus no surprise that many games are announced. However, as games like Pocket Legends find success, the room for growth is increasingly moving, like for social games, to outside of the US/English-speaking territories. What’s the market looking like in Europe?

Devices

According to ComScore’s last report Mobile Year in Review 2010 in Europe, the smartphone installed base in the 5 biggest EU countries (Germany, UK, France, Italy, Spain) in Q4 2010 is at 72 million subscribers (15% more than the US). The market is pretty evenly divided between those countries, with Italy and UK at about 23%, and Germany, Spain and France a bit below 20%. Compared to the respective countries populations, it means that Spain with 45 million inhabitants has almost as many smartphone subs than Germany with its 81 million people, and more than France with its 62 million people.

That trend can be seen in the smartphone adoption rates from the same countries, with Spain, Italy and the UK far ahead :

I couldn’t find any data for tablets installed base in Europe. According to IDC, shipments in 2010 have been around 6 millions in EMEA (of which 5 million iPads), and they forecast 22 million shipments in the territory in 2011.

Operating systems

It’s difficult to estimate precisely the market share for mobile OS in Europe, as the last months have seen several contradictory press releases from different sources quoting either iOS far ahead or Android winning all.

From a devices sales point of view, it seems that according both to IDC and Kantar WorldPanel, Android is now ahead in Europe.

IDC announced (in the above article) that Android got a 31% market share of Western European smartphone shipments in Q4 2010, compared with Apple’s 20% :

And according to Kantar WorldPanel, Android’s market share for smartphones sales in Q1 2011 is 38% in the UK (vs iOS’s 23%). In Germany, they announced Android’s market share was 35% (vs iOS 24%), in France it was 36% for Android vs 23% for iOS, and in Italy, iOS was shortly ahead with 20% while Android was at 19% (It seems that a lot of smartphones sold there are running Symbian).

All the numbers can be found here, although in a very blurry version:

Nevertheless, since Android’s growth was very sudden (its market share a year ago was only 4% according to IDC), what does it mean for usage and the current installed base?

Mobile OS market share data from GlobalStats StatCounter (an analytics solution which aggregates data fro all the websites that uses it). This data collection method has issues, counting hits on mobile browser is different than giving accurate installed base market share, but it’s nevertheless interesting to see the trends.

According to them, iOS has just below 45% of the market, when Android is just below 18%, a massive progression from just 4% a year ago. Symbian, Nokia’s OS, has declined a lot during that time.

ComScore has also recently published a study where they estimate the European smartphone installed base for the 5 biggest EU countries (Germany, France, UK, Italy, Spain). According to this report, the installed base for iOS devices (iPhones, iPod Touch and iPad) in those 5 countries is just below 29 millions, of which 16 millions iPhones, while all Android devices (smartphones and tablets such as Samsung Galaxy) reached 13.4 million.

What this study doesn’t say, though, is the breakdown between iPod Touch and iPads for the remaining 13 millions of iOS installed base, and the breakdown between tablets and smartphones for Android.

Conclusion

It’s important to distinguish market share in terms of sales and the installed base of devices in a territory. It seems that sales-wise, Android is now ahead, but there is still some space ahead to catch up with iOS, which has an important advance in terms of installed base and usage. According to previous studies by AdMob, Android users have a comparable usage of mobile web and apps compared to users of Blackberry and the late Symbian, who used those features much more rarely, so it implies that it shouldn’t take too long to Android to catch up though in terms of applicable market for mobile connected games (which is our main focus here). Mobile ad network inMobi already reports that most of its impressions in March 2011 already come from Android devices (29%, vs 20% for iOS).

So, coming back to games, what’s a developer to prioritize now? At the moment, it seems that the growing market share and the reduced competition on Android make the platform slightly more attractive for smartphone focus, but still not there yet for a tablet focus. On the other hand, that space is quickly becoming even more crowded as the Apple App Store due to the simpler publishing process. Marketing games on Android is poised to become less hit-or-miss, but also more complex and time-consuming than the App Store due to the probable multiplication of channels such as the Amazon store. In the future, it could certainly open the way for more dedicated Android publishers. In all cases, now’s a good time to take a strong footing there.

The recently launched RIFT, a big-budget subscription MMO, has been offering a very deep discount for 3- and 6-months subscriptions set up early (the Founder pricing, normally valid for the first 2 weeks after release, which has been extended to the end of March). Discounts for longer subscriptions are the norm in the industry, and such an offer has been proposed before by other games. These limited offer at a very low price are really interesting.

If you sign up for 6 months subscription for Rift relatively early, you would pay $9.99 / 9.99€ / £5.99 a month instead of the normal price of $14.99/ 12.99€/ £8.99, a discount of respectively 33% for US and UK players and 23% for the German and the French. (Side note : There might be payment processing fees-related reasons other than just getting away with making Euro players pay more – even if, since most of the competition is doing it, it is indeed possible to get away with it. Similarly, the common price for a MMO subscription is now 25% undervalued in GBP, as this “standard” price was decided at WOW’s release, when the pound was worth about 1.45€,  compared to now when it’s only worth 1.15€. At today’s rates, $14.99 should translate to 10.5€ and 9.1£. But by now, the European players are used to paying more and the British to paying less, and anyone lowering the Euro price would leave money on the table while anyone increasing it in the UK would not be competitive*. Fun stuff, and end of side note.)

This type of offer, similarly to the « lifetime subscriptions » used by other subscription MMOs (a lump sum, generally available only before or shortly after the launch of an MMO), have an evident goal : trading a part of the profits in exchange for certainty, thus sharing the risk between the operator and the player. If the player loves the game and ends up playing it for a very long time, the studio loses a share of the margin. But if the player leaves the game sooner than what he commited to (the duration of the subscription, or the break-even point in case of lifetime subscription), or if the game closes before that, then the operator has earned more than it should have. In all cases, if cash-flow is uncertain, as it can be really common after a long development, generally over time and budget, and in a context of anxiety about launch results, the cash is more valuable to the studio sooner than later.

RIFT's founder subscription options.

In addition to this economic risk-shifting game, it is also very probable that the simple fact of committing early to the game by purchasing a long-term plan is a big boost to retention for the early period. Most players are likely to give the game more time, and be more acceptant of bugs and early game issues, if they have paid for 6 months, compared to the situation where the choice they make about committing is at the end of the first month (as is the norm for most retail MMOs, where the first month of subscription is included in the box). Since few MMOs can boast a very smooth launch and first month, these deals are a way for the operators to buy time and entice players to be more patient. I would suspect that long-term subscriptions are more effective for retention compared to lifetime, as there’s the addition of knowing your investment was for a limited time only. Lifetime subscriptions tend to let players think that they can always come back to the game at any point, rather than giving them the pressure of making the most of their investment now.

This retention effect is especially striking when looking at Free-to-Play games, which, in the absence of such commitment, have to be very careful in their early player experience in order to hook the players enough for them to keep playing, let alone trying to convert them into paying players. A lot of F2P games shower the newbies with welcome packs, limited-time free mounts, etc. The goal is double : make the early gameplay experience more palatable, but also give a taste of what using the paying items feels like. Similarly, most F2P games will try to make the user pay as soon as possible; social games also often give cash currency away in order to « educate » the player to pay – once « committed », having done it once, they’re much more likely to pay again, as have shown some studies, for example this one by Social Gold (56% of one-time spenders will purchase a second time, 25% three times or more) . For that same reason, first-time currency purchase discounts are also a good idea.

Getting players to commit to the game is not only financial : social commitment is also a strong tie. For that same reason, social media marketing campaigns asking players to write favourably about the game on their Facebook wall, on Twitter, etc, in exchange for in-game items or benefits have also probably more than just a viral or social proof effect : once players have publicly recognized they like the game, they are indeed more likely to really mean it.

Cialdini, in his famous « Influence » bestseller, called the commitment bias the « hobgoblin of the mind » (after a quote by Emerson) to emphasize the power it has on human psychology. If the hobgoblin can be bought for a few quids, it might well be worth it.

*Provided that the games are sufficiently similar to justify price-based competitivity. EVE Online’s subscription Euro price is the highest on the market at 14.95€/month, but I doubt many EVE players would switch to another game in order to save 2€ a month. The subscription pricing is maybe not always thoroughly thought about, with also few games offering price discrimination to those who would pay more, but that’s another story.

One of the direct consequence from GDC is that we are going to be busy in the foreseeable future and possibly a bit *too* busy (if such a thing could be possible). And it looks like it will be time now to expand the team again and we are now opening a new position in our Brighton office and you can find the full job description here:

You can also download the pdf version.

You are free to spread the word around you as well!

While Thomas and Diane are already visiting panels and having meetings at the GDC Europe in Cologne, the rest of ICO’s crew is making the final preparations for their flights to the following gamescom convention starting on Wednesday. In fact, we are pretty much set and ready to go, staring at the planes taking off outside our office window at Gatwick Airport and looking forward to being on one of them tomorrow afternoon. We also finally got the confirmation for the catering service at our booth at Hall 4.1, Aisle H, Booth 055 – and as we are looking forward to seeing many of you in person, this means you can enjoy snacks and drinks while dropping by.

Like us, you may already have a busy schedule but even without having arranged a meeting you’re welcome to visit us and talk about business or finally meet in person. Whether you plan on publishing a video game in Europe, want to talk about partnerships with us or are just eager to collect the full set of our shiny new business cards, you should memorize the location of our booth.

Here is how I do it:

Germany-England 4:1, Hungary was the best team in ‘55 (before Germany won the world cup in ’56)

(EDIT: This is actually not true, but it works and could keep you busy to spot the error in the sentence)

Of course, that’s my way, easy for a German but might work for others, too.

(Now I’m back at nervously checking volcanic ash forecasts one more time)

• Italy-based Gametribe portal, operated by Game Media Networks, subsidiary of Digital Bros, a retail videogame distribution company, will be closing down on December 31st. The portal had already lost or not renewed the license for Dekaron from developer GameHi since September. It also operated action online game Infinity, cel-shading MMO Dreams of Mirror Online (DOMO) and football session game Kicks Online.

• UK and Spain-based company Rourke Online has seen its portal Key2Play and game servers disconnected after failing to pay for the hosting at the end of November. They were operating F2P MMOs Priston Tale 2 and Ys Online. Ys Online’s service termination had already been announced.

• Germany-based Aeria Games, whose parent company is based in the US, has announced the closure of the French and German service for adult-themed cel-shading MMO Shin Megami Tensei Online : Imagine, on December 21st. Players can transfer their characters to the English servers.

• UK-based Codemasters Online has closed hardcore PvP MMO Archlord in early October after developer NHN Games did not renew the license. The service has  been transferred to Webzen portal.

• Finally, France and Ireland-based publisher GOA, subsidiary of France Telecom, has announced the closure of Action-RPG Warrior Epic on December 21st, is shutting down session-based Kart racing game Kart N Crazy and has cancelled their publishing of a European version of MMORTS Mytheon. The company is focusing on its remaining titles Warhammer Online, Pangya and League of Legends. It had previously closed session-based, turn-based arcade game Gunbound last May.

While the situation and reasoning for the closure is different for each of these companies and games, most of the time it comes down to a difficulty of reaching and maintaining critical mass on the European  services. One can reflect on the flooding of the market with a lot of very similar games making differentiation very hard, the lack of experience and competence of some of the actors, the fact that certain genres like session-based arcade games were not adapted for the European market, an inherent weakness of the third party licensing model with scarce access to development resources, making it extremely difficult to offer a good service to players (with frequent updates, tailored events, good hack/gold farming protection, etc), the poor quality of some of the games, or a combination of all of these factors, to explain these failures.

Does that mean that the European market for free-to-play games is completely saturated and starting to decline? I personally don’t think so, but new entrants must make sure they think about a few points before entering the market :

• Defining critical mass : before considering opening a new service, consider the critical mass this particular game would require.  An asynchronous 2-player game, or a niche game, may be sustainable on a small critical mass, not necessarily so if the game is based on large scale RvR battles. Evaluating the potential of the title for the market is important : so far, few session based arcade online games for PC have been successful in genres traditionally reserved for console (fighting, racing, sport…).

• Differentiation : on very saturated markets like English, German and Turkish languages, a new MMO has to bring a significant level of quality and differentiation to be taken seriously. A niche game like Atlantica Online, with a strong differentitaion, has been doing well on the English language, and launched a German version recently. The quality of the game and service can also be a strong differentiation factor. The last wave of F2P MMOs (Runes of Magic, Free Realms, Allods Online) is significantly raising the bar by being closer to Western players tastes and offering a much more polished experience than most of their competitors. Operators who focus on providing a good service experience to their users can also use it to be special.
• Looking for gaps in the market : Certain territories in Europe are currently underserved, as a lot of actors are focusing on the biggest languages. French, Spanish, Polish and Italian are quite big languages with a limited localised offering compared to English, German and increasingly Turkish. A player like Gameforge has historically been successful by taking market share in underserved territories.
• Leveraging social/viral acquisition as much as possible. Again, this is difficult to do for publishers who are licensing third party products not designed for this, but it can be an essential advantage as the boundary is still relatively clear between social games and MMOs. This situation is probably not going to last very long, but quick movers here can gain an advantage.

As more Asian and American eyes are turning to the European market (since market is less mature and the Chinese market is increasingly closed), Turkey is emerging as a rising star of the European region for online games. The country has the second biggest population of the region, and a majority of them are young (60% are under 35) and educated. According to a recent Comscore report, Turkey is the 3rd most engaged Internet audience in the world. The games websites category there has a 68% penetration, higher than in the UK. According to government statistics, 24% of Turks aged 16+ played network games with other people in 2008.

Early entrants like Joymax, K2 Networks or Gameforge have had a lot of success.  As the industry grew, companies like GameSultan or GGC rised from the country’s 20,000 cyber-cafe ecosystem to become local operators, handling distribution, payment systems, localization… At its peak, Knight Online is thought to have earned $1M/month from its Turkish operations. Metin2 is thought to have as many as 3 Million active Turkish users. The success of these games has encouraged actors already well implanted in Europe to localize and operate their games in Turkey. New entrants on the European market like Korean publisher NHN are preparing Turkish versions of their games in the very first served.

Browser based and social networks games are also growing a lot . There are more than 14M Turkish members on Facebook, Turkey is the 3^rd biggest country on the platform country on the platform. 53% of the Turkish Internet population is on Facebook, and games like Farmville have a very important community of Turkish players . The Flash games website oyunlar1 has more than 6.5M unique visitors. Virtual worlds are growing, as shows the success of Sanalika, which grew to 3M registered users in 6 months.

This huge growth does not come without challenges – some of them are common to many other online games markets, but some others are specifically Turkish. Due to the young age of Internet users and gamers there, there is a lack of mainstream gaming culture which makes difficult to reach new audiences.  The home broadband offering has download limitations, which prevent most users from playing from home as getting over the allowances is super expensive.  An academic study of 2009 has shown that 78% of Turkish Internet cafe gamers have a PC at home.

This reliance on cyber-cafes have given them a lot of power in the value chain and has made it difficult to distribute new games in the territory, giving a big advantage to already existing distributors.  As there are few players and the market is becoming increasingly competitive, the industry will have to become more professional. This should make some issues like e-pin smuggling and VAT evading less acute in the coming years.

There’s also the problem of how to increase the ARPU and how to better monetize besides the system of e-pin (codes sold by the cyber-cafes) – as the gaming population is still in majority under 24, it means opening more accessible means, like pre-paid cards and SMS payments.

The industry is also trying to improve relationships with the government, as recently 6,000 websites have been temporarily banned by the Turkish Internet Bureau, including Farmville, LastFM and MySpace.

The very specific demographics of gamers in Turkey, younger and more male than elsewhere, also leave plenty of room for growth outside of this segment, so maybe we’ll see more games targeted to kids, girls and adults in the future.

Also, there are more and more Turkish development teams with interesting projects, so maybe we won’t have to wait long before we see a Turkish success story overcoming the domestic boundaries, a la Ankama or a Travian Games?

A new edition of the conference should happen in 2010, Diane recommends it for anyone wanting to get more info on this fast-evolving market!

EDIT : Here is also the link to the GFK research on the Turkish market that was presented at the event

Thomas spoke at KGC, presenting not one lecture, but two! Both went very well, with a very attentive audience that was thirsty for knowledge on the European market and the European players.

The presentations are on SlideShare now:.

This presentation is similar to others we’ve done during the year. Some of the numbers have been updated, and as always we have provided additional information from previous iterations. The section on how to enter the European market, and related advice, has been fleshed out more thoroughly.

This is quite a new angle for us. We prepared this lecture at the request of the KGC organizers, and we can honestly say it was a lot of fun to prepare. We’d like to develop it even further, but we hope that in its current form it has enough material to be useful to its intended audience (non-European developers).

As ever, feedback on both presentations is very welcome!

[You may have noticed that those presentations feature a different logo than our previous materials. We'll talk more about that soon, but for now let's just say that we felt the need to move on to an image that's more representative of ICO's spirit.]

To renew the disclaimer in the presentation, a lot of the numbers are estimates based on various sources. If you have official numbers for any of those games, please contact us and we’ll update it!