SkyMobi on why it's focusing on casual Chinese mobile gamers

yeah thanks to John for organizing this afternoon and uh for pocket Gamer's continued coverage of the Asian market obviously there's a lot going on and pcket gamer is covering a heck of a lot of it uh I apologize to those who were expecting to see Michael song our CEO on stage here I have 27 slides to share with you this afternoon of the Chinese market and he thinks I'm more like Mary Meer than he is so I'm uh replacing him this afternoon but Michael is in town here with us and you can meet Michael and chat with us afterwards at our booth right outside so to get started um actually if I can go back there we go so uh to look at what we're doing and talking about this afternoon a very broad overview of the market um both size and monetization uh then the breakdown of the market by City tier uh you know we're talking about a population of 1.3 billion people 500 million mobile internet users and so obviously what do these people look like um you know let's look at the de

demographics in China at a lower level and also an overview of what we call Di which are the people that live in the lower tiered cities which actually makes up the bulk of China's mobile Gamers so I mentioned Mary maker so this is one of her slides she showed a couple weeks ago um and right so over 500 million mobile internet users in China and we're seeing more and more of these guys becoming mobile gamers and that's an 80% penetration rate of all uh of how people in China access the internet and we're going to see that of course increase year on year uh a look here also from uh Mary um and it's looking at GDP it's increasing uh compared to other countries around the world and I include this because of course as a country's GDP increases also so does the middle class also so does the purchasing power of its citizens so this just means we

have more people being able to spend more money on games and so we have a wealth of other uh third party uh research that we included in our uh PowerPoint this afternoon uh several slides from Super data and what uh so when we look at thirdparty research uh we should look at it more of as the trend uh maybe not the exact numbers because of course you have different uh uh research firms giving some different exact numbers but anyway the point here is uh you can see the conversion rates of uh paid users in China is increasing actually a pretty large margin 20% uh from last year to this year and if you compare that to the US it's actually you know decreasing perhaps a little bit and also if you take a look at the average revenue per pay user uh it's a big jump as well in China uh so it just means once again uh China's becoming uh better at monetizing for your game uh take a look at China compared to other main markets around the world uh you do see that uh the cost

per installation um and revenue per download are a bit lower uh than most other countries but the margin you're looking at is perhaps 23 cents per download and now we're talking about hundreds of millions of potential users of course this does add up and this is why China uh in early 2015 if not already depends on whose numbers you're looking at will become or is currently the world's largest mobile game Market uh so let's compare CPI and arpu between the US and China um it's kind of funny what it does here on this graph but essentially what it's saying is um the CPI in arpu of January 2013 uh the arpu did increase a little bit and then the CPI did decrease which is great means you guys are making money but that was last year uh I'm sorry that was last year and uh so this year you're seeing that the trend continues that rpu does continue to remain above CPI but

actually in the US according to this research um it's not monetizing as well cost per installation is actually a bit higher than RP po at this time at least in the first quarter of 2014 and let's uh look again at why China is or currently currently is or will be the world's largest mobile gain Market uh here's the number of monthly active users and Revenue so as I mentioned earlier China incredibly huge Market but what do these users look like well yes 1.36 billion people 500 million monthly uh mobile internet users and about 266 million monthly active users of mobile games and so do all these people look the same are they the same demographics do they have the same purchasing power and of course the answer is no so let's take a closer look of what these guys look like uh in China we call it different tiers of

cities of course you all are quite familiar with I assume Beijing Shanghai uh and probably Guang Joo and shenen these are consider considered first tier cities um but we also have second tier third tier and even like fourth and fifth tier cities and this is determined by population uh their GDP their cultural significance as well as other factors and so maybe this provides you an Insight you haven't seen before and haven't really thought about at least is that when you look at third tier cities and Below that's really the bulk of Chinese mobile Gamers 60% live in third tier cities and lower so what exactly does that mean for you guys well we'll discuss that a little bit uh later uh also third tier cities and below are the fastest growing as you see uh 27% annual growth of uh the daily sessions that these users partake in you know it's a

fantastic uh submarket in China here's just uh an Insight on Android devices versus iOS the key Trend here is that of course third tier cities uh will have more of these Android devices and of course are more popular than iOS uh that's typically typically because uh folks in the third tier cities and lower cannot really afford an iPhone unless they're selling their liver I think you've heard stories like that before not funny okay and um and so what's very interesting in China as well worldwide of course the number one selling Android phone Samsung uh same case in China but uh besides Samsung the other top phones they're homegrown looking at Lenovo huway sh me uh cool pad um and so there's actually hundreds of oems in China and so uh companies like ours actually does partner with each of those for uh pre-installs with App Store but

we'll chat about that in a little bit later and so okay fine so third tier cities are so important uh so the people that live there what do they look like we call them Di and that means what we'll share later we'll show you what their game preferences are uh the trends and the preferences in user Behavior Uh diela do prefer casual games over other game types and kind of casual games are the gateway drug of sorts in the mobile game Market Market in China so uh we definitely think that casual games are going to continue to be the most popular for this segment um interesting thing about this demographic is that uh in these smaller tier cities uh there are definitely improving the 3G 4G coverage but it's not quite there compared to the larger cities and so we need to uh be careful about uh the size of the packets of our games that we do distribute and of course this does show um the success

rate of downloads based on size also the phones well the capability and processing power of the phones are improving um it's still a little bit lower than uh some higher tiered cities phones so once again uh we're looking at casual games for this reason um holidays are a little bit different in China than the rest of the world so it's great to work for a Chinese company because maybe have two sets of holidays I only get one actually but so that's what we look at national holiday is uh the best time of the year for promotions and of course there's several other holidays that you have to be more mindful of than just the typical Western holidays uh quickly just showing that games are actually uh more important to uh um third tier City residents or users uh in in respect to other tiers and so okay so uh let's look at the third tier cities the DSA it sounds like maybe they don't have a whole lot of money

right because generally they're not as well educated as those in the larger cities and so the jobs that they have are typically not as uh does not allow them to be so wealthy so can they monetize do they spend money on games and here's a cultural um uh aspect of the diaa actually the answer is yes they definitely do monetize and the reason is they have so few options for how to be entertained to how to relax for how to have fun and so you know movies in China are about 10 bucks $1 us it's out of the budget uh to go to to the bar out of the budget and so games are actually a great way for diala to be entertained and secondly there's a lot of mechanics and games in China that allow uh its users to what we call a show face so for example you can uh treat your friends to inapp purchases or you can be a VIP member just kind of allows you to have a supposed higher Social um rank

and so yes DSA definitely do monetize and so Sky Mobi I haven't introduced much about us but we do have the mower app store which is pre-installed on about 40% of Android phones sold today in China so that's about 400,000 new users that we add every day for a total of uh 147 million users about 25 million monthly active users and we do partner with the Chinese oems um so so that's how we're so uh prominent in the third tier in lower cities uh 30 uh 30,000 local stores of China Unicom China mobile also pre-install our games and we do have 70 plus distribution channels including all the leaders in the space like 10cent Chi who and by um must have been a very happy day for Michael and uh yeah thanks a lot guys [Applause]