Itâs the format that few speak about, but Flash Lite has made one Japanese entrepreneur a billionaire
Amid the constant iPhone/iStore love fest in the mainstream press and the recent Adobe bashing evidenced by the lack of Flash support by the iPad, a rather exciting news item has passed by largely unnoticed: Forbes Magazine crowned Yoshikazu Tanaka the world’s first mobile gaming billionaire.
Tanaka is the founder and CEO of JASDAQ-listed Gree in Tokyo, which creates socially connected Flash Lite mobile games for the Japanese market.
After the mention of both ‘Japan’ and ‘Flash Lite’ in the first paragraph, there may now be half as many readers of this second paragraph. Sure, Japan is like visiting the future, but no mobile services from Planet Japan have ever successfully taken root outside its exotic ecosystem. Japanese phones are proprietary devices and the i-mode experiment in other markets was a disaster. And don’t get us started on Flash Lite – we’ve been waiting for that train since before the RAZR phone was launched.
While it is true that the Japanese mobile market is fairly closed, the real takeaway from the Gree success story is the viability and attractiveness of free-to-play, socially connected mobile games with virtual items as a business model.
Gree has operating margins of 57 per cent and was ranked by Deloitte Touche Tohmatsu as the fastest growing tech company in Japan, with over 2,600 per cent revenue growth over the past three years. It has 15 million users, up from eight million a year ago. Yet it’s not even Japan’s biggest social games firm – that’s Mixi, with 18 million users.
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Gree has set itself apart from the crowd by focusing on easy, fun gaming. New subscribers get a manga-style avatar in underwear. They can then shop for everything from clothes to accessories that can be used in games based on virtual fishing, gardening and pets. And an estimated 80 per cent of its revenues come from these online accessories.
Like Tanaka-san’s net worth, Flash Lite has also crept past the billion mark largely unnoticed. After the Adobe acquisition of Macromedia, Flash Lite was made free for OEMs to install in mid-2008. Since that time, hundreds of millions of devices with Flash Lite pre-installed have been shipped, bringing the addressable marker to well over a billion.
While Adobe is now moving to support Flash 10.1 on higher end phones, there will be a Flash Lite opportunity for years to come. Why? Because it’s not smartphone users who are the ideal target for socially-connected gaming. They may be cash rich, but most are time poor. Instead, it’s the low-end users with free time and some disposable income who are the ideal target, and are much more likely to have a compatible device.
In Japan, Flash Lite enjoys 97 per cent penetration and there’s a vibrant, flat-rate 3G user base. But the opportunity exists in other regions too. A browser-based Flash Lite gaming experience can reach hundreds of millions of users. By comparison, WAP provides a flatter user experience while J2ME, though highly functional, poses enormous porting challenges.
The iPhone and Android platforms provide compelling environments, but the addressable market is much smaller.
Japanese companies like Gree, Mixi and DeNA are all opening up to allow game developers to place their games on their platforms. Flash is coming of age, so don’t miss out.
Richard Robinson is chairman of Kooky Panda, which develops Flash Lite games from Beijing and is backed by Japanese VC, Infinity Venture Partners.
