SEOUL, KOREA - Focus on strong overseas performance as domestic market is slowing and more competitive: As its size balloons, the mobile games market is becoming more competitive. Korea’s market has grown at break-neck speed backed by high smartphone penetration and games on KakaoTalk widening the gaming audience. With a flood of new releases, however, profitability is falling due to less chance of success, shorter popularity span and swelling marketing costs. Over thepast three years, the mobile games market has raced along the path taken by feature-phone mobile games and PC online games since the late-1990s. We recommend narrowing the investment focus on companies that can rapidly release several games to dominate a wide range of genres and will likely improve their overseas performance.
- Line and KakaoTalk paved a shortcut to overseas mobile game markets: As of May, NHN-developed Line has attracted more than 150mn and KakaoTalk 90mn users. By market share, Line is the no. 1 mobile messenger in Taiwan and Thailand as well as in Japan. Line acts as an overseas platform for KakaoTalk-based games that are popular in Korea. A good example is WeMade Entertainment’s (WeMade) Wind Runner. The more the two applications attract users in
overseas markets, the better Korean mobile games should perform.
- Top picks: NHN and WeMade: Our top picks are NHN and WeMade. NHN is the most stable and solid beneficiary of the growing mobile games market backed by Line, a mobile platform, and in-house content offerings. After shifting its focus to mobile services, WeMade has proven its global competitiveness with Wind Runner’s strong performance not only in Korea but in Japan via Line. Gamevil and Com2uS are also delivering favorable performances in and out of Korea backed by in-house games and a publishing business.
