How Japan Is Winning in Mobile Games ;Publishers Master the Psychology of Payments in a Country Conditioned to Buy on Phones

How Japan Is Winning in Mobile Games

Publishers Master the Psychology of Payments in a Country Conditioned to Buy on Phones

MAYUMI NEGISHI

Updated Dec. 11, 2013 3:38 a.m. ET

TOKYO—Like many other mobile games, “PokoPang” features cartoonish animals and requires players to defeat monsters. Hironori Tomobe, data scientist at Mobage game platform operator DeNA Co., talks about how big data is used to retain users and to improve long-term profits in an exclusive interview with the Wall Street Journal. But the puzzle game—little known outside Japan—stands out for its developer’s ability to conquer revenue.“PokoPang” has helped make Line Corp. one of the highest-grossing mobile-game publishers in the world for much of this year, according to app-analysis provider App Annie.

Line isn’t alone. Japan’s GungHo Online Entertainment Inc. 3765.TO +2.53% earned $4.1 million per day in October, according to company projections, thanks to its biggest revenue source, “Puzzle & Dragons.” Neither game shows up in App Annie’s top 10 most-downloaded list.

Better than any other country, Japan’s mobile game makers have cracked the revenue code despite having few world-wide megahits. The secret: an industry that is constantly experimenting with new ways to master the psychology of mobile payments.

Japanese game publishers make sure each download counts and players stay engaged—hiring math and statistics experts to parse billions of data points in real time, as Line, DeNA Co. 2432.TO -8.25% and GreeInc. 3632.TO -6.09% do, or having dozens of staffers monitoring the chatter on blogs and Twitter, TWTR +5.14% like GungHo does.

In Japan, each downloaded game earns three times the global average on Apple AAPL +0.01% devices and six times the world-wide norm on Android devices, according to App Annie.

“The download is just the start,” says Jun Otsuka, Line’s global business manager. “The real grunt work is in running the game.”

The stream of cash from games has even pushed Japan to overtake the U.S. in app revenue on phones and tablets overall, according to an App Annie report being published Wednesday. In October last year, Japanese consumers spent roughly 30% less than U.S. consumers did on gaming apps; this October, that is reversed to roughly 30% more, App Annie said.

Game experts point out the Japanese populace has long been conditioned to pay for goodies on their phones.

Japanese carrier NTT DoCoMo Inc. introduced its mobile Internet service i-mode at the beginning of 1999, eight years before the first iPhone and nine years before the first Android-powered phone.

GungHo’s “Puzzle & Dragons” uses clever tactics to entice players to pay for extra goodies:

Funny Money

Like a casino, “Puzzle & Dragons” issues its own virtual currency—magic stones—to lull players into forgetting they may be spending real money.

Reward Removal

Players can pay one stone to continue a game even after it ends. If players choose not to, the game reminds them of what they’ll lose.

Limited-Time Sale!

For five magic stones, a dragon-shaped machine dispenses a monster to use in battle. Limited-time offers stoke enthusiasm.

Won’t You Miss Me?

As players collect monsters, they run out of places to keep them—unless they buy more space.

Source: GungHo, AppBank, WSJ reporting

In the early 2000s, many i-mode users were already spending hundreds of dollars per month on everything from services that let you check weather and train schedules to games and fancy emoticons.

Japanese publishers, though, say the real key to their revenue generation is a system of data-crunching and game-tweaking that keeps people engaged and active, on the theory that “people will eventually pay, if they keep playing,” as GungHo producer Daisuke Yamamoto says.

Although many global publishers crunch data as well, the Japanese firms have the deepest pockets, and are the most thorough in applying tactics to get people to pay, says Ramin Shokrizde, an expert on monetizing games at the U.S. arm of Wargaming.net, the Belarus-based developer of World of Tanks.

For instance, DeNA—maker of card-battle game “Rage of Bahamut”—often tries out different versions of game tutorials on test audiences to make sure they entice people to start playing, says Hironori Tomobe, a Ph.D. in computer science who heads a group of 30-odd data-analysts.

To keep enthusiasm from waning, DeNA—like most Japanese publishers—holds periodic events where players for a limited time can get special prizes, enhanced odds of winning coveted items, or more interactive game play.

During each event, Mr. Tomobe’s team keeps track of a range of parameters—like how many people are playing or whether they’re graduating to new levels—and tweaks the game in real time if the figures are off what’s expected by 10% or more.

DeNA’s programmers also adjust parts of games that seem too hard, as they did with a role-playing game called “Kaito Royale” when they found a high number of players defecting after they had to fight a particularly difficult enemy.

The sweet spot, says Mr. Tomobe, is to keep games just hard enough so that players will pay money for items that help them get ahead—yet not so hard that they feel taken advantage of, or get frustrated and give up.

“Sometimes the data looks good—people are engaged and buying items—but then you realize that it’s too tough on people and their wallets,” says Mr. Tomobe. “In the long run, it’s always better to have people enjoying the game and coming back for more, than making money short-term.”

Mobile-gaming experts say the master of getting players to pony up inside the game is GungHo, whose “Puzzle & Dragons” was one of the first mobile games to adopt an arcade-type system of paying virtual money to continue playing after the “game over” notice.

In the game’s dungeons, for instance, players have to defeat a number of waves of monster attacks.

After each wave, they’re shown the treasures—and rare, collectible monsters—that are waiting if they can make it all the way through.

For those players who don’t make it the first time, those glimpses provide an extra incentive to buy game extensions and try again.

“‘Puzzle & Dragons’ is truly diabolical in convincing you that you need to pay money,” said Tokyo-based games consultant Serkan Toto. “You don’t make that kind of money without being relentless on how you operate your game.”

Now, Japanese game makers are trying to replicate their lucrative mobile-gaming model abroad—mainly by promoting their games in foreign markets. The English version of “Puzzle and Dragons” has been downloaded more than a million times in the U.S., while a Korean version of “World of Mystic Wiz” by Colopl Inc. 3668.TO -0.49% has been downloaded a million times.

Still, those levels are just a fraction of the downloads at home, and the gaming sites of DeNA and Gree have had slow starts in the U.S. Some mobile-game experts say differing tastes may be to blame. Many Japanese companies are eyeing partnerships with local game developers to combine overseas tastes with Japanese