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Apps take new lead from social games

by Akky Akimoto

On Japanese TV, you may notice that a lot of commercials for smartphone social games emphasize the word muryō (free). Consumers have been purchasing digital content on their phones for years, even since the clam-shell cellphone days. Now, more and more Japanese people are migrating to the sort of smartphones that are popular around the world, and Japan’s smartphone app business has overtaken the United States to become the world’s largest. Believe it or not, this is largely down to players of free social games who purchase virtual items within the game.

And now, publishers are trying to replicate this formula with microtransactions in non-game apps, too.

In the most popular social games, over 90 percent of users never pay anything. While this majority of players get to enjoy the game for free, they also play a role in making the action more interesting for paid players, since social games involve some level of interaction with other players online.

For a few hundred yen each time, users can choose to buy items that give them an advantage or special privileges. They may only make up a small percentage of the overall user base, but their desire to beat the casual players and be seen as elite is enough to generate huge profits for the games’ publishers, especially as offering a game ostensibly for free means the user base itself can be in the millions.

This “basically free” model is now being tested in several non-game apps, hoping to exploit consumers who are willing spend on in-app purchases.

Messaging app Line achieved 400 million worldwide downloads this month, chasing the 465 million monthly active users of Whatsapp (now owned by Facebook). Line’s new video app, Line Kids Doga, launched on April 7, targeting Japanese children with popular anime videos such as “Pokemon” and “Doraemon” for “basically free.”

Line also offers several successful social-game apps, and it has applied some of those monetization methods to Line Kids Doga. Users are given five minutes of free viewing time every eight hours, which means kids can enjoy 15 minutes of video every day. If they want more, they can pay, or connect with their networked friends and family for a bonus. These are familiar tropes of social games, the latter encouraging friends of the user to come back to the app.

Manga apps are experimenting too. There are a few iOS apps that offer long manga series for free; each series includes perhaps 30-60 volumes, or as many as 5,000-10,000 pages in total, which would costs several tens of thousands of yen to purchase as physical or digital books. The iOS app for “Rokudenashi Blues,” a popular 1980s-’90s boxing manga originally published in Shonen Jump, offers all 123 volumes for no charge upfront.

So how can they be free? Here again the formula combines free and monetized “freemium” usage, just like social games. Your free reading is limited to 30 minutes per day, and users who reach that limit just as the story is reaching its climax may be happy to spend ¥100 for another 30 minutes, rather than wait 24 hours for their next free session.

Like games, video and manga services are entertainment products, and so it seems only natural that a similar pricing model could be applied. Perhaps a more interesting case is that of Daijisen, a smartphone dictionary and encyclopedia app which was released in May 2013 for iOS, with entries for over 260,000 words. It was made available for free, but like a social game, it came with limitations to entice users to spend money.

Users began with five points to spend on looking up words. Once these are gone, users could wait 15 minutes to spawn one new point, or pay ¥85 yen for a top-up.

Because there were no other full-fledged Japanese dictionary apps available for free, the app was downloaded more than 150,000 times, which is quite successful for a reference app.

However, HMDT, the publisher, gave up on its free version after 11 months, replacing it with a regular ¥2,000 paid app. According to the company’s website, only 1 in 200 (0.5 percent) downloaders paid for extra points, against the 1 in 20 (5 percent) required to achieve profitability. The social-game-influenced dictionary app was an interesting but failed experiment.

The number of apps with microtransactions, which walk the border between paid and free, is forever growing. There are no guarantees of success, as Daijisen proves, but then again, in such a crowded marketplace, a traditional paid app is just as likely to fail under the wrong conditions. You can bet that more utility or productivity apps will dip their toes into the “basically free” waters.

Akky Akimoto writes for Asiajin.com, an English/Spanish blog on Japan’s Web scene. His Twitter account @akky is followed by over 120,000 users.