Executive Summary

In Part 2 of our interview with mobile marketing company Fugu Mobile CEO Ranjit Singh, we disucss the current environment of China's wireless sector and some of the hurdles facing China's mobile gaming market. Click here for Part 1 on the interview.

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PE: What is the general attitude right now towards the recent crack downs by mobile operators?

Singh: For the wireless industry as a whole, it is a negative. But it is good for content providers like us. The new restrictions affect companies that depend on subscription services.

PE: Is the negative market sentiment affecting investors as well?

Singh: Investors are showing a lot of interest in specific areas. The market for the old business models has cooled down, and investors are aware of that. There is actually a lot of enthusiasm in the mobile marketing industry right now. They see that mobile adverting will grow; it is just a matter of time. I think things have cooled down for the content providers, largely driven by the tight controls from the telecom operators. China Mobile is being very monopolistic and this is affecting content providers. For example, investors do not find pure mobile gaming so exciting anymore as it is tightly controlled by China Mobile and its Java platform Magic Box. It takes anywhere from three to five months to get a game on Magic Box. It is an extremely slow and painful process to get a actually get a game on the operator's platform in China. It is much easier to publish games in other countries. Time to market in other countries may be maximum one month. Receiving approval for games from China Mobile is difficult too as they every now and then change their testing partners or make some changes to their platform. It is limited to three or four content providers that in a sense have become China Mobile's "recommended" partners, meaning these companies have corner the market to a certain extent . There is also a policy that only allows you to publish five games per month.

PE: Don't a lot of companies offer games on their own portals to be downloaded?

Singh: Companies can offer downloads on their own portal, but the games are linked through Magic Box. China should be the largest mobile game market in the world, but the market here has really been handicapped. It is costing revenue for everyone. China Mobile is not really focusing on this market right now since the market has already reached a decent size. 3G, mobile TV and other things are getting the attention right now. We are currently experimenting with free games with a couple of companies. There are ads included in the game, such as banners. We can rotate the in-game advertisements according to time or numbers of impressions. The idea is use the brand to drive revenues for the mobile games.

PE: Do these types of games have to go through Monternet?

Singh: No. When the game is free, you skip the entire China Mobile process. It is also more effective for the brand as it takes a much shorter amount of time to launch the game.

PE: How is the mobile gaming businesses going in Western countries and India?

Singh: It is going very well for us there. We get more revenue from game downloads from some small countries like Bangladesh than we do from China, which shows how tightly controlled China has become. We have seen some of the largest returns from the smaller markets. Europe is a tougher market to break into because there are already so many players, but we have found a place for ourselves there, too. In the mobile gaming market, there is this tendency for mobile games to go towards branded games, such as a Star Wars game or a Spiderman game. Most mobile gaming companies have to purchase licenses for the games and there is a huge cost in acquiring the licenses. We do not buy any licenses. We develop our own games and we do not target hardcore gamers. Our games target consumers who may play a game infrequently for 10 to 15 minutes. There are two types of games: branded games and value games. We are making the value games, which probably cost half the price of the branded games and offer more choices. When we work with a mobile operator, we tell them that we guarantee them six games a month, which is more than what most companies are able to do.

PE: Is the US mobile gaming market growing?

Singh: It is growing. The mobile operators in the US are also very controlling, and most of them have exclusive content aggregators. That market is actually growing really fast, even on the mobile marketing side. We are actually working with a few brands there on mobile marketing campaigns. The costs in the US are very high and a lot of the agencies are looking to work with companies in a lower cost environment to do the development work. Execution of a lot of the brand marketing in the US actually takes place offshore.

PE: What is the state of mobile game development in China right now? Are you able to find good developers, or is it better in India?[/i]

Singh: We are able to find good developers here. Actually, the style of games here is very different from the ones consumers in the West are downloading. We bring in the creative concepts and ideas that would work in the West, and get them developed here. I would say most of our games have more of a Western flavor than a Chinese flavor. One of our advisors was the creative head of MTV. We have advantages over the game developers here as they look at China as an isolated market. They are blocked at the sales end because of China Mobile, and they have not look at other markets. We do not have that obstacle as most of our revenues are not from China. Our mobile marketing revenue is from China, but our mobile gaming revenue is not. India is a big market too, and gaming is growing really fast over there. The revenue share is not as good as China, but it is far more open and easier to penetrate. We will look at mobile marketing in India in the future.

PE: How much do you typically charge for games?

Singh: Pricing varies from country to country; it is usually something from US$1 US$5. Revenue share is typically 50:50 in most cases.

PE: Is Fugu Mobile profitable yet?

Singh: I don't expect Fugu Mobile to be profitable for the next few months as we will spend some money getting people for marketing. Right now we are at break-even. The mobile gaming business sustains us, and is growing, while the mobile marketing part is icing on the cake right now.

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