Korea Social Game Market

Trend Report

2011 Second Quarter (Vol. 4)

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Table of Contents Market Overview .......................................................................................................................................... 3

Accumulated AppStore Users .................................................................................................................... 3

Total Revenue of Cyworld AppStore ......................................................................................................... 4

Gender Ratio ............................................................................................................................................. 4

Age Distribution ........................................................................................................................................ 4

Age Distribution by Gender ....................................................................................................................... 5

Simulation Games ......................................................................................................................................... 5

Accumulated Installs of Simulation Genre ................................................................................................ 6

Monthly Revenue Simulation vs Non-Simulation Genre ........................................................................... 6

Installation ratio Simulation vs Non-Simulation Genre ............................................................................. 7

Total Revenue Ratio .................................................................................................................................. 7

ARPPU for Simulation Genre .................................................................................................................... 8

ARPPU for Simulation Genre by Gender .................................................................................................... 8

AppStore Overview ....................................................................................................................................... 8

Accumulated Installs for All Genres .......................................................................................................... 9

ARPU All Genres ...................................................................................................................................... 10

ARPPU for All Genres............................................................................................................................... 10

Revenue of all Genres .............................................................................................................................. 11

ARPPU All Genres .................................................................................................................................... 11

Cyworld Mobile AppStore ........................................................................................................................... 12

Developers at a Glance ............................................................................................................................... 13

Number of Apps in AppStore ................................................................................................................... 13

Conclusion ................................................................................................................................................... 14

3

Market Overview

Cyworld AppStore in the 2nd quarter has had its ups and downs. Despite seeing growth in games

launched in the first quarter, the platform also saw a drop in new users as well as revenue.

Cyworld AppStore attracted around 400,000 new users in the 2nd quarter or just about half of what we

saw in the 1st quarter. In total, the number of total users in the platform is at 4.9M users, up from 4.5M

as reported in the 1st quarter.

<Line graph 1: Accumulated AppStore Users>

Even with the decrease in new users signing up to the AppStore, the quarterly revenue continued to

increase. The AppStore also saw the highest monthly revenue in April with just over $900,000 USD in

revenue before fading the next two months. Despite the decline in May and June, it was the best

performing quarter so far for the Cyworld AppStore with the total revenue reaching $8M USD since the

AppStore launched in 2009.

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<Line graph 2: Total Revenue of Cyworld AppStore (Jun 2011)>

One thing that remained steady in the Cyworld AppStore was the demographics. The growth between

male and female users remains steady for four straight quarters. Like previous quarters, female users

continue to be the majority in installing apps with the ratio remaining consistent with previous quarters

(56:44).

<Pie graph 1: Gender Ratio> <Pie graph 2: Age Distribution>

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Total Revenue of Cyworld AppStore (Jun 2011)

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Much like the gender ratio, the age distribution for the Cyworld AppStore saw a slight change from

previous quarter with a tiny increase in users between the 16-18 years old age group and users in the

25-29 years old age group dropped slightly.

<Pie graph 3: Age Distribution by Gender>

Simulation Games

Simulation genre has always been at the top attracting users and increasing revenue even well before

this quarter. The games that were popular then and continue to be popular now are farming, aquarium

or business management games. The 2nd quarter exploded with a handful of simulation games from

both local and foreign developers. Those games that were introduced to the AppStore were games that

are already published on Facebook and other social networks. Some of the simulations games were My

Farm, My City (Avocado), My Kingdom (Happy Elements), Viva 3 Kingdoms (Crzyfish), and first person

shooter, Uberstrike (Crzyfish). This quarter, the city building games took off in Cyworld AppStore with

the aforementioned games in the genre.

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<Line graph 3: Accumulated installs for Simulation genre.>

There’s no question by now that simulation genre is the most popular amongst the users in Cyworld and

data up until the 2nd quarter proves it. An overwhelming 90% of the revenue for the 2nd quarter was

from games in the Simulation genre, ranging from farming to building a kingdom to running a fashion

store.

<Pie graph 4: Revenue Sim vs Non-sim games. in KRW. Figures rounded.>

Driven by the release of new simulation games in the 2nd quarter, the majority (94%) of the AppStore

users installed more Simulation games than Non-simulation games in the quarter. Revenue from

Simulation games also increased from the previous quarter. The ARPPU was higher for each category in

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the Simulation genre, while the ARPPU for the city building games more than doubled for each month of

the 2nd quarter.

Note: Q1 2011 report included data for the last month of the quarter (March) while this report reported numbers for the three

months in Q2.

<Pie graph 5: Sim vs Non-sim games install ratio and revenue ratio>

<Line graph 4: ARPPU for Simulation genre>

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<Bar graph 1: ARPPU of Simulation genre by gender>

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AppStore Overview

While Simulation genre continues to be a strong genre in the AppStore, there are still a continuous flow

of games, of other genres, into the AppStore. Users continue to install various types of games that are

available in the AppStore. The installation numbers were positive for each genre in the 2nd quarter,

while there was a noticeable increase for some genres as compared to the previous quarter. As

mentioned earlier, games in the Simulation genre saw the most growth compared to other genres while

others remained steady or flat or saw little growth. City building games more than doubled their

installations in the 2nd quarter from 890,000 users ending March 2011 to 1.8M users at the end of June

2011.

<Line graph 5: Accumulated number of installs by genre>

While users are playing games and purchasing in-game items in the AppStore, the revenue generated by

games other than the Simulation is still relative small. The ARPU has been down for many genres with

the exception of city building games whose unexpected growth helped drive the city building game’s

average revenue per paying users up to as high as 150 Won or roughly USD $0.10. The ARPPU was

higher in the 2nd quarter, with many seeing an increase from previous quarter. City building games were

right behind RPG games, which is known to have the highest ARPPU in the AppStore for past quarters.

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<Line graph 6: ARPU of All Genres>

<Line graph 7: ARPPU of All Genres>

Another genre we’ve highlighted in the past couple reports was the success of RPG genre. In the 2nd

quarter, the revenue from RPG games dipped after a promising 1st quarter. The ARPPU, on the other

hand, continued upwards, moving past 18,000 Won or roughly equivalent to $17USD. Despite the

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decrease in revenue in this quarter, solidly designed RPG games will continue to attract both male and

female users.

<Line graph 8: Revenue of RPG genre>

<Line graph 9: ARPPU for RPG>

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Cyworld Mobile AppStore

With the increasing popularity of smartphones in Korea, Cyworld embarked on a mobile AppStore that

would allow users with a smartphone to play social games on the phones. Smartphones are booming in

Korea, with over 10M smartphone users at the end of March 2011. In April 2011, Cyworld unveiled the

mobile AppStore to their users. Initially, the mobile platform launched with five games and it slowly

grew to nine games by the end of the 2nd quarter and is mostly made up of simplified versions of the

exiting games in the AppStore.

The Cyworld mobile AppStore allow developers to create both Flash and HTML/Javascript games played

on mobile browsers on their smartphones and/or other mobile devices. Additionally with our mobile

API, developers are also able to integrate the Cyworld social graph into their games as well as integrate

dotori “acorn” virtual currency into their mobile social games and native mobile games/apps.

While it’s still too early to report back any statistics on the performance of the mobile AppStore, the

increasing number of smartphone users, it a good signal of where the trend is going.

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Developers at a Glance

The 2nd quarter continued to see growth in overseas developers publishing their games into the

AppStore. Overall, there were 33 games published in the 2nd quarter. Of those, eleven were games

developed by overseas developers. The number of overseas games has already surpassed the previous

years combined. Despite the growth in overseas developers in the AppStore, the local developers still

have a very strong presence in the AppStore.

<Bar graph 2: Number of Apps in AppStore>

The increase of developers only means an increase of games for the platform. Simulation games

continued to be the popular genre the overseas developers are bringing to the platform. All but two of

the eleven games were simulation games. First person shooter and RPG were the other two games

published this quarter.

Of the overseas developers coming to the Cyworld AppStore, Chinese developers were the most active

since Rekoo first began service on the platform in 2009. Followed closely are developers from Russia

while developers from North America and other parts of Europe were not present in our platform since

the platform began operations.

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Games from Chinese developers appear to have an easier time breaking into the market compared to

other overseas developers. Happy Elements’ My Kingdom (known as Happy Kingdom in Facebook), Wild

Age (Avocado) and Hoolai’s Viva Three Kingdoms (locally published by Crzyfish) have attracted solid

number of users to their respective games since launch.

Games being published are also reaching a new high each quarter. The AppStore has reached a total of

66 games through the first two quarters of 2011. It’s expected the AppStore will surpass the 86 total

games that were launched in 2010.

Conclusion

While we saw favorable growth in the 1st quarter of 2011, the user growth slowed in the 2nd quarter.

After reaching a record revenue month in April 2011, the revenue decrease in May and June. Despite

the slight decrease in new users and the decline in monthly revenue the last two months of the quarter,

the 2nd quarter performed better the previous quarters, in terms of generating revenue.

Simulation games continued to be the dominant genre in the platform. City building games became one

of the popular categories in the Simulation genre. While the installs of city building games remain the

lowest behind the farming, aquarium, business management and pet simulation games, their revenue

far exceeds those type of games and is second only behind to RPG games in terms of ARPPU. Korean

users are seeking simple yet fun games on the platform and games in the Simulation genre provides that.

The introduction of these city building games helped revive a stale city building genre.

As we saw last quarter, overseas developers had begun to notice the Korean market. This quarter, there

were even more overseas developers entering the market, either directly by themselves or through the

one of many local publishers. The increase of proven games from the Chinese and Western market will

be beneficial to both users and their developers.

The introduction of the Cyworld mobile AppStore social gaming platform is the first from the three local

social game platforms. Developers can now develop games for users to play on the browsers of their

smartphones. In addition is the availability of our Mobile API, which allows developers to develop

games for mobile operating systems, Android and iOS.