China's Android and iOS Market Will Break 400 Million in 2013

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2013 has only just started, but from our office in Beijing, I can already see several major trends in China's mobile gaming market taking shape. Some are so large, they stand a good chance of turning the global game industry on its head. And if you plan on developing games for iOS and Android this year, I think you'll want to pay close attention. Here's four to watch for in the year ahead:In 2012, China had an install base of over 200 million iOS and Android devices. (Umeng, the largest mobile analytics platform in the country, tracked over 140 million Android devices and over 60 million iOS devices as of October 2012.)With market research firms such as IHS iSuppli projecting 268 million new shipments this year and most major smartphone manufacturers expected to double sales in China this year, 400 million smartphone devices would seem a fait accompli. To put this into perspective: By end of 2013, there will probably be more smartphone owners in China than the total populations of the United States, the UK, and Canada combined.One important point to note about this growth: Although global manufacturers such as Samsung and Apple derive solid device sales in China, the bulk of growth stems from local brands such as Huawei, ZTE, and Lenovo, as well as a slew of ultra-low end "shanzai" (i.e. counterfeit) devices, powered by the Android OS. Consider: At our office, the team just reviewed a new knockoff Android phone (with an HTC logo on it) which looks remarkably like a Samsung Galaxy Note, plays all our Android games remarkably well -- and sells for less than $50.And that's just one model of Android currently available in China; we're seeing a proliferation of other ulta-low end Android phones. How many of these "shanzai" phones are being sold, you ask? According to distribution partners, over a million units of this one particular phone are being shipped each month. How many different shanzai phones are there on the market? LOTS.Finally, China's mobile operators are changing their entire lineup to be smartphone-based. Walk into a China carrier store today, and you'll notice the majority of devices on sale are smartphones. All this in mind, I'd say 400 million smartphones by 2013's end is a forecast on the conservative side. And since the total smartphone market will be massive, the market for smartphone gaming will be large too. In 2012, Niko Partners estimated 192 million mobile gamers in China. So if mobile gamers continue growing at pace with the total smartphone market, we can expect to have an addressable audience well over 350 million.Or maybe we should say Android/iOS -- because this leads me to my next prediction:As noted , Umeng analytics placed the Chinese smartphone market at 60 million iOS devices, and 140 million Android devices last year -- i.e. 30 percent iOS, 70 percent Android. This year, for the reasons I've mentioned above, the Android share will probably increase, to more like 75-80 percent of the total market.As Android's share increases, so will monetization rates for games on this platform. I'm talking massive growth, with year-on-year increases over tenfold. For one thing, Android gaming revenue in China was so small for most of 2012, it has nowhere to go but up. But far more crucial, China's largest mobile operators, game publishers, and gaming platform/app stores havefigured out that working together to simplify the discovery, download, and payment process for Android players results in huge game money.This cooperation solves a major problem that's made Android revenue so tiny. Up to now, there was no easy way for an Android user to make an in-app payment. Every Android app store in China (and there are hundreds) had a different payment method, and none of them were easy, often requiring a 6 to 10 step registration process.Now all the major China carriers have built out a channel ecosystem that facilitates carrier billing. (China Mobile, for example, just launched the IDO channel program, which allows the big app stores to apply for and issue carrier billing codes to developers.) At roughly the same time, game developers in China have figured out how to optimize in-app purchase design, while Chinese players have grown accustomed to the convenience of one-click carrier billing.Carrier billing is starting to enable casual social titles on Android to monetize well, but in 2012, most Android game monetization occurred through mobile-based hardcore MMOs with custom app store payment gateways. As the registered user base for these large app stores have grown, gamers making in-app purchases have also become easier and more frequent.For instance, HiAPK, a leading Android app store in China, processes around US$5 million of in-app payments monthly, with monthly ARPPU at over US$50. HiAPK alone drives over 110 million app downloads each month, and according to Joe Wu, HiAPK's CEO, 2013 will be a year of hyper growth for the company, with projected revenues of US$80 million... and that's just one Android app store in China.As part of this growth of the Android, we expect to see the platform's app stores start to consolidate. Where China now has hundreds of sites to download Android apps (yes, really) and a market where discovery, distribution, and payment are insanely fragmented, we're soon going to see the number of app stores shrink from over 500 to about a dozen major players who can handle carrier billing for in-app payments; these players will also start to consolidate the discovery and distribution challenge, getting good games into the hands of Chinese gamers and making payment on Android devices relatively easier. (Emphasis on "relatively": Now there's only about a dozen payment SDK's to integrate and your Android distribution partner list is reduced to double digits.) So still not quite as easy as Western markets, where there's only Google Play and Amazon to deal with.Starting this year, then, developing Android games in China will be more monetizable than it has ever been - but again, that doesn't mean it'll be perfect. For instance, here's another important caveat: Android-based tablets are not likely to monetize well yet, because most tablets on the Chinese market don't have a sim card slot, which precludes them from doing carrier billing. Very few game developers know this, but it's an important point for China distribution: Right now, developing games optimized for the Android tablet market in China could be the worst financial decision they'll ever make.Speaking of tablets, I'm fairly confident 2013 will be the year for an undisputed champion to rise:This prediction is probably larger than just the China market, but it's still more than worth a mention here: the iPad Mini is going to be the king of mobile games. Its long battery life makes hardcore gaming for many hours at a time possible, and just as key, due to its right-sized form factor, games optimized for the iPhone play better on the Mini than the larger iPads.The device's price point opens it up to a much larger demographic, and here's the Chinese twist that makes it even more attractive to the gaming market here: Unlike Western consumers, who are accustomed to getting deep discounts for their iPhones through a carrier contract, most Chinese tend to pay full price for their iPhones. (The iPhone 5 now retails here for $850-900.) Meanwhile, the iPad Mini retails in China for about $350-400, which makes it both an effective and affordable mobile game device.However, while I definitely think the tablet market is going to grow, my guess is its share of the total mobile market will remain flat or even decrease, simply because the phone space is growing so quickly.This brings us to my next forecast, on the kind of games that will do well on mobile this year:For the latter half of 2012, the top grossing iOS and Android game charts in China were dominated by hardcore online games and MMOs, but that's already shifted as more people enter the smartphone market, and more of them come looking for casual games to play. We expect more casual single-player titles to become top grossers in China, especially (as I noted above) as game studios learn to better monetize their freemium casual games, and carrier billing for in-app payments gains broader acceptance.We're also seeing another shift from last year's market to now -- a move away from Western games toward Chinese titles, and to Western games deeply localized and culturalized for the Chinese market, with themes, stories and dialog relevant to players in China.In early 2012, a significant number of top games on the market were non-localized hits likeand, but now the charts are ruled by games with Chinese names and language (even if they were first made in the U.S. or Europe). With the advent of so many high quality, fully-culturalized titles, players here naturally gravitate to the products that directly cater to them. In 2013, I'd estimate over 80 percent of the top games by distribution and grossing will likely be fully localized and culturalized titles.To compete in this market, Western developers need to optimize their games so that the artwork, themes, and monetization are appropriate to how Chinese players like to pay and play. I discussed this at length in a previous post for Gamasutra , and can point to the recent success we had with, a casual hybrid which became the top downloaded game in China last month, even though it was developed by our pals XMG Studio in Canada.No doubt it'll take some time for Western developers to prepare their products for the China market, but I'm confident a lot of them will start this year: After all, they'll soon have over 400 million reasons to get it right.