Smartphones have become the norm in Korea and in Japan the market has taken off in the last six months, but fierce competition abounds in both of these unique and uniquely advanced markets. beSUCCESS has conducted research of the Japanese and Korean app markets to uncover the opportunities and difficulties for foreign developers wanting to cash in.
Current Situation in Korea & Japan
Korea & Japan combined out download and out-spend the USA on Google Play and as of November 2012 Japan on its own is outspending the USA on iOS. From Q3 2012 to Q4 2012, global Google Play revenue doubled, in a large part due to these increases from Japan and South Korea, which, combined, contributed to close to half of Google Play revenue in Q4 2012.
Asian (Korean & Japanese) developers are also shining, with figures showing that in October 2012, seven of the Top 10 publishers on Google Play by monthly revenue, were Japanese or Korean, according to AppAnnie data.
Japan & Korea Market Overview
GDP per capita
Smartphone Penetration (whole mobile market as base)
No. of smartphones in use
World smartphone market rank
4th (behind US, China, UK)
iOS market share
Android market share
Other OS market share
Facebook usage on iOS vs Android
36% vs 40%
20% vs 53%
Facebook Market size
Japan is likely to catch up to Korea in terms of smartphone penetration with the total market size to reach similar levels to Korea within the next few years. The Korean market is more mature, with 65% smartphone penetration already. The Japanese potential market is effectively twice the size of that in Korea and will continue to grow substantially, as smartphones continue to proliferate.
Research conducted by Cyber Agent, Japan, suggests that although Apple app store is not as big as Google Play in terms of downloads, monetization is outperforming Google Play. This trend is expected to continue in 2013. Japanese consumers are also bigger spenders than Koreans, who prefer free apps. A similar expectation for exceptionally high quality UX and UI exists in both countries, though the more advanced Korean 4G infrastructure can cope with ‘heavier’ applications.
Like in the rest of the world, the iOS threatens carrier power over the content that is available to their customers. NTT DoCoMo, Japan’s largest carrier doesn’t partner with Apple as it can’t control the flow or sale of content through the iTunes store, which threatens an important revenue stream for the company. They instead focus on Android, and promote their own carrier stores — called “dmenu,” which is a portal for accessing Internet-based content, and “dmarket,” which is a market offering videos, music, books, and apps (source: TechCrunch).
DoCoMo’s decision gives them more control over the content of apps downloaded to their devices. However, it alienates them from 36% of the potential market. It remains to be seen how this decision will affect them in the long run, but a Cyber Agent spokesperson suggested that this could hurt their profitability in the long run, unless robust strategies to migrate current users to other services (e.g. their own in-house apps) is successful. This could offer potential for foreign developers, as DoCoMo look to gain an edge over the Apple app store.
No.1 mobile contents open market in Korea, since its launch in September 2009. Posses the largest subscriber base, contents volume, and sale figures in Korean app market. Entered Chinese market in partnership with China Mobile & Lenovo and Japanese market with its own service, ‘qiip’
19 Million Users
400k registered contents
34k registered developers
Preferred over Google
Messaging service with 97% sign-up in Korea. Launched games platform in 2012, with resounding success. Currently supports 12 languages. Launched in Japan in Feb 2013.
77M users globally
97% penetration in Korean market
8 of top 15 top grossing apps (Dec 2012)
Available on iOS and Android
Google Play is main distribution channel
10 of top 15 downloaded games (Dec 2012)
Source: MetApps 2012
How to ‘beat’ Kakao?
Kakao Talk’s Casual games offering has practically saturated the Korean market, and for small-time developers entering the Korean market (without big marketing budgets) things will be tough. However, the mid-core market offers great opportunities for penetration from new developers. Similarly, the hard-core market has no Kakao presence, though demand is minimal. In the long term, as the mobile gaming market matures it is expected that there will be a move to more mid & hard core games.
The Korean gaming market is one of the most advanced in the world. A powerful 4G network means that games with high band-width requirements do not face connectivity issues or dropouts. Korean consumer expectations are very high and cracking this market relies on high quality games. Social gaming can be wildly successful, as demonstrated by Kakao Talk releases since the launch of their platform. However, phenomenal user experience, partnership with Kakao or massive marketing budgets are really the only sure-fire way to get noticed. Even global powerhouses like EA Games have not had the same levels of success as in other parts of the world.
Although the Japanese smartphone market is less mature than the Korean, it is now growing rapidly. Android is the major player and Google play the preferred app store. There is little hint at the current time that Apple will catch up (iOS market share is shrinking slightly).
Line messenger from NHN Corporation dominates messaging and VoIP. Line broke the 100M user mark recently and has 41M users in Japan. Its service is currently available in 231 countries. Line was launched in June 2011, as a copy-cat of Kakao Talk, which launched about eight months earlier. User acquisition has outpaced Kakao Talk, mainly due to its growth outside Japan. Line is also beginning to make inroads into Kakao’s domination in the Korean market. It is unclear at this stage whether Kakao will eventually be eclipsed by Line, in Korea.
As domestic games platforms lose their monopolies in Korea and Japan, opportunities will open up for foreign developers.
Japan is an incredibly hard market to break into, according to a report from AppAnnie. The top five publishers in Japan dominate the fiercely competitive market, with nearly one-third of all revenues (and they’re all Japanese). Japan has been slow to adopt smartphones, but the success that domestic game developers have had in the feature-phone era has crossed over into smartphone. Japanese companies absolutely dominate the local charts in terms of revenue. The exceptions are NHN (from Korea), which produces the hit messaging app Line (developed in Japan), France’s Gameloft and Apple.
Games account for the vast majority of app revenue on iOS, at 77%. The USA lags at 59%. Line is the top revenue generator in the social space in Japan (IE not facebook) and social networking revenues were up almost 400% between Jan-Sep 2012, demonstrating the enormous and growing potential in Japan as smartphone adoption continues to accelerate.
Regardless of population figures both Japan and Korea represent large tech-savvy markets, with a big appetite and unique characteristics. Domestic developers can expect short sharp fame through distribution on closed platforms (such as Kakao Talk or Line). Foreign developers should seriously consider the risk of competition in the casual-gaming space in Korea, but large-scale opportunity exists in mid and hard core gaming. In Japan fierce competition exists, but users spend a lot of time (and money) using their preferred apps, so even a small user base can result in a good ROI.
Which platform to use?
The advice from MetApps is that you should stick with what you know, with a preference for Google play, based on their market share. To achieve the best ROI an effective marketing plan is a MUST, in order to beat local platforms (Kakao in Korea and Line in Japan). Publishing on Google Play and hoping for the best will not work. Use a balance of methods to achieve success. Generating positive feedback from customers, through careful engagement with customers, is important, as low feedback scores directly correlate to low downloads in a region where user experience and reviews are powerful.
Localization is Essential
Both Korean and Japanese consumers expect excellent localization and generally prefer domestic services to foreign, so make sure service localization is given due care and attention. The Korean and Japanese languages are similar, grammatically (even though they look very different), so once you have localized for one language translation to the other language is reasonably straight forward. However, a knowledge of local gaming / social jargon is beneficial.
Bare in mind that both Korean and Japanese markets are still ‘cutesy’, but this is less pronounced that it used to be. Getting local expert advice on localization will make a real difference when launching your service. And remember, in these experienced markets expectations are high – don’t disappoint your customers.
Consumers in the region can be fickle and mobile content is consumed fast, so be prepared and keep users engaged. Content refresh is advised, and should be executed in line with an effective advertising plan.
According to extensive research conducted by Fiksu in the region, both Korean and Japanese game developers have turned gamification into a science. An example of the extreme extent to which scientific consumer spending methodologies have been employed in the industry is the "Kompu Gacha" mechanic, which was so effective that it was actually banned in Japan. Additionally, users in both countries are used to the microtransaction monetization scheme as it has been part of the online gaming space since long before smartphones became prevalent. Developers should try to mimic monetization schemes in successful Korean and Japanese games in order to capitalize on this.
A few people to contact if you are thinking of entering the Japanese or Korean App Markets
Metaps: One of N.E. Asia’s most successful app marketing / monetization platforms. Headquartered in Tokyo. Offices in Singapore, Hong Kong, USA.
Fiksu: Headquartered in Boston, Fiksu have become one of the most successful app marketing companies to date. They have experience in NE. Asian markets.
AppsAsia: Headquartered in Korea their services include: Regional localization, viral, video and social network marketing. Traditional forms of promotion and domestic advertising play a role in their strategies.
Incross: Headquartered in Seoul, thier business areas are: Contents verification and wireless internet portal management.
Cyber Agent: Headquartered in Tokyo, CyberAgent is the operator of “Ameba.” They conduct a range of Internet services in Japan and Korea’s internet advertising market.
BeSUCCESS: beSUCCESS aims to be the preferred media partner for Korean tech startups who want to enter the global market, and for global startups wishing to enter the Korean, Japanese and Chinese markets.
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