Can Nintendo’s mobile games succeed without targeting whales?

Successful CMOs achieve growth by leveraging technology. Join us for GrowthBeat Summit on June 1-2 in Boston, where we'll discuss how to merge creativity with technology to drive growth. Space is limited. Request your personal invitation here!

GUEST:

Nintendo’s entry into the mobile gaming market continues to grab industry press headlines. Only last week, Satoru Iwata, Nintendo’s CEO, caused a stir when he claimed that Nintendo would not be pursuing high-value consumers, aka whales, with its mobile free-to-play games.

“My understanding of how to succeed in the Japanese [mobile gaming] market now is to find a limited number of generous consumers who are willing to spend a lot and analyze what encourages them to spend.” Iwata said “However, if we did that, I don’t think that we would be able to entertain hundreds of millions of consumers all around the world or to produce large and long-lasting achievements.”

Already, this has led to some backlash. Benjamin Cousins, an ex-monetization consultant who formerly worked at Nintendo’s mobile gaming partner, DeNA, took to Twitter to deny that such a strategy could ever work in the market.

So, who is right? The answer, as ever, is complicated. But while it is possible to succeed in the mobile gaming market without hunting whales, it is likely that level of success will not be enough for a company such as Nintendo.

Whale-free success

Contrary to what many believe, game makers can achieve success in mobile free-to-play without whales. And when we look at why companies have succeeded, we can identify cause for minor optimism at Nintendo HQ that a whale-free strategy can have a successful outcome.

Since the advent of the mobile industry, we have seen a number of viral free-to-play successes that prove this to be true. The likes of Flappy Bird, Crossy Road, and Temple Run have each gone on to global app store success and revenue generation.

The profile of these games are likely to prove encouraging to Nintendo’s hopes of forthcoming success. Each game is simple to play, eminently shareable via word of mouth or online, and has managed to reach a global audience as a result.

Considering Nintendo’s heritage with the success of the causal-focused Wii console, the influence its gameplay has had on mobile games as diverse as Oceanhorn and Mino Monsters, and its globally recognized characters, the House of Mario could easily exceed the global reach of these titles and monetize a much larger audience.

The problem of scale

However, something else links all of those games; the studios that develop them have tended to be incredibly small. Crossy Road is a three-man team (and Hipster Whale has a new game in the works – and it involves Pac-Man), Temple Run was initially developed in a husband and wife partnership, and Flappy Bird was a one-man success story.

And the reason why these studios have been small is because, surprise, their games don’t make a vast amount of money. Don’t get us wrong, the amount they make is significant for a smaller company.

After all, if I took a third split of the $10 million the makers of Crossy Road made from small IAPs and advertising in three months, I’d be more than happy with how successful we had been.

However, their monetization methods inevitably led to smaller yields, and smaller yields do not sustain larger companies. Despite having millions of users, Flappy Bird’s advertising made only $50,000 each day for the developer in comparison to the $1 million plus the likes of Clash of Clan generates in a single day.

And that’s simply a result of how the economics of free-to-play work. Irrespective of whether you work in gaming, in game journalism, or in any other field, you’ll struggle to get more than 5 percent of people paying for your game. But those 5 percent who do pay are often willing to spend whatever is necessary to get ahead, making them the key to a monetization strategy large enough to build multinational businesses on.

So for Nintendo, a whale-free strategy simply won’t work within their target structure. Having set a goal of generating $25 million a month from mobile titles, it is clear that ad funded games or those running small IAPs à la Crossy Road simply won’t let them reach that target.

Changing perspectives

Ultimately, this will mean Nintendo will have to pursue whales to have its chance of making enough money on mobile. But instead of seeing this as a cause for concern, Nintendo can easily turn things on its head by thinking about one simple thing: its core console business.

Think about it for a moment. A player who wants to play Mario Kart 8, Super Mario 3D World, and Super Smash Brothers on a Wii U will have to stump up over $400 for the privilege. That’s without adding the potential costs of additional Wiimotes to get multiplayer going to the mix or accounting for the fact Nintendo fans may already own a $200 3DS.

Rather than hunting for whales, then, Nintendo has to remember that it already has a pool of happy customers who have willingly spent hundreds (if not thousands) of dollars with them.

So if it can create mobile titles that monetize well, without doing so in a way that conflicts too much with Nintendo’s values, then it can certainly succeed by monetizing a small audience successfully.

But if Nintendo does attempt to answer its monetization question with the “big audience, low yield” strategy that Iwata suggested, then we’d suggest it may not be as successful as the legendary video game company hopes it will be.

Brendan Lyall is the cofounder and CEO of GrowMobile by Perion, a provider of top user acquisition and engagement solutions for mobile businesses.

VentureBeat’s VB Insight team is studying marketing and personalization... Chime in here, and we’ll share the results.