Smartphones Are All About Business…Funny Business

“I have always known about man. From the evidence, I believe his wisdom must walk hand and hand with his idiocy. His emotions must rule his brain.” – Dr. Zaius,  “Planet of the Apes,” 20^th Century Fox, 1968

Have you noticed that Apple and Samsung have both lowered their sales projections?

Have you noticed that companies like Huawei, Lenovo, ZTE, Coolpad, Xiaomi and Oppo have all raised their projections?

O.K., they aren’t household names but they will be soon, at least household names in certain parts of the globe.

That’s because these firms (and probably hundreds of no-names you’ll never hear of) are doing something Apple and Samsung won’t or don’t want to do … make a cheap – really cheap – smartphone.

Sure, we know you don’t care. You love your iPhone or Galaxy because it lets you do just about everything and be in touch with just about everyone.

Got something to do?

There’s an app for that.

Want to avoid something you need to do?

There are hundreds of apps for that.

The problem is, worldwide, there are more folks who can’t afford to drop the equivalent of a year’s plus salary for one of those two phones than there are of people who can afford them!

Distribution of World Population

                                                                                  Source – U.S. Census

Emerging Share – While the industrial countries account for more of the spendable income, people in emerging countries are making it known they are ready for technology. China and India both have populations of about a billion each. Add the people in Brazil, Russia and a few other countries and you’re talking serious markets who are smartphone  ready! 

The folks most interested in getting their hands on a smartphone to do everything are those individuals living in the BRIC (Brazil, Russia, India, China) countries. 

The Chinese like the sleek look of the iPhone and Galaxy and everything you can do with them; but cripes, the iPhone 5 costs about $780 in China and the Galaxy S4 costs about $850 … jeezz!

And they have to pay full price because Chinese carriers didn’t buy into the idea of a phone subsidy to get you into the habit of using their service.

So the ingenious Chinese figure they can knock those suckas off and give their countrymen – and the world – what they really want…a cheap look-alike smartphone.

Analysts at Bernstein figure that could mean about 300M phones a year in China and an equal number in the rest of the BRIC.

Sure, they could use their old flip-phones to make calls but they want to do what you do …look cool… play games.

Look at U.S. mobile gamers as an example – 17.7 percent will use their feature phone for gaming by 2017, but 90 percent of smartphone users will do the same with their everything device. Don’t you think the ROW (rest of the world) will want to do the same? Well Yeah!

As George Taylor said, “Chalk up another victory to the human spirit.”

That’s great news for Japanese mobile social gaming firms DeNA and GREE. When it comes to monetizing their users they’re more efficient than anyone else.

That’s probably why Zynga bribed Don Mattrick, the head of Microsoft‘s Xbox business, with a pay package that could be worth about $50M to give them a more global look at the market.   

Despite all the business and store apps that are available to you and me, just remember the one thing we (O.K., you and my kids) want to do is play games.

Keeping Limber – Smartphones let people do a lot of things and stay in touch with a lot of people; but the thing most users add are a few dozen games to keep them from getting bored. Ironically, most of the game play on their go-anywhere mobile device is at home. 

Gamers are gamers, no matter where they live; or, as Julius said, “You know the saying, “Human see, human do.”

No wonder DeNa and GREE are glad to see those cheap smartphones coming out and why Zynga went on a staff diet and wrote a big check for a new boss.

Global Potential – The game industry has always been strong with all age groups, even though Boomers and Gen Xers don’t admit it. In the emerging economies, the potential for mobile game play is very strong because the device is often their first and only computing/communications device and the potential for mobile games – especially with less expensive smartphones – will be tremendous for developers. 

While console and PC games made healthy contributions to the 39 percent gaming growth that showed a respectable $960M in sales last year in the U.S., mobile will take the lead–especially in developing countries where the phone is their primary computing/communications device.

Researchers at Newzoo project that much of the growth will come from the Asia Pacific and Latin American countries and that the new lower-cost smartphones could help game developers rake in about $12.3B by the end of the year

There’s no reason the model that has worked so well in the EU and Americas won’t work just as well (translation – profitably) in countries where kids play games even more than ours.

All Segments Strong – With the introduction of new game consoles and ultralight notebooks, the console/PC market segment should continue to be good. But new generations of mobile devices (especially low-cost smartphones) should kick mobile gaming into high gear. 

In the U.S., game developers make their money from a combination of paid downloads, in-game purchases of virtual goods and in-game advertising.

And the market is rapidly evolving to free, platform-agnostic games supported by a combination of ads and virtual goods sales.

Multiply the U.S. figures by even 10 and suddenly you’re talking about a serious pocket of change!

Profit Play – Whether they are paid or free games, creative developers have also figured out how to turn a profit with the games people play. With the rapid ramp-up of cheap smartphones that have a good “look/feel,” the open platform games could become even more profitable. 

Yep, the market is going to be big, huge even; and there’s nothing out there to make me believe that the new potential gamers will be any different from the people doing it right now … yes, right now!

According to eMarketer, more than half of the U.S. and EU mobile phone users will play games on their phones this year. (The other half will lie about it.) 

Even though 44 percent primarily play games at home, 22 percent said they played “while waiting for something” and 21 percent played while traveling. 

While females tended more toward puzzles, guys preferred action and sports games (about 3 to 1 in each category).

Game Categories – Game developers don’t really develop new games, new segments, new features for themselves, they design them for the guys/gals so they buy more and more and more. While males tend to prefer sweaty palms and brutal action, the ladies prefer finesse, talent and eye/hand/mind coordination to win. 

At the same time, the tastes in game play changes with the various age groups. 

Adrenalin- pumping action games tend to appeal more to the younger crowds while older players of both sexes tend to migrate to puzzle games. 

Both GREE and DeNA have a very broad user base by offering games to fit every age group and play preferences. 

With more smartphones being designed for consumers in emerging markets, the growth potential for the Chinese device manufacturers – and mobile game producers – should be very strong in the coming years. 

According to Canalys, Samsung presently has 20 percent of the Chinese market, and several “hometown” companies have surpassed Apple’s 8 percent market share. 

Local competitors are going to make it tough for Apple and Samsung because Chinese smartphone shoppers are concerned about brand image and the look/feel, but they are still concerned with price. 

Both market leaders will have to deliver lower-cost units to retain and grow their market share without diluting the value (and profit) from their high-margin units. 

The move is important for Apple and Samsung because Chinese switch phones far more often than folks in the West — generally after about six months, compared with every two years or so in developed economies.

And doing well at home will help the Chinese smartphone producers export their devices to the rest of the emerging countries around the globe.

As more of the economic smartphones are sold, more kids will download games and the mobile game market that can be monetized will continue to get bigger.

As George Taylor exclaimed, “It’s a mad house! A mad house!”

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G.A. “Andy” Marken

President

Marken Communications, Inc.

Andy@markencom.com