KakaoTalk enters mobile game market, and LG U+ takes cloud-based approach

Telecom Lead Asia: Mobile messaging service KakaoTalk,
which has acquired a user base of 55 million since its launch in March 2010, is
about to move into gaming. Its creator, Kakao, plans to launch the tentatively
titled Game Center service on July 30, 2012, and the move is likely to be a
profitable one.

The company recently launched its virtual currency,
Choco, and Ovum expects it to pursue a free-to-play (F2P) business model in
which digital item sales will be the main revenue stream.

The Game Center will compete with mobile carriers’
services, iOS and Android application stores, and existing game portals in the
rapidly developing Korean game market. Korean MNOs have been largely
dis-intermediated from the Korean mobile game market in the post-smartphone
gaming market. Carriers are now looking to exploit new 4G mobile networks as
they seek to re-establish themselves in the mobile gaming space. LG U+ is taking
an especially innovative approach, having recently launched the C-games cloud
gaming service.

When the Game Center launches it will be easy for Kakao
to bring it to users’ attention and to tempt them to try the new service.
Companies such as China’s Tencent have had success with this strategy of
gaining scale and loyalty through a core messaging service, and then using that
messaging service to promote new services that generate higher revenues.

Capturing users’ attention is only the first step towards
monetization, but it is a crucial one. KakaoTalk’s users have already
demonstrated that they will spend money within the service, and sales of
premium emoticons generate revenues of up to USD$87,000 (KRW 100 million) per
day. Emoticons may remain a significant revenue stream, but mobile gaming’s
broader appeal and larger monetization potential should soon dwarf emoticon

Of all the Korean MNOs, LG U+ has so far taken the most
innovative approach to LTE gaming, and on July 18, 2012, it launched the C-games
cloud gaming service. The company sees cloud gaming as an effective way to
bring high-quality, processing-intensive gaming experiences to almost any
mobile device without the need for large initial game downloads, as the game
content is streamed from the nearest server to the user’s device.

SK Telecom and KT will no doubt be watching LG U+’s cloud
service very closely. If the initial signs for LG U+ are positive, Ovum
believes all three carriers could be operating cloud gaming services in the
near future. Although the potential to launch cloud gaming services is not
limited to MNOs, superior network expertise and the ability to offer special
data allowance plans catering to cloud gamers could help carriers to
differentiate themselves from their OTT competitors.

Mark Ranson, analyst,
Consumer Telecoms, Ovum

[email protected]