As the Japanese mobile social network games market matures, it makes sense for its leading providers to seek international growth. IHS Screen Digest research indicates that the domestic Japanese mobile social network games business was worth over $1bn in 2010. DeNA, its main competitor Gree and newer services from Mixi and Ameba contributed to this record performance.

DeNA is not alone in seeking international expansion. Gree will use its Q2 2011 $104m acquisition of US-based smartphone games community platform OpenFeint to set up a Western service. Gree also has partnerships with Chinese online games operator The9 and Mig33, a mobile social network popular in South East Asia.

DeNA's freemium business model is growing in popularity. Free-to-download games accounted for around half of the top grossing games on Apple's App Store at the end of Q2 2011. Unlike in Japan, most of these Western titles only have loose connections with existing social networks and communities. IHS Screen Digest does not believe Japanese companies will be able to match their domestic success in terms of revenues per user internationally. The millions of potential new users will still provide a significant boost to revenues, despite the expected poorer monetisation opportunity.

DeNA's 15% cut of revenues (after store owners' 30%) will see it make proportionally less money per transaction in the West than it does in Japan. Most Japanese payments are completed by mobile network operators which usually take a 10%-13% share of revenues - the remainder is split 70-30 in the developer's favour. This leaves DeNA with around 25% of transactional revenues in Japan; its Mobage smartphone service will leave it with around 10% of transactional revenues. In each case, developers end up with roughly 60% of revenues. The effective 60% revenue share may deter some successful Western developers from bringing games to Mobage as it is lower than the 70% they take from existing mobile (Apple App Store, Android Market) and social platforms (Facebook). For developers that have struggled to reach a wide audience or drive revenues, the lower revenue share will likely be more than offset by the increased volume of users and better engagement provided by Mobage.

Mobage offers improved discovery and monetisation opportunities for developers that will be particularly welcome for Android content, which developers have often struggled to monetise. The limited device support offered by DeNA at launch is an indication of one of the major difficulties that developers and service providers face in the ever expanding and increasingly fragmented Android ecosystem.

DeNA has been active in China since 2006 and has operated a browser-based service with only limited success. As 3G penetration and smartphone adoption increases, its new service will likely prove more popular as it offers higher quality content to a more engaged, more receptive audience.

The launch of these new services is just the latest move in what is likely to be a long and hard fought battle for success in the global mobile social games industry.

More advanced mobile content services are expected soon from leading global social network Facebook. A social games service is also likely from Google. Platform/OS providers, device manufacturers, mobile network operators, and application store owners are all keen to stake a claim in this growing market.

IHS Screen Digest will provide further analysis of the global mobile social networks and games market in a forthcoming report, to be published shortly.