Well, to follow on with a topic posted by my colleague Chris Delcourt relating to GREE and its rise to fortune and new found stature amongst the SNS community, I thought I would introduce our readers to some insight as to why this company has skyrocketed and why many anticipate this to continue despite the worsening economic conditions.
Like all successful companies, it all starts with a solid business model. GREE has set out to deliver true value to consumers in such a way that subscription fees, although minimal contribute to approximately 70% of revenues versus that of 30% deriving from online advertising revenues. This model is much different than Japanese SNS mainstay and current leader MIXI which is wholly ad driven, yet offering a free service. As one longtime, Japanese based entrepreneur Terrie Lloyd points out, aligning value in terms of content and quality with a monetary sum is not a concept that has been completely displaced. The recent trend within the mobile/web based world has been all about ad supported content which has allowed users to find their SNS fill without paying anything. This free model has been used a good number of times across many types of web based businesses.
However, this could all be changing according to Mr. Lloyd who foresees the rise of companies which return to a model more aligned with true content value and subscription based revenues over ads. This concept becomes very important in poor economic times like these in which consumers will certainly pull back on the purse strings and seek out the cheaper modes of entertainment such as online gaming/SNS communities which offer value but at a much lower cost than say travel, dining out etc. Also, the ad supported firms are undoubtedly feeling the pinch now as their B2B ad based deals are put on hold or cancelled due to the present downturn.
They say recessions bring about business change in so many ways, whether it’s saying goodbye to old mainstays, greeting new players or witnessing the rise of others. GREE certainly has been skyrocketing and I am sure this is in no small thanks to their well thought out positioning strategy. It will be interesting to see how other mobile/web based companies react and how this potential return to an old business model plays out.
Canadian Chris
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