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2304 Media Management Group 6A,[object Object],Industry Analysis of the Social Network Gaming in Turkey,[object Object],[object Object],[object Object]
Stardoll,[object Object],[object Object]
Growth - 20 languages, 80+ million users worldwide, since 2004
Platform – Web based
Business model– Free entry (a small share of userspay a lot plus ads),[object Object]
General overview of the market in Turkey,[object Object],Main operators,[object Object],Early entrants: Joymax, K2 Networks and Gameforge.,[object Object],Very successful -> no local competitors.  ,[object Object],GameSultan, GGChave started as Internet-café, became local operators handling distribution, payment systems, localization. (20,000 Internet-café by 2009). ,[object Object],Knight Online earned about $1M/month from Turkish operations. ,[object Object],Metin2 has about 3 Million active Turkish users. ,[object Object],New entrants (like Korean publisher NHN) are preparing Turkish version of their games.,[object Object],Virtual worlds ,[object Object],Virtual worlds are growing (for ex.: Sanalikagrew to 3Million registered users in 6 months).,[object Object]
General overview of the market in Turkey,[object Object],Facebook,[object Object],Turkey is the 3rd biggest country on the platform.,[object Object],More than 18.5M members(02.01.2010).,[object Object],44% of users are 18-24 y.o. ,[object Object],Popular games: Farmville, City of Wonder.,[object Object],Main business models used for social network games:,[object Object],1) in-game ads; ,[object Object],2) micro-transactions.,[object Object]
Industry analysis of social network games in Turkey using the five forces,[object Object]
Bargaining power of suppliers,[object Object],Independent game developers - low bargaining power.,[object Object],Using external platform= High costs of switching suppliers for game developers – when games are adapted to the platform dependency increases. Few number of platforms in relation to the number of game developers,[object Object]
Bargaining power of customers,[object Object],Large customer base – ,[object Object],low volumes,[object Object],Differentiated products ,[object Object],Switching costs could ,[object Object],be present (psychological),[object Object]
Threat of new entrants,[object Object],Developing a new platform requires substantial investments. ,[object Object],Strict governmental policies,[object Object],Independent game developers could emerge at any time,[object Object],Value of product increased by ,[object Object],	number of users.,[object Object]
Threatof substitutes,[object Object],Many available substitutes from both a narrow and broad perspective,[object Object],Technological advances may change the future game market,[object Object],Time spent on Facebook increasing, ,[object Object],	both threath of substitute (own platform) and ,[object Object],opportunity (usingFacebook),[object Object],High taxes on importing video games ,[object Object]
Rivalry among existing competitors,[object Object],Numerousequallybigcompetitors,[object Object],Currently in Turkeythere are comparablefew independent social network games,[object Object],Lowbarriers of exit,[object Object],Commitedactors,[object Object],Industry primarily not figthing for monetaryresources, ratherpeople’s time,[object Object],Innovation and first moveradvantagecrucial,[object Object],difficult to maintainleadership over time,[object Object],Aspiration to drive industrychange,[object Object]
Threats for Stardoll,[object Object],The threat of the most popular platform – Facebook,[object Object],Rapid technological changes/updates,[object Object],Dependency on Facebook micro payment solutions (currently could be seen as an opportunity),[object Object],Bargaining power of platform supplier, increased dependency,[object Object],Difficulty to maintain competitive advantage and leadership position – innovation required,[object Object],Governmental regulations, interventions and restrictions,[object Object],Uncertain and fast-changing industry,[object Object],Increasing density (level) of competition,[object Object],Foreign competitors with strong financial and IT background, Korean companies entering the market,[object Object],Domestic competitors with strong competences and know-how of the local market,[object Object],The potential threat of mobile games (future substitute),[object Object]
Opportunities for Stardoll,[object Object],The market: massive potential,[object Object],Young audience – young market,[object Object],Men,[object Object],The dominant (standard) platform Facebook – highly used and hence a good distribution channel,[object Object],The Turkish fashion industry is growing and is hence young and dynamic  possibility for Stardoll integrate and leverage,[object Object],Turkish people willing to pay when liking the game,[object Object],Exploit opportunities in young target groups e.g. Stardoll merchandise ,[object Object],Market becoming more western – chance to anticipate change,[object Object],Developing high quality games to satisfy increasing knowledge of the European market, Turkey might follow the same pattern,[object Object]

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Notes de l'éditeur

  1. Turkey is an interesting market due to the high number of young and educated people, who are interested in social games and are willing to pay for them.The competition level in Turkish social gaming industry can be regarded as high and is increasing as the market attracts new players of both origin: foreign and domestic. The threat of substitutes is relatively high. There is a potential future rivalry with the developers of games for mobile phones/devices. Moreover, the social games are indirectly competing with any other kinds of spare time and leisure activities. The threat of new entrants to the market is both high and low as the market possesses attractive potential, but is becoming more and more competitive at the same time. The bargaining power of game developers (suppliers) as well as the power of customers is relatively low. This can be attributed to the structure of the industry, which resembles monopolistic competition or perfect competition in some sense.Stardoll is a popular social game operating in the Turkish market. The main threats in the social gaming industry include uncertainty and fast pace of technological changes, governmental regulation (facebook platform) as well as difficulty to maintain the leadership position and competitive advantage. Facebook, being the dominant social networks platform in Turkey, could be regarded as a threat and as an opportunity at the same time. The platform is being constantly updated. Therefore the communication solutions and other applications should consider the possible technical changes, which in some cases might totally change the practices. At the same time, facebook provides a distribution channel reaching the majority of social network users, which is a massive market and possess much potential. Other opportunities in the social gaming industry of Turkey include the booming fashion industry with partnership and co-creation possibilities related to that.
  2. Average age of users 11Income model: play for free, a small share of users pay a lot plus ads. Members earn credits by making friends members
  3. Social networks definition, that we would like to use:Social network games are games where you need a network of people to drive the game (games offered by Facebook, on-line games like WorldCraft, and virtual worlds). Some words must be said about some more Turkish specifics and challenges:1) Internet users and gamers are very young there. 2) there is no mainstream gaming culture that makes it difficult to reach new audiences.  3) The home broadband offering has download limitations making downloads above limits very expensive. As a result, most users don’t playing from home and prefer cyber-café.This practice gave cyber-cafes a lot of power in the value chain and has made it difficult to distribute new games in the territory, giving a big advantage to already existing distributors. 4) As there are few players and the market is becoming increasingly competitive, the industry will need to be more professional in the future.  5) There’s also the problem of how to monetize better besides the system of e-pin (codes sold by the cyber-cafes) – as the gaming population is still in majority under 24, it means opening more accessible means, like pre-paid cards and SMS payments. 6) The industry is also trying to improve relationships with the government, as recently 6,000 websites have been temporarily banned by the Turkish Internet Bureau, including Farmville, LastFM and MySpace.7) Popular games that are played in Facebook: Farmvill is produced by Zynga, City of Wonder by Playdom.Business models: 1) In-game advertising model means that game is a medium for delivering advertising.2) Micro-transactions or micropayments is a financial transaction involving a very small sum of money.
  4. There are some local social networks in Turkey, for example: mynet.com and yonja.com. But they cannot compete with Facebook in popularity, because the penetration of it in Turkey is great. Basically, Facebook should be considered as main dominant player at the market.Structure of Turkish Facebook users: By gender:37% females, 63% males.Age structure:13-17 – 16%18-24 – 44%25-30 – 23%31-40 – 13%41-65 – 4%
  5. This live case will show the potential of the Turkish market for new players from the social network games industry. Industry definition: We define the industry by technology and geography. Hence out industry is the online social network games in Turkey. We will do this by conducting a Porter analysis on the market and see what opportunities and threats there are with entering this market.Social network games, our definition: A game that can best be played by involving friends in a social network.To strategies in the social network games market: use an existing social network as the platform of the game, e.g. Farmville on facebook or to have your own platform, like stardoll.
  6.  Barganing power of supplier. High/lowSome game developers buy the original game from independent developers. With this strategy, the independent developers can be seen as suppliers. However, these do not have any barganing power since there are many independent developers offering their alfa versions to bigger companies like Zunga or Bigpoint.  For the other strategy, social network platform such as Facebook are defined as suppliers. These platsforms, such as Yonja, Mynet and Facebook, have many different game developers to choose from, and since it is not the game itself, but the social network it acts on that determine the success of the game, the suppliers of the social network platform have extremely high barganing power over the developers. There are numerous game developers such as Zynga, but as seen only a limited number of social networks reaching a large audience. Further, games often need to adapted, encoded to the platform used. This could be costly, and hence the switching costs of changing platform provider are high.
  7. Bargaining power of customers: LowThe customers in this industry are defined as the users of the game.   The customer base is big, however the volumes purchased are small meaning that the customer’s bargaining power is low. Furthermore the different games are highly differentiated, which in turn further decreases customer bargaining power. Also, seeing that most social network games are highly addictive could be very high psychological switching costs involved
  8. Threats of new entrants: High/lowAccording to our two entry strategies you can either go via existing platforms, or you can create a platform where part of the game is to increase the social network. This in turn means that there are different barriers of entry considering the two strategies. However, overall in the industry there is a low initial investment since encoding a game mainly requires knowledge. For the strategy of developing an own platform, there is a higher cost involved with creating a new and sustainable platform that will attract customers than it is for using an existing platform. Further barriers of entry in the Turkish market is that the government have restrictive policies regarding the gaming industry- banned websites. there is a constant struggle for game developers and platforms to improve relationships with the government Also, the games must be translated to the local language and preferably also adjusted to the local culture, which can pose as a barrier of entry. Despite these elaborations, the overall threat of new entrants is high in this industry. This due to the fact, that in order to develop an alfa version of a game does not require heavy investment, only knowledge. It is reaching the network (customers) and fine-tuning the game that costs. Hence numerous new entrants can emerge at any timeWith social network games there is a demand-side benefit of scale, meaning that the value increases the more users there are. This also increases the barrier of entry for companies having their own platform for social network games.
  9. Threat of substitutes: HighThere are two ways to look at the concept of substitutes in the social network gaming industry on the Turkish market. Either you can see it as very narrow and only regard it as other high technological games. However, one can also see substitutes as all other activities you want to spend your free time on, which would be a very broad perspective. This view would mean that the online social network games have to compete with all other things people want to do on their spare time. Disregarding the viewpoint you take, the fact of the matter is that there are numerous potential substitutes, and hence the threat of substitutes can be concluded very high.  When analyzing the threat of substitutes one also has to take into account that the technology is constantly advancing and hence the situation and the threat with regards of the substitutes can change in an instant. For example, facebook as a substitute for other spare time activities emerge out of nowhere. Statistics show that Facebook is the most visited page on internet and that people spend average 35 minutes per visit on Facebook (http://www.alexa.com/siteinfo/facebook.com). This means that the games actually compete with the substitute “surfing facebook”. On the other hand, if Facebook is used as the primary platform for the social network game, in this case Stardoll, then Facebook is actually not a substitute but rather a benefit.  Seeing that Turkey has a very high taxation on imported games, but not on online games (Stefan Lampinen) this should be a decreasing force on the substitutes in the form of other types of games. However, this should have a positive effect (increase) the online rivalry for social network games. So, as mentioned there are also numerous other substitutes threatening the industry and it can be concluded that the threat of substitute is substantial in the industry. Therefore it is important for the developers to make the game as attractive and addictive as possible and to keep upgrade and develop the game to keep up with the competition.
  10. Rivalry among existing competitors: HighThere is a fierce rivalry in the social network gaming industry since there are numerous equally big competitors bundled into different clusters. What do we mean by this? Well it seems to be different clusters with regards of size. For example, simpler games such as Farmville and click a cow, and more serious games such as war of worldcraft and stardolle. However, as of now in Turkey, there are not that many independent social network games (SNG2) (MalinStröman). However, seeing the taxation system in Turkey, there should be increasingly high rivalry in the online games.   There is a high industry growth and almost no barriers of exit, which in Porter’s reasoning shows that it is low rivalry among competitors. These industry actors are highly committed and it does not appear as actors are fighting for market leadership. This due to the fact that this kind of industry is not primarily fighting for monetary resources (since a lot of games are for free) but they are rather fighting over peoples limited time which in turn should lead to high revenues.  In this fast moving industry it might be difficult to gain a leadership in the form of a superior brand over time (like Chanel being a huge brand of the fashion industry without changing much), but rather in this industry it is a matter of being the first to reach the market with a new product (Stefan Lampinen). Therefore it seems like the biggest advantage a company can have, is not that the quality is better, or that it is cheaper, it is rather a question of first mover advantage. Hence it is an extremely fast moving industry which makes it hard to over time remain a leadership. On the hand, this technologically advanced sector can be extremely beneficial for the once having the technical capabilities to drive industry change.   So in a sense, anyone can become a market leader at any time, the difficulty is to maintain the advantage.    
  11. ThreatsOne of biggest threats within the social network gaming industry is the increasing level of competition. The high market potential attracted a great number of international game developers as well as encouraged the locals to develop their own games. In addition to that, the massive increase in usage of smart phones, consumption of mobile applications and mobile games can be regarded as potentially strong competitors (substitutes) in the near future. The dominant social network – facebook can be treated as a threat and as an opportunity at the same time. Facebook is constantly updated in terms of technological features and communication solutions, therefore the advertising, co-creation campaigns should consider potential changes of the technical aspects of the social network. As it is a highly dominant communication platform, the bargaining power also is concentrated at its side, which is a potential threat.The Turkish social gaming industry is relatively young and rapidly changing, which lead to high uncertainty. Moreover, governmental regulations, regarding the most popular social network facebook, can and should be considered as a signal that the market can be intervened and regulated according to the Turkish state preferences. The facts mentioned before, lead to uncertain key success factors of the industry as well as difficulty to maintain competitive advantage and leadership position.
  12. OpportunitiesThe most promissing opportunity in the social gaming industry of Turkey is the market and its potential. The huge population of the country (more than 70 million), relatively young consumers and the extreme popularity of social networks and games leave much space for potential opportunities and profits.According to the facebook terms and conditions youths under 13 cannot access the platform. The average age of Stardoll users is 11 years and thus they cannot access facebook. Therefore this inaccessibility is an opportunity in itself for Stardoll. The orginal platform should be maintained. Despite that, facebook can be regarded as a very efficient distribution, comunications and advertising vehicle. The most popular social network in Turkey possesses strong reach within the market and can be used successfully.The fashion industry is booming in Turkey. As the Stardoll game is related to clothing and style mutually-benefitial partnerships can be developed with the exisiting actors in the fashion industry. The virtual designing game can foster co-creation and provide with opportunities to take advantage of existing consumer-preferences, expressed in the game.