GREE predicts very tough year for mobile start-ups

Naoki Aoyagi, CFO of the Japanese mobile gaming company GREE, believes that the mobile market will become more hostile towards start-ups than ever by the end of the year.

Speaking to VentureBeat from GREE's E3 booth, Aoyagi spoke candidly about the speed with which larger companies have dominated the mobile space. That trend will continue, and the resulting level of competition will threaten even the most established players.

"It's going to be a really tough market for start-ups. By the year's end, it's hard as it can be," he said. "We have to be really prepared and ready for this year.

"What happened in Japan in the last two years is that, after they saw some successful games, everybody followed and then the market became very big, very rapidly. In just, like, 18 months. From a $1 billion to a $4 billion market.

"That kind of big jump, we're going to see that this year and next year. And then the older market and the conventional games are going to be over by the end of next year. That's how I see it."

Aoyagi believes that there is now little room for start-ups to achieve success, particularly with larger companies like Zynga spending money so freely to acquire both talent and users. In addition, many older companies - typified by the struggling Digital Chocolate - are being left behind by rapid growth and change in the space.

"Everybody now is coming to mobile," he added. "But the companies that started last year, I think they're in the best position. A better position than the other guys from traditional and mobile.

"Still, I think companies from online gaming, Facebook, they have some chances, some opportunities to get in... Companies like Kabam, companies like us, a company like Nexon, other Asian companies, they're in very good positions."

In the immediate future, GREE will focus on high ARPU games. They allow the company to spend more on marketing in order to acquire new users. GREE already pays for TV advertising campaigns for its most successful games in Japan, and Aoyagi expects that to continue as the company expands into Western markets.

Indeed, when asked about GREE's $3.7 billion market capitalisation versus EA's $4.2 billion, Aoyagi indicated that GREE should already be higher.

"Once we prove ourselves in the Western market, there will be a valuation adjustment," he said. "It's going to happen."