GameWith 6552
GameWith
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2021-10-20
2021-10-06
2021-08-16
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Summary
GameWith, Inc. is a specialist media company that provides information on games. The company operates “GameWith,” Japan’s leading website for game app information and gaming tips, and earns ad revenue from selling ad spaces.
Interactive Media & Services
Key dates
2019-09-03
Coverage initiation
Executive summary
Business overview
Business areas and revenue per business area: GameWith, Inc. is a specialist media company that provides information on games. The company operates “GameWith,” Japan’s leading website for game app information and gaming tips (company estimated market share of nearly 40%), and earns ad revenue from selling ad spaces. The Media segment is the company’s only reporting segment. Founded in June 2013 by President Takuya Imaizumi who was then fresh out of university, the company listed on TSE Mothers in June 2017 and moved to TSE First Section in August 2019. In FY05/21, revenue was JPY2.9bn (-0.3% YoY) and there was an operating loss of JPY210mn (operating profit of JPY408mn in FY05/20).
Revenue structure: The company breaks down its revenue by content categories (business areas): Game Guide accounted for 54.7% of total revenue in FY05/21 (-13.4% YoY), Game Review 28.5% (+21.7% YoY), Video Streaming 12.6% (+19.9% YoY), and Other 4.1% (+50.0% YoY). By offering such content, the company helps build player communities and prolongs the life span of the games, which in turn brings in more revenue from related ads. Strengthening content for the top six megahit smartphone games (apps) proved successful for GameWith. Meanwhile, as viewers have started to drift away from the top titles, the company is keen to develop Game Review and Video Streaming into the next mainstay following Game Guide.
Game guide revenue consists of income from ad space sales via ad network and fees for posting contracted game guide articles and videos (tie-up ads) from sources including “GameWith,” the company’s website for game app information and gaming tips. The income from ad space sales can be calculated by multiplying revenue per page by the number of page views. Revenue for Game Review is not simply a function of revenue per page view times page view count. Rather, the company contracts directly with the advertiser for tie-up ads and gets a fixed monthly amount per ad space. Revenue in Video Streaming comes mainly from ads displayed on video platforms like YouTube. Views of esports videos are trending strongly.
Cost structure: Excluding advertising and one-time expenses, personnel expenses comprise about 75- 80% of costs, rent about 6%, and server use roughly 4%. These are effectively fixed costs and the combined total for personnel, rent, and servers was roughly JPY2.0bn in FY05/21. The company spent virtually nothing on advertising through FY05/20 and invested JPY680mn on promotion in FY05/21. Advertising expenses for FY5/22 are expected to be JPY172mn.
Transition Strategy: GameWith sees its mission as building a world with a more enjoyable game experience. As of FY05/21, Game Guide was its main business, but the company has ambitions of becoming a global game infrastructure. It thus intends to branch out beyond the media business and get involved in all businesses that will lead to greater game enjoyment. Until FY05/18, the company worked to generate revenue and become profitable in the domestic media business. From FY05/19, it adopted a three-pronged strategy. The first element of this strategy was to focus on the Game Review business to build a second source of earnings in addition to Game Guide; the second was to step up its overseas development, primarily in the English-speaking world; and the third was to expand into a variety of game-related areas outside its existing business. However, during FY05/21, the company decided to scale back its iOS app mobile game reviews to comply with App Store guidelines and maintain iOS app updates. In FY05/22 the company plans to expand into new business areas with a focus on esports.
Trends and outlook
FY05/21 results: In FY05/21, GameWith reported full-year consolidated revenue of JPY2.9bn (-0.3% YoY), operating loss of JPY210mn (versus profit of JPY408mn in FY05/20), recurring loss of JPY224mn (versus profit of JPY409mn), and net loss attributable to owners of the parent of JPY218mn (versus profit of JPY219mn in FY05/20). This was generally in line with the revised forecast issued by the company on June 16, 2021. Explaining the loss at the operating profit level, the company said the loss was the result of its massive promotional campaigns run through Q3 at a combined cost of some JPY680mn.
FY05/22 forecast: For FY05/22, the company projects full-year consolidated revenue of JPY3.2bn (+10.9% YoY), operating profit of JPY133mn (versus loss of JPY210mn in FY05/21), recurring profit of JPY130mn (versus loss of JPY224mn in FY05/21), net income attributable to owners of the parent of JPY79mn (versus loss of JPY218mn in FY05/21), and EPS of JPY4.39. Advertising expenses are expected to decrease JPY508mn YoY, and even when taking into account investment in new businesses such as esports, the company anticipates a return to operating in the black. The new businesses will still be in the investment period through FY05/22, and the company doesn't expect rapid sales growth in the short term.
FY05/22 focus area: According to Famitsu’s Game White Paper, there are currently an estimated 15 million PC game users in Japan, including users of both console and app games. The company believes this number will continue to grow in connection with the increasing popularity of multi-platform games. For example, both the popular Apex Legends and Fortnight (which the company has been focusing on) can be played on PCs, Nintendo Switch, and PlayStation. The company wants to expand its esports and related businesses by leveraging its access to a large pool of young people in their teens and twenties through media like its GameWith platform. Launched in FY05/19, the company's esports business is also expanding and they expect it will continue to grow in the years ahead. The company's main focus will be on Video Streaming, which accounted for 75% of esports business revenue in FY05/21; they will use it to leverage the solid fan bases of successful esports players. Concurrently, the company will build its revenue base with additional services, including a fan business and online tournament management. The company also plans to expand its business to include gaming infrastructure with the development and sales of, for example, gaming PCs and products providing internet access.
Strengths and weaknesses
Strengths:
▷ Ability to attract viewers with search engine optimization (SEO) and maximize their lifetime value by harnessing quality content
▷ Top share in niche market of guide sites for smartphone games
▷ Relatively low-risk business that does not require large initial investment
Weaknesses:
▷ Game Guide business highly dependent on top mobile game titles
▷ Dependent upon major platforms run by Apple Inc. and Alphabet Inc. as channels for attracting users
▷ Earnings are mainly from advertising, and thus vulnerable to fluctuations in ad volume driven by the economic cycle
Key financial data
Notes: Per-share data is adjusted for stock splits.
Figures may differ from company materials due to differences in rounding methods.
Recent updates
Q1 FY05/22 Report Update
Shared Research updated the report following interviews with GameWith, Inc.
Q1 FY05/22 flash Update
GameWith, Inc. announced earnings results for Q1 FY05/22.
Full-year FY05/21 Report Update
Shared Research updated the report following interviews with GameWith, Inc.
Trends and outlook
Quarterly trends and results
Note: Figures may differ from company materials due to differences in rounding methods. The company moved to consolidated accounting starting in Q3 FY05/20.
Cumulative figures shown in table above are simple sums of quarterly figures and may differ from the company’s cumulative figures
Portion of revenues included in Other reclassified as Video Streaming revenue
Game Guide revenue includes the proceeds from network ads (ad network advertising) and tie-up ads (contracted game guide articles and videos). Game Review revenue consists mainly of tie-up ads (game review articles and videos). Video Streaming revenue is revenue from network ads delivered via YouTube. Network ad revenues are a product of page views (PV) and revenue per PV. Tie-up ads are ads directly contracted by the company at a fixed monthly price per ad space.
Since Q2 FY05/19, overseas contributions have been included in page view count and revenue per page view.
Revenue per PV index in FY05/20 was adjusted by Shared Research based on indexes disclosed in Q1 FY05/22 and earlier
Notes: Total personnel costs and expenses are the total of directors’ compensations (booked as cost of revenue and SG&A expenses), salaries and allowances, bonuses and bonus provisions, legal welfare expenses, shareholder perks, outsourcing expenses, and hiring and training expenses.
Cumulative figures shown in the table above are simple sums of quarterly figures and may differ from the company’s cumulative figures.
Figures too small to be disclosed in quarterly company announcements are assumed to be JPY0mn.
Total headcount is the average number of employees (including temporary workers) and directors, based on those employed in each month.
Q1 consolidated results for FY05/22
Summary
Q1 FY05/22 results: In Q1 FY05/22, GameWith reported consolidated revenue of JPY713mn (+3.7% YoY), operating profit of JPY35mn (versus loss of JPY71mn in Q1 FY05/21), recurring profit of JPY32mn (versus loss of JPY74mn in Q1 FY05/21), and net income attributable to owners of the parent of JPY18mn (versus loss of JPY77mn in Q1 FY05/21). Progress versus the full-year FY05/22 company forecast was 22.3% for revenue, 26.1% for operating profit, 25.0% for recurring profit, and 23.3% for net income. Due to seasonal factors, the company’s results in Q1 are, usually comparatively weak, and the company accordingly had projected an operating loss in Q1 FY05/22. Despite this forecast, the company generated operating profit due to revenue generated through business areas other than Video Streaming, which was stronger than expected.
Video Streaming revenue declined, but revenue was up in the Game Guide, Game Review, and Other business areas. Profit increased, due in part to a JPY125mn YoY spending cut for advertising and promotions as a result of reviewing its promotional strategy. In making YoY comparisons, we note that year-ago earnings were impacted by the spread of COVID-19.
FY05/22 forecast: The company left its initial full-year FY05/22 forecast unchanged. For assumptions underlying earnings forecasts and other details, see the Company forecast for FY05/22 section later in this report.
At a meeting held on October 13, 2021, GameWith’s Board of Directors decided to select the Standard Market as company’s new market segment on the Tokyo Stock Exchange and submit relevant applications. Moving forward, the company will prepare for its April 2022 transfer to a new market segment by performing all relevant procedures in accordance with application schedules established by the Tokyo Stock Exchange.
Revenue by business area
In Q1 (June–August 2021), the company generated JPY389mn in revenue through Game Guide (+6.6% YoY). Page views forgame guide articles concerning major titles is declining because a considerable amount of time has passed since their release. However, revenue per page view has been recovering from the downward slide in revenue per ad that occurred due to COVID-19-related impact. Looking at page-view (PV) trends, for the three-month period of Q1, Game Guide reported monthly average PV count of 450mn, down 8.2% YoY and down from the 490mn in Q4 FY05/21. Indexed to 100 with Q1 FY05/21 as the base period, the company’s index for monthly average revenue per PV finished Q1 FY05/22 at 122, up 22.0% YoY.
Revenue generated through Game Review in Q1 amounted to JPY222mn (+6.7% YoY). The company’s sales activities were boosted by increased awareness stemming from television commercials the company ran in FY05/21.
Video Streaming revenue in Q1 came to JPY60mn (-39.4% YoY). Average view count and average revenue per view declined compared to Q1 FY05/21, when they received a boost from demand associated with the trend of consumers remaining at home in response to the COVID-19 pandemic. The company observed a strong number of e-Sports-related video views (Fortnite and Apex), but this figure was not large enough to make up for the decline in views of gameplay videos associated with major titles, which occurred due to the considerable amount of time that has passed since these titles’ releases. The company believes that average revenue per view declined because advertisers have begun selecting the media upon which they run ads only after making careful determinations regarding ad effectiveness. GameWith projects that average revenue per view will begin recovering in early 2022.
Other revenue amounted to JPY39mn (+178.6% YoY). The company observed growth in performance associated with e-Sports, blockchain games, and other new businesses.
Costs
In Q1 FY05/22, the company lowered its advertising expenses to JPY32mn (-79.6% YoY) after reviewing its promotional strategy in Q4 FY05/21. The company is conducting online advertising in accordance with projections.
Q1 personnel spending came in at JPY486mn (+10.7% YoY). The head count was up by seven YoY to 255 and unchanged QoQ.
Other key points
Effective at the close of the company’s Annual Meeting of Shareholders in August 2021, Yusuke Murata resigned from his position as a GameWith Director. Mr. Murata is an unlimited liability partner of both Incubate Fund Number Two Investment LLP and Incubate Fund Number Three Investment Limited Partnership, which were respectively the second (with a stake of about 21%) and fourth (with a stake of about 6%) largest GameWith shareholders as of May 2021.
On July 26, 2021, the company reached the decision to establish a new subsidiary (GameWith NFT, Inc.) with the goal of conducting non-fungible token (NFT)-related business operations. Through this subsidiary, the company plans to provide game companies and publishers holding game-related IPs with consulting services regarding the monetization of NFT-based IPs. The company has no plans to conduct operations related to NFT infrastructure, which involves costly investment. GameWith indicated that it base future decisions regarding potential investment in NFT-related companies on the details associated with each individual investment opportunity.
On September 15, 2021, the company reached an agreement with Nintendo Co., Ltd. (TSE First Section: 7974) and UUUM Co., Ltd. (TSE Mothers: 3990) that will grant gaming talents and e-Sports players affiliated with the company extensive permission to utilize copyrighted material from Nintendo on their YouTube channels. The company’s gaming personalities and e-Sports players only use copyrighted material from Nintendo on a limited basis, so this agreement is expected to have little impact on the company’s revenue. However, the company strives to maintain its image as a corporation that deals with copyrighted material appropriately and believes that this agreement will be constructive in this regard.
Company forecast for FY05/22
Note: Figures may differ from company materials due to differences in rounding methods.
Company forecast for FY05/22 (initial forecast, released July 14, 2021)
For FY05/22, the company projects full-year consolidated revenue of JPY3.2bn (+10.9% YoY), operating profit of JPY133mn (versus loss of JPY210mn in FY05/21), recurring profit of JPY130mn (versus loss of JPY224mn in FY05/21), net income attributable to owners of the parent of JPY79mn (versus loss of JPY218mn in FY05/21), and EPS of JPY4.39. Advertising expenses are expected to decrease JPY508mn YoY, and even when taking into account investment in new businesses such as esports, the company anticipates a return to operating in the black. The new businesses will still be in the investment period through FY05/22, and the company doesn't expect rapid sales growth in the short term.
Outlook by business area
The company did not provide individual estimates for its different business areas, but did note that sales increase of JPY94mn was expected to come from existing businesses and JPY219mn from new businesses centered on esports (Including derivative businesses). It expects the seasonality trend in May will stay in line with company’s historical trend, where in general, its Q2 and Q4 tend to have slightly higher sales than Q1 and Q3.
At Game Guide, the company anticipates sales will remain flat, or at the same level as Q4 FY05/21. Its plans call for continued growth led by its mainstay GameWith game guide site. In addition to guides for smartphone game apps, the company will be working to expand its game guide service to include console games and PC games so as to provide content that addresses the entire consumer market for digital games. The company plans to utilize the additional user traffic to these sites to develop new services, through which it aims to diversify its source of revenue.
At Game Review, plans are much the same as at Game Guide, as the company will be seeking to expand its game review service beyond smartphone games to include console and PC games. For PC games, the company expects growth in the number of game players buying specialized gaming PCs in order to up their game as the number of multi-platform games on the market increases. By creating new content aimed at these first-time buyers of gaming PCs, the company is looking to build up its revenue base and sustain growth.
At Video Streaming, in addition to videos connected with Game Guide, the company plans to continue focusing on esports video content as it did in FY05/21. It also plans to launch new channels based on new game titles and build up its player base.
With respect to new businesses, the company’s main focus will be esports video streaming, but it will also be building its revenue base with additional services, including a fan business and online tournament management.
Change in spending plans
Company plans call for cutting advertising spending by JPY508mn versus FY05/21 by greatly increasing the efficiency of the money spent in this area. As a result, advertising spending is expected to total JPY172mn. Web marketing will be scaled down and there won't be any TV commercials. Since the TV commercials were intended to promote the installation of the company's apps, the company believes that the impact of reduced advertising expenses on FY05/22 sales will be minimal. The company plans to invest in advertising expenses related to web marketing on a roughly equal quarterly basis, with a slight increase in Q4. It expects an increase of JPY370mn YoY in personnel-related spending to support its hiring plans for esports and other new businesses, and an increase of JPY86mn for various other expenses related to the new businesses (other than expenses related to human resources).
Difference between initial company forecast and results
Note: Figures may differ from company materials due to differences in rounding methods.
FY05/22 areas of focus
GameWith sees its mission as building a world with a more enjoyable game experience. As of FY05/21, Game Guide was its main business, but the company has ambitions of becoming a global game infrastructure. It thus intends to branch out beyond the media business and get involved in all businesses that will lead to greater game enjoyment.
Until FY05/18, the company worked to generate revenue and become profitable in the domestic media business. From FY05/19, it adopted a three-pronged strategy. The first element of this strategy was to focus on the Game Review business to build a second source of earnings in addition to Game Guide; the second was to step up its overseas development, primarily in the English-speaking world; and the third was to expand into a variety of game-related areas outside its existing business. However, during FY05/21, the company decided to scale back its iOS app mobile game reviews to comply with App Store guidelines and maintain iOS app updates. In FY05/22 the company plans to expand into new business areas with a focus on esports. As it expands into new business areas, the company will actively consider forming business alliances with companies capable of complementing its efforts. It will also examine opportunities for the acquisition of companies that are compatible in terms of corporate culture and agree that a deeper relationship would be mutually beneficial. When searching for acquisition targets, the company will aim for companies that generate revenue of roughly between JPY50–300mn.
Utilizing traditional media, expanding the esports business
According to Famitsu Mobile Game White Paper, there are currently an estimated 15 million PC game users in Japan, including users of both console and app games. The company believes this number will continue to grow in connection with the increasing popularity of multi-platform games. For example, both the popular Apex Legends and Fortnight (which the company has been focusing on) can be played on PCs, Nintendo Switch, and PlayStation. The company wants to expand its esports and related businesses by leveraging its access to a large pool of young people in their teens and twenties through media like its GameWith platform.
According to famitsu.com (April 2021), the size of Japan's domestic esports market in 2020 grew by 9.2% YoY to JPY6.7bn. The market expanded due to a bolstered esports title lineup with the launch of Valorant and the holding of online tournaments for popular titles such as Shadowverse, Player Unknown's Battlegrounds (PUBG), Rainbow Six Siege, and League of Legends. The same survey reveals that the main source of revenue for Japan's esports market is from sponsors, accounting for 67.3% of the total. Broadcasting rights make up 19.2%, and charges for in-game items and prize money make up 11.5%. Although the scale of the market was still small in 2020, it is expected to achieve high growth moving forward, andthe company anticipates that it will reach a scale of JPY18.4bn in 2024 (CAGR of 29% compared to 2020).
Launched in FY05/19, the company's esports business is also expanding and they expect it will continue to grow in the years ahead. The company's main focus will be on Video Streaming, which accounted for 75% of esports business revenue in FY05/21; they will use it to leverage the solid fan bases of successful esports players. Concurrently, the company will build its revenue base with additional services, including a fan business and online tournament management. The company also plans to expand its business to include gaming infrastructure with the development and sales of, for example, gaming PCs and products providing internet access. Since it can be difficult to differentiate between gaming PCs based on their high-performance components, the company envisions developing a relatively inexpensive entry-level model with the optimal specifications for newbies, and then promoting it in cooperation with esports players. In terms of a revenue model for these infrastructure products, the company will consider factors like whether it should take inventory risks, position itself as an OEM, or charge only an initial one-time fee or a fixed monthly fee after consideration of the profit margin and business risks involved.
Business
Business model
Company overview
GameWith is a specialist media company that provides information on games. It operates GameWith, Japan’s leading website for game app information and gaming tips (company estimated market share of nearly 40%), and earns ad revenue from selling ad spaces. In FY05/21, revenue was JPY2.9bn (-0.3% YoY) and there was an operating loss of JPY210mn (operating profit of JPY408mn in FY05/20) . Revenue breakdown by content categories (business areas): Game Guide accounted for 54.7% of total revenue in FY05/21 (-13.4% YoY), Game Review 28.5% (+21.7% YoY), Video Streaming 12.6% (+19.9% YoY), and Other 4.1% (+50.0% YoY).
The company has elevated the media value of its GameWith platform by devoting management resources to the operation and improvement of its three main content categories.
▷ Game Guide: provides tips that help players advance in their games
▷ Game Review: provides information that allows players to find games they like
▷ Video Streaming: offers YouTube videos starring gamers and esports players
GameWith offers this content to the viewers of its website and apps and earns revenue by selling ad spaces in these media. Ad spaces sold include pure ads sold directly by the company and ads sold via ad networks. As revenue per PV is higher for pure ads, GameWith’s policy is to increase pure ads. Fluctuations in the game industry have a large impact on the company’s earnings since the users of the company’s services are gamers.
Notes: Overseas data included in PV and revenue per PV index from Q2 FY05/19
Notes: Cumulative figures shown in table above are simple sums of quarterly figures and may differ from the company’s cumulative figures.
Part of revenues included in Other reclassified as Video Streaming revenue
Relationship between main products and business areas
The company disclosed a quarterly revenue breakdown by product (ad offerings; disclosed through Q4 FY05/19) and business area. There are three types of products—network ads in the web and app platforms, tie-up ads, and network ads in video streaming. Advertisers or ad network companies (YouTube in the case of video ads) pay the company for network ads based on page views and the price per page view. Tie-up ads are directly contracted by the company at a fixed monthly price per ad space.
Network ads made up most of Game Guide revenue, but tie-up ads are on the rise. Game Review that mostly involves tie-up ads is quickly growing into a second earnings pillar after Game Guide. Videos streamed via YouTube involve network ads for which revenue is determined by page views and the price per page view. Contracted game guide videos and review videos generate tie-up ad revenues booked under Game Guide and Game Review, respectively. The company announced with FY05/19 results that it would change its business breakdown from a product-based one to a classification based on business areas, reflecting the company’s operations more accurately. This is in line with the company’s plan to position Game Review as its next growth driver. Amid sluggish revenue growth from Game Guide due to the drop in PV, performance has been brisk in Game Review, where the company mainly generates revenue from tie-up ads.
Synergy effects
GameWith has developed various services ancillary to the game guide content. It offers game reviews and streams videos to promote use of the “GameWith” platform when gamers look for a new game. The company’s game guides serve as an entry point, while viewer traffic across its content offerings (game guides, game reviews, and video streaming) produces a synergy effect that maximizes viewer retention within the company’s platform. Generally speaking, gamers who discover a title that hooks them will first search walkthrough sites and play the game while referring to multiple sites, gradually narrowing down their choice to the site that is frequently updated and offers quality information. An enhanced reputation of the “GameWith” platform creates a buzz online and attracts more viewers, thereby generating a virtuous cycle.
Overview by business
Game Guide
In this business, the company operates the core GameWith website featuring game app information and gaming tips (domestic version), as well as English and Chinese (overseas) versions of GameWith and @WIKI, a wiki rental service specializing in game tips. Revenue in this business can be calculated by multiplying revenue per page by the number of page views.
GameWith game app information and gaming tip website (domestic version)
GameWith hires top-ranking gamers to write game guide articles in a systematic way, building a structure in which the company can respond quickly to events and frequently update its platform with new articles. To improve the writing operation, these gamers (writers) receive training and education, article production tools, and manuals, and the company also implements divisions of labor. The in-house writers are organized into a number of teams, and the gamers who rank in the top 0.1% are charged with writing game guide articles.
The company constantly monitors already popular titles, as well as those with quickly rising popularity, and focuses on promptly posting game guide articles on these titles when they are accessed the most. It is careful not to miss any titles that have the potential to become popular. Refreshing its coverage in line with the changes in title rankings ensures a consistently high level of viewer traffic. Even if a given title declines in popularity, there will be little negative impact on the company’s earnings as long as the gamers who played it turn their interest to a new title. However, the company’s results will be negatively affected if the gamers spend their disposable time on an activity other than gaming.
The shelf life of game guide articles depends on the title. In general, game guide articles on mobile games must be frequently updated in response to frequent game updates and in-game events that occur at regular intervals. The advantage is that mobile titles tend to remain popular for at least several years. In contrast, console games are not frequently updated, which means demand for articles covering them is high right after their release but dwindles as time passes. It is also becoming more important to alter formats to meet new user needs. The company says they are starting to pivot from RPGs, whose players generally favor database-oriented guide articles, to battle royal type games (first-person and third-person shooter games, etc.), where the players’ focus is more on combat maneuvers.
Game guide articles on the same game ultimately tend to resemble each other. Also, the barriers to entry are low because even individuals can write game guide articles (for certain games and regardless of page views). The company aims to differentiate the site as a whole by rapidly publishing accurate game guide articles and offering comprehensive coverage of popular titles.
Revenue structure
Revenue in this business consists of income from ad space sales via ad network and fees for posting contracted game guide articles and videos (tie-up ads). The income from ad space sales can be calculated by multiplying revenue per page by the number of page views. In addition to attracting traffic through search engine optimization, the company has succeeded in increasing PV and revenue per PV by securing skilled writers to boost content volume and quality. The inception of the company coincided with the release of popular native app game titles for smartphones such as Puzzle & Dragons* and Monster Strike*, and this has also acted as a strong tailwind to business growth. At the time, the main sources of information about these games were walkthrough sites of individual gamers and consumer generated media (CGM). While many gamers struggled to play with limited information, the company was the first to launch a game guide site for smartphone games as a business, attracting fans with better quality walkthrough content. The company also forms player communities within the GameWith platform to maximize viewer retention and conversion rates (CVR). By doing so it gains the trust of game companies (the advertisers), which leads to an increase in ad orders. Having strengthened its sales structure targeting game companies, GameWith outperforms its competition in capturing ad orders.
Since Q2 FY05/19, overseas contributions have been included in page view count and revenue per page view.
Revenue per PV index in FY05/20 was adjusted by Shared Research based on indexes disclosed in Q1 FY05/22 and earlier.
Revenue per page view
Most of the revenue in the game guide business comes from advertisements placed via ad networks. Revenue per page view is thus affected by the supply/demand balance for the overall online advertising industry.
Number of page views
The company does not place as much importance on the number of page views as it once did. This is because: 1) the number of page views is difficult to control as it is easily affected by the trend in popular titles, 2) even if the number of page views decreases, sales can still be increased by increasing the sale of pure ads to raise revenue per PV, and 3) advertisers value actual monetization (app installs) over the number of page views.
As for game guide articles, the company incurs production costs for each title regardless of page views, so its profit margin can rise sharply when particular titles become more popular and plunge when that popularity declines. In recent years, as multiple titles tend to be popular at the same time, the company's cost efficiency has fallen. The company believes it is unlikely that there will be any additional deterioration in cost efficiency.
The company used to disclose monthly trends in its Game Guide PV index, broken down into three major titles and other titles. The decline in page view numbers in FY05/19 was the result of a decline in figures for the top three titles. In Q4 FY05/20, page views increased as more users played games at home due to the COVID-19 pandemic. Since Q1 FY05/21, page views for the three major titles have been on the decline again.
Eighty to ninety percent of users access the content through mobile devices like smartphones and tablets. The main user base ranges in age from 18 to 44, with users aged 25 to 35 comprising the largest group. When selling ad space through ad networks or agencies, GameWith sets standards so that only ads relevant to the young user base are displayed.
When they do not access via an app, in many cases, users enter terms such as “XYZ [game name]” and “tips” into a search engine such as Google, and directly access an article with tips. As a result, in Game Guide, it is important to update articles as soon as possible and employ SEO skillfully in order to obtain page views. Conversely, relatively few users specify GameWith in their searches, so there was formerly little point in the company investing in promotion for branding purposes.
However, the lifetime value for users in the Game Guide business manifests over a shorter period of time than for users in the Game Review business because it is affected by the playtime for games.
Notes:
PV index is indexed to the PV count excluding Game Review-related PV as of June 2018
Three main titles are top three titles as of June 2018 based on monthly PV
Overseas “GameWith” English and Chinese versions
GameWith has launched English and Chinese versions of its GameWith site. The English version garnered 14mn monthly page views in Q1 FY05/20.
As of May 2020, the English version of GameWith featured mainly console game content. In Q4 FY05/20, page views on the English website more than tripled from Q1 as people stayed home due to the COVID-19 pandemic. This period of stay-at-home demand concluded in FY05/21, and PV count has remained slightly above the Q3 FY05/20 level since Q1.
Different types of games are popular in Japan and overseas. As a result, the overseas versions of the site must publish content that differs from the Japanese version as they cover titles that are popular in their respective regions. Another difference is that users from the Europe and the US tend to prefer video content to written content. As of January 2020, GameWith was increasing the number of page views overseas by rolling out content on titles that are popular both in Japan and abroad, but owing to the difference in popularity of titles overseas, the number of page views is not growing as much as in Japan.
Since revenue per ad varies based on region, growth in page views is not a reliable indicator of revenue growth. As of January 2019, more than 70% of page views for the English version of “GameWith” came from North America, the UK, and Australia, developed economies with high revenue per page view.
@WIKI
In December 2019, GameWith established a subsidiary, AtWiki, Inc., to operate a wiki rental service specializing in game guide information, and acquired Atfreaks Limited’s @WIKI business. Revenues from the service are recorded under the Game Guide category.
Writers produce and publish content for targeted games on the GameWith website. @WIKI differs in that its users are the ones who create and publish content. As such, there are no fixed personnel expenses for writers.
As all ad postings in @WIKI are sold through ad network companies, revenue per ad is less than for GameWith. Furthermore, no mechanism had been established for raising revenue per PV before GameWith acquired @WIKI. Thus, there was significant scope to increase revenue per PV at @WIKI by leveraging GameWith’s expertise on raising revenue per PV. In fact, in Q2 FY05/21, after its acquisition, monthly average revenue per page view for @WIKI was up 129% from Q2 FY05/20, immediately before the acquisition, despite lower revenue per ad due to the COVID-19 pandemic. The company commented that the short-term improvement in revenue per ad more or less ended in Q2 FY05/21, and any further improvement in revenue per PV will be gradual.
@WIKI has averaged 90–100mn monthly page views (as of Q3 FY05/21). The company expects @WIKI’s page views to track a gentle decline in the long term, and plans to recoup its purchase price primarily by boosting revenue per ad.
The GameWith website is concentrated on titles with a high number of users. It, therefore, makes sense to use the acquisition of @WIKI to cover titles not able to be covered by writers on GameWith. Due to the difference in website positioning, though, it is unlikely that the number of page views can be significantly raised from the current number.
Game Review
GameWith’s strategy is to make Game Review, which provides opportunities for consumers to start playing games, a second source of earnings following Game Guide. The company said it wants to be the first brand that comes to mind when users look for a new game to play, and aims to transition from being GameWith, the game guide site, to GameWith, the game media site. The company has built one of the leading comprehensive game databases in Japan. It posts quality game review articles and videos by having the employees play the games themselves.
Revenue structure
Revenue for Game Review is not a function of page-view count times revenue per page-view. Rather, the company contracts directly with the advertiser for tie-up ads and gets a fixed monthly amount per ad space.
According to the company, the time spent reading articles on Game Guide tends to be short, but readers tend to spend longer on Game Review articles, and customer loyalty is strong.
Because users who seek out game reviews primarily look to discover interesting games, the company thinks the lifetime value (LTV) for such users manifests over a longer period of time than for users who browse game guides.
While revenue forecasts are easy with tie-up advertising, to avoid alienating users, it is important to strike a balance, avoiding bias in content and overly familiar relationships with game companies.
Apps
Due to the nature of the Game Review business, GameWith app users typically use their app under certain circumstances, such as when having time to kill or hankering to play a game, and the majority of them are mostly likely not constant daily users.
In Q3 FY05/21, the company announced that it was scaling back some of its iOS app mobile game reviews in order to conform to App Store guidelines (App Store Review Guidelines 3.2.2—Business—Other Business Model Issues—Unacceptable) and maintain iOS app updates. This is not expected to have an impact on the Game Guide business area. Mobile game reviews will continue for Android applications and web browsers. The company will be seeking to expand its game review service for console and PC games and review its promotion strategies accordingly.
Key advantages of the apps
Web browser users arrive at articles by searching for game titles in a search engine, rather than by searching for the GameWith brand. As such, it is important for GameWith’s articles to rank higher in search results than those of competitors. However, in the case of the apps, users are guaranteed to use GameWith’s articles.
User attributes can be more accurately ascertained for app users than for web-based users. As user attributes are vital information to advertisers, the accurate ascertainment of attributes can lead to a rise in revenue per PV.
There is potential to increase the user conversion rate by leveraging functions, such as push notifications.
Video Streaming
The company streams video content it creates over video platforms such as YouTube (the main platform for gameplay videos in Japan). The company has accumulated knowhow on developing YouTube channels, having produced a number of popular YouTubers. It supports creators in various ways so that they can perform at their best. Support includes provision of its own studio for shooting videos, assistance in recording and editing, collaboration and joint appearance arrangements, strengthening of fan communities, channel development, collaboration with game companies, and administrative support.
Revenue in Video Streaming comes mainly from ads displayed on video platforms. This revenue can be calculated by multiplying cost per view by the number of views. Revenue from videos provided as a part of Game Review is attributed to the Game Review business, rather than the Video Streaming business.
The company said that fluctuations in Video Streaming cost per view are greater than those in Game Guide. This is because in Game Guide, revenue per ad is adjusted across numerous advertisers and numerous media through ad networks. In contrast, the arrangement is different for video distribution, as cost per view is set between the video platform and the advertiser.
The number of views and number of channel registrations for esports-related video streaming, such as third person shooter (TPS) videos, are rising as people stay home due to COVID-19.
The company explains that its strength in the video streaming business is that it is a natural choice for those who want to specialize in games, such as esports players. At standard YouTuber management companies, content creators are required to do other work unrelated to games in areas where they have little interest. The company said that content creators who want to specialize in games gravitate toward GameWith.
esports
Video Streaming accounts for 75.5% of the company's esports business revenue (FY05/2021). The company's revenue structure is not dependent on sponsorship revenue, unlike typical esports teams, where about 70% of revenue comes from sponsorships (Famitsu, April 2021). Most esports business revenue besides that from Video Streaming is included with other revenue. The company's main focus will be on Video Streaming, using it to leverage the solid fan bases of successful esports players. Concurrently, the company will build its revenue base with additional services, including a fan business (which was launched in Q4 FY05/21) and online tournament management.
Average number of views for Video Streaming in FY05/21 peaked in Q1, and declined through Q4. In Q4 FY05/20 and Q1 FY05/21, there was particularly high demand among people who had to stay at home due the spread of COVID-19. The popularity of FORTNITE, which had been a company focus, peaked in FY05/21 and Apex Legends gradually became more popular. The company will be aggressively launching new channels, as well as a new division dedicated to Apex Legends.
Other
Other revenue comes from areas such as event production, blockchain games and esports revenue other than Video Streaming.
esports
24.5% of the company's esports business revenue comes from sources other than video streaming (FY05/21). Specifically, 11.9% is from broadcasting rights, 5.3% is from tie-ups, 4.2% is from sponsorship revenue, and 3.1% is from its fan business. While the company's main focus will be on video streaming, it will strengthen its revenue base with additional services, including a fan business (which was launched in Q4 FY05/21) and online tournament management. The fan business commenced with a monthly fee of 720 to 840 yen, in line with the amount paid for ordinary fan clubs.
Event production
The company operates an event production business with an aim of fulfilling its mission to “create a more enjoyable gaming experience,” not only online, but offline as well.
Blockchain games
Blockchain games are games that harness blockchain technology. Blockchain does not have a central administrator; instead, an unspecified number of participants store and manage network information. Blockchain games stand out in that it involves an automated, decentralized system that is fraud-free; gamers’ assets and liabilities remain even if the game is discontinued; and virtual currency (Ethereum [ETH]) is used within the game.
GameWith officially launched its first blockchain game, EGGRYPTO,in April 2020. The game was jointly developed with Kyuzan Inc. Following the launch, the company began token sales (sales of rare characters). From FY05/21 onward, it plans to incorporate elements of casual games and generate earnings through token sales and in-game charges. In August 2020, it added gacha (loot box) functionality. As of January 2021, the company generates revenue mainly through in-game charges, while working to attract more users. As of August 2021, the number of EGGRYPTOmembers amounted to more than 300,000.
In addition, Crypto Games Inc., which the company invests in, launched blockchain game CryptoSpells in June 2019.
Establishment of a subsidiary for a Non-Fungible Token (NFT) related business
On July 26, 2021, the company resolved to establish a new subsidiary, GameWith NFT Co., Ltd., for the purpose of conducting NFT-related business. The company had already invested in an organization with a proven track record in developing and operating blockchain games, and the company plans to develop a variety of game-related NFT businesses as well. It decided to establish the new subsidiary to clarify its business areas and build an efficient structure for NFT-related investments.
Through this subsidiary, the company plans to provide game companies and publishers holding game-related IPs with consulting services regarding the monetization of NFT-based IPs. The company has no plans to conduct operations related to NFT infrastructure, which involves costly investment. GameWith indicated that it base future decisions regarding potential investment in NFT-related companies on the details associated with each individual investment opportunity.
Revenue from top customers
The top customer of GameWith by revenue is Google Asia Pacific Pte. Ltd., which accounted for 21.5% of revenue in FY05/21 according to company disclosure.
We understand revenue from Geniee Inc. (TSE Mothers: 6562) declined sharply, because GameWith took in-house the supply side platform (SSP) operation that had been outsourced to ad network companies.
F@N Communications, Inc. (TSE1: 2461) is a major ad network company that mainly sells ads soliciting smartphone app installation (adopts a results-based compensation model). Since FY05/20, F@N Communications has not met the disclosure standard for top customers (generation of more than 10% of the company’s revenue).
Cost structure
Cost structure: Excluding advertising and one-time expenses, personnel expenses comprise about 75 - 80% of costs, rent about 6%, and server use roughly 4%. These are effectively fixed costs and the combined total for personnel, rent, and servers was roughly JPY2.0bn in FY05/21. The company spent virtually nothing on advertising through FY05/20 and invested JPY680mn on promotion in FY05/21. Advertising expenses for FY5/22 are expected to be JPY172mn.
Gameplay Workers
The “gameplay worker” system allows the company to outsource as required to program registrants. This benefits the company by helping reduce fixed costs, while game aficionados can earn income as Workers while gaming, no matter where they live.