From ad revenue to item billing: Kaito Royale (2009)

From advertising medium to billing platform

The heart of this pivot lies less in the commercial success of a single title than in remaking the very machinery that produced revenue. A model that gathers members for free and sells advertising sees per-user revenue grow slowly even as users multiply, and it ties its earnings to the swings of the advertising market. What DeNA established with Kaito Royale was a design that turned competition and cooperation among users into a motive to spend, and a system for collecting that revenue on its own platform without relying on outside payment. Binding acquisition, billing and settlement into one, this mechanism did not end as a one-off hit but became the structure that would sustain DeNA’s social-game business thereafter.

At the same time, this success left the problem of lopsided earnings. Growth that tripled consolidated revenue in two years concentrated much of it in social games, and led on to the later need for the shift to smartphones, for overseas expansion and for diversification. The choice to rebuild the ad-dependent Mobagetown into an item-billing platform brought DeNA some of the highest margins in Japan, while breeding the next problem — dependence on that growth model. The design that bundles a free entry point with small-sum billing was widely inherited across the mobile-game industry that followed, and DeNA became one of the companies that built that form early.