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GREE’s “Newly Disclosed” US Sales Numbers Are Hardly New. And Misleading. [Social Games]


GREE caused a bit of a splash in American media today when the company, for the first time, broke out sales numbers for markets outside Japan (essentially the US).

The company says that in the first quarter of this year (January-March) sales in the US reached $12.15 million. In Q2, sales increased 38% to $16.87 million.

So far, so good. But these numbers are not really as surprising as they are supposed to be. And they are misleading, too.

Here is why I think these numbers are misleading:

GREE hasn’t really generated revenue in the US by itself so far but “bought” it through the Funzio acquisition. That’s of course fine.

What isn’t fine, at least in my view, is to include Funzio’s revenue in GREE’s Q1 even though the startup became part of GREE in May (see below) to inflate numbers.

GREE did not have $12.15 million in sales in that time frame. By extension, their sales did not increase “by 38%”. GREE didn’t have to do anything with this. Only two of the six months under discussion were under GREE’s control, May and June.

Here is why these numbers are hardly a surprise:

In the earnings statement from May, GREE already disclosed that Funzio’s sales reached $12 million in Q1:

So as Funzio made $12 million on its own in Q1 and as GREE told Venturebeat overall sales amounted to $12.15 million, that would mean that GREE’s own titles only contributed $150,000 in that quarter. Again, this also means that GREE includes revenue from a company it bought in May for Q1 “retroactively”.

So the Q1 number isn’t a big surprise. (As a side note, I don’t think GREE is doing itself a favor by showing how much money they made in that time frame. Not at all.)

Now GREE also says in Venturebeat that revenue shot up 38% q-o-q to $16.87 million in Q3, but that’s not really news either: in the screenshot above, you can see that the company already disclosed in May that Funzio’s monthly revenue accelerated to $5 million in April (by the way: apparently without GREE needing to help them with monetization expertise from Japan).

TechCrunch wrote an entire article about it – also over three months ago.

According to Venturebeat, Funzio sales increased 27% q-o-q, meaning sales went up from $12 million to $15.28 million in Q2, as already indicated in the May earnings report and said TechCrunch post. In other words, GREE’s own sales would be somewhere around $1.6o million in Q2 (probably generated by Zombie Jombie and Alien Family for the most part).

So apart from GREE disclosing unfavorable sales data from their own games in the US, the company isn’t saying anything really new here. I am just asking myself why GREE includes Funzio’s sales in Q1 even though the acquisition was inked in May.

I contacted GREE Japan, which didn’t correct my back-on-the-envelope math above (which means it’s accurate). The company confirms that Funzio’s sales were included “retroactively” for comparison purposes.

More on Inside Mobile Apps (which has pretty interesting comparisons between ARPDAU from GREE and other companies in the US) and Venturebeat (where Dean Takahashi interviewed GREE International CEO Naoki Aoyagi on its US business).

To make it clear at least once: I have no interest to “bash” GREE, DeNA or any other company on my site. As a consultant focusing on Japan’s social gaming industry, it would be in my own best interest to talk up these and other companies and spread good news about the sector.

I am choosing to be as objective and fair as possible instead, even if that means I shoot myself in the foot (potentially damage my own business) by being critical when I need to be.

Serkan Toto About Serkan Toto
I am the CEO & Founder of Kantan Games, Inc., a Tokyo-based game industry consultancy focused on the Japanese market. Please subscribe to updates on this site via RSS or Email.