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Social companies "may not be up to their valuation" - Nexon

But market activity is testament to micro-transactions as "dominant business model," says CEO

The high prices being paid for mobile, online and particularly social games companies may not be realistic in the long term, according to Nexon America CEO Daniel Kim, but the buzz and activity in the sector is testament to the strength of a new games economy.

Speaking in an interview published today on GamesIndustry.biz, Kim also detailed plans to acquire businesses as the free-to-play publisher makes a concerted effort to enter Europe, a market that only currently accounts for 1 per cent of global business but is next on the list of growth regions following a successful push in North America.

"We know some companies are very profitable and doing well. Others may not be up to their valuation. Time will tell," he offered. "Especially on the social side, it's a newly emerging market and people haven't quite figured it out. There's a little bit of hype going on.

"But certainly, the idea of these companies getting great valuation is testament to the idea of micro-transactions as the dominant business model that everybody believes is going to be the way of the future in terms of how games are serviced. We've seen that happen in Asia as we switched over from subs to micro-transactions, the 30 games that we publish and operate around the world are based on the same business model."

With recent activity seeing a spate of mergers and acquisitions across Europe, from RockYou's Playdemic buy to numerous land grabs from Zynga, Playdom and others, Kim conceded that the talent pool could be getting thinner, although Nexon has strict policies for partnerships itself.

"The types of companies and the resources that we're looking for might not be in direct competition to the ones that are important to Zynga, but development resources are development resources," he said.

"The market certainly has been going through a bit of inflation in the recent months and it's a healthy thing for the game industry so far. Again, we're not looking for a short-term flip on any investments or acquisitions, we're looking for long-term partnerships, in the same way we would develop a long term partnership with our users. That's the mantra and the way we operate.

"We're careful to make sure there's a really good cultural fit. I don't really see that as a big hurdle for us because we also have something very unique to offer - 16 years of concentrating on this market, this genre, this business that companies are excited to absorb and learn from. We believe these new companies will also bring some fresh ideas to the table also, and we're excited about working with this new talent all over the world."

He also acknowledged that there is more competition in Europe where Nexon publishes titles such as Maple Story, Atlantica and Combat Arms, but the company is ready "to bring the operation in full-force" to launch games as a service in the region.

"There's definitely more competition with established service providers that operate these types of games but there's huge potential there. Overall, group-wise, Europe became just big enough for us to invest in a little bit more aggressive expansion.

"Europe is just over 1 per cent of our global revenues. But again, global revenues are growing so fast that it will be hard for both Europe and the US to keep the pace up and running."

The full interview with Daniel Kim can be read here.

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Matt Martin avatar

Matt Martin

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Matt Martin joined GamesIndustry in 2006 and was made editor of the site in 2008. With over ten years experience in journalism, he has written for multiple trade, consumer, contract and business-to-business publications in the games, retail and technology sectors.

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