IGG’s Kevin Xu on challenging the Chinese game market

The Chinese online game market is booming, but a very tough market to break into as a Western developer or publisher. IGG might have found the magic formula to do so, but not without the necessary planning. IGG’s COO Kevin Xu took the time to tell us all about IGG’s trials and tribulations while preparing to enter the Chinese market at GDC Europe in Cologne.

Spreading their odds on a diverse portfolio of games since the company was started by three friends in 2006, IGG has experienced a steady growth as a publisher of free-to-play online games. Currently managing a portfolio of 25 games and having had a focus on the US market, IGG has become known to spread their own in-house development over client-based, browser-based and most recently social games. While IGG’s 14 development studios located in China, Chinese players were only able to play the publisher’s games as testers. Until now.

Done with social

At the beginning of 2010, IGG saw the growth in the social game market and quickly responded by relocating a major part of their development assets and pipeline into social games. FishIsle on Facebook was born, drawing in over 5 million users in its first week. But most recently, the market situation has been changing. “Now every user we receive, we basically had to spend $1 dollar to acquire,” Xu says.

“The situation has become much, much worse.” On the other hand, some of IGG’s client-based games have been growing. With another two new client-based games on the way, one of them promises to be IGG’s big entry into the Chinese online game market. With a development history that involved small budgets below the $1 million dollar threshold and a varied portfolio of games, Xu himself is mostly excited about IGG’s new big budget game, Dreamland Online, which is IGG’s first game to be launched in China before the US. “That’s where all my bets are on,” Xu says. “We’ve already had five successful rounds of beta testing in China.”

Getting ready for the Chinese Market

Though IGG owns 14 different development studios in China, the company always chose to stay away from the Chinese online game market for as long as possible. “The Chinese market is a huge organic market,” Xu explains. “If you have enough resources, money and a great game, it will be a very good market for you.” Having little money in the bank when Xu and two of his friends started IGG in 2006, they chose to avoid direct competition with the big market leaders such as Tencent and Perfect World. Instead, IGG went for the US market where the company had little to no competition in publishing MMOs.

“As of today, things have changed a lot,” Xu says. With IGG stronger the ever, the strategy now dictates that all of IGG’s new titles are launched in China before reaching the US. This change has many benefits, including testing games against cheating. According to Xu, testing a game against Chinese hackers makes it almost foolproof against their western counterparts. “If it survives, it will everywhere,” Xu says. Since IGG started in 2006, Xu and his colleagues have been waiting for this moment. While the company started focusing on the US market, it recently partnered up with mail.ru in Russia and is building up licensing partnerships in Europe and South-East Asia. It all has to do with IGG’s long term strategy.

Playing it safe and flexible

Two years after the company started, IGG went into game development. Every game that was released was subsequently updated, improved or killed based on its popularity and profit margin. “We were building eight games every three to four months,” Xu admits. “Now, we do focus more on the quality of the games as well.”

As the company steadily grew and its portfolio expanded to browser-based and social game titles, the development strategy also shifted to higher quality and better graphics. In the past six months, IGG’s workforce grew from 550 to 700 people, mostly due to its growth in the Chinese market and increased licensing activities. This isn’t stopping IGG from keeping their reputation for spreading their bets on different kinds of games. “We’ve also seen Bigpoint’s success on the European and US market,” Xu says. “We’re trying to duplicate their success in the US and we’ll definitely give browser games a big try.”

Even though Facebook is no longer as attractive as it once was, Xu also confirms that their production of social games is also at an all-time high. Instead of halting their production, the Facebook policy change made IGG more interested in other, smaller and more local social networks. Even though most of the publisher’s resources are currently aimed at conquering the Chinese market, it seems IGG is sticking to its roots, playing it safe and staying flexible.

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