New Trend in Online Revenue

Popular mobile game site GREE is bucking the recent trend in decreasing revenue for online businesses. Last month GREE announced that their net profit will probably hit JPY3.5bn on sales of JPY11.2bn for the financial year ending June 30th. These numbers are nothing to sneeze at. At a time when corporate ad budgets are being squeezed in Japan, it is impressive to see a fairly new company report earnings as high as GREE.  Most online businesses continue to rely on ad dollars to fire their growth engines. And though over the years we have witnessed a redistribution in ad spending from traditional print and TV to online media, the last few quarters have revealed to us that even web and mobile players are not immune to ad spending cutbacks. Unlike most SNS and content sites that rely on corporate ad revenue, GREE generates most of its cash flow directly from its users.  More than 70% of GREE’s income is derived from selling enhancements and avatar accessories to users of its free mobile games. The comparatively low cost of selling digital content will help make companies like GREE, Yahoo Auctions and other similar entities the dominant business models for the digital age.