Gree not saying sayonara to games, looks for the ‘next big trend’ with diverse investments (#StartupAsia)

Yoshikazu Tanaka, CEO and founder at Gree, first entered the internet industry about 15 years ago. “I didn’t know programming, and the company I was working for suggested I pick it up. Even though I plan something, if I cannot create it, I cannot articulate what I want,” Tanaka recalled onstage at Startup Asia Tokyo. The rest, as they say, is history – but Tanaka believes that Gree’s journey is only just beginning.

To be sure, Gree has had its fair share of ups and downs in the past 10 years since founding. Their recent earnings report for fiscal year 2014 saw revenue fall JPY 26.64 billion to JPY 125.6 billion (US$1.23 billion), while net income dropped JPY 5.1 billion to JPY 17.35 billion (US$169.6 million). These numbers are noteworthy when compared to 2012, when the company earned only JPY 47.97 billion (US$469 million) in yearly net income.

Not saying sayonara to games

That was the fateful year when the company announced that it would focus on browser-based gaming using HTML5. Since then – especially after losing ground to GungHo’s hit game Puzzles and Dragons – they have shifted their focus to “full native” games. Tanaka is clear that they are not abandoning games altogether.

“We have been facing lots of changes in our business. Feature phone games were our main business at first, but in terms of hardware it was on the declining trend,” he says. “We knew that we needed to adapt our main business of browser-based games from feature phones to focus on smartphones. That is a very difficult technical challenge on its own, but while we did that we knew we also needed to invest in native games while also internationalizing our business.”

In terms of native games, Tanaka reveals that a lot of their sales have come from overseas. To him, it makes perfect sense. “The game market overseas is growing a lot, but native games aren’t really succeeding in Japan,” he says.

Clearly, Gree has its mind on other things as well, with their recent investments in same-day hotel reservation app Tonight, a review site for elderly care homes, and a child care service called Smartsitter. They also led a US$36 million round into the news app SmartNews.

It might seem random to most, but naturally Tanaka has his reasons. “We want to focus on what keeps growing […] right now we’re doing mobile games and community-based services, and we do it based on the hypothesis that they will grow in the future. But we keep thinking about the next big trend is,” Tanaka explains.

See: The GREE Story, Told By Founder and CEO Yoshikazu Tanaka

Tanaka is especially bullish about the redefinition of industries due to the introduction of the smartphone and the sharing economy. He uses Uber as an example of this. “Uber only works because almost all taxi drivers have smartphones today,” he says. “If you focus on smartphones, you can think of many business opportunities.” He explains that SmartSitter can be an extension of the smartphone-based sharing economy.

Even though the number of users for Smartsitter has been increasing rapidly, he emphasizes that it is not a clear-cut case of simply expanding into new industries. He brings up the example of the fishing game that they first started out with, Tsuri Star.

“We didn’t plan on expanding to browser, feature phone, and smartphone games based on a single fishing game we started from [but it happened],” he explains. “We hope this [moving into babysitting industry] acts as a trigger for other business opportunities. We just need an opening to expand further into this field.”

Investing in opportunities that others can do better than themselves is another strategy that Tanaka believes in, which is why Gree made the investments they have thus far.

(Photos courtesy of Michael Holmes Photo)