Mobile Game Market - Bear or Bull?

Here at the Mobile Phone Blog we spend a lot of time talking and thinking about the mobile game industry. At CTIA we had 15 meetings with friends and partners in the space and overall feeling about the market was tepid at best.

If you're familiar with the space, you know the current challenges - (lack of consumer awareness, distribution bottlenecks through carriers, too many publishers and games, crappy games, etc., etc.) The consensus from folks like M:Metrics and others is that the business is flat. And today, market research firm iSuppli reported that:

"mobile-gaming market suffered a reversal of fortune in the second quarter of 2007 as revenues for title publishers declined by 9 percent sequentially, compared with 11 percent growth in the first quarter."

Knee jerk reaction to this news might suggest that this business really sucks, and if you've seen what Glu's shares have done recently, you could make a good argument in support of this opinion.

BUT, if you read further through iSuppli's report:

"Despite the short-term setback, mobile gaming revenue is expected to nearly triple by 2011, growing to $6.6 billion, managing a Compound Annual Growth Rate (CAGR) of 23.2 percent from $2.3 billion in 2006."

Seems kind of contradictory to think that a market that is expected to triple in 5 years could have negative growth over the last quarter. So what gives?

In my opinion, this market is a classic example of the diffusion of innovation model or what most people in the tech world know as Crossing the Chasm. I'm not going to go into a long explanation of the theory and if you're really interested, you can read the book but basically, the theory argues that there is a chasm between the early adopters of a certain product (the technology enthusiasts and visionaries) and the early majority (the pragmatists). A lot of technologies and firms die in the chasm because they never get more adoption than from the early adopters. But those who do survive the chasm, get rewarded when the mainstream crowd catches on.

In the mobile game space today, less than 5% of cellphone subscribers play games on their phones. This number represents the early adopters because most people don't even know that they can play games on their phones. Yet we live in a world where everyone I know plays video games (whether online, or on their favorite console platform) and the cellphone is the only device that they have with them ALL THE TIME.

I know their are skeptics who think this market will never be "huge" but for those of you in the trenches right now, hang in there, because this market will take off and it will be worth the wait.

Cellfire - A Mobile App that Saves you Money

Finally an application that you can download to your phone that actually saves you money! We've been tracking a San Jose based technology company, Cellfire since they launched their service last summer. I thought it was a great idea when I first heard about the business and based on the recent news it appears that mobile consumers are finding a lot of value in the service as well.

For those of you that aren't familiar with the service, Cellfire is a mobile coupon service that gives you the best deals, instantly, right on your cell phone. Cellfire enables savvy shoppers and budget-conscious consumers to save money when they are dining out, shopping, or just having fun. Users have their own set of discounts and offers specific to their geographic locations. Users simply click on the coupon they want to use and show it to the store sales person for redemption. Cellfire users never need to clip paper coupons.

Check out a Flash demo of the service here.

Cellfire offers coupons from popular retailers including Hollywood Video, Arby's, Domino's Pizza, T.G.I. Friday's, Peet's Coffee, 1-800-flowers.com, EMI Music, North Beach Pizza, Quiznos, and more. New merchants and coupons are continually available. If you check out the ticker on their homepage, Cellfire's total delivered savings to consumers to date is over $20 million!

The Cellfire service is a great mobile application and I highly recommend that you try it out by signing up here.