Gree to the World

Japan’s #2 SNS platform - Gree - IPO’d on Mothers stock-exchange last week and saw it’s shares jump 52% on listing day to a valuation of just over $1.2B, closing ahead of Mixi and gliding into 4th place for all digital-focused listed companies in Japan. While claiming approx. 7M users, only half of the Mixi base, Gree is almost entirely a mobile play. Serving as defacto SNS platform for the KDDI/au network, who was an early stage investor, the service offering combines gaming and messaging with a virtual goods model. According to company financials they reported $11M in profit on revenues of $33M in their last fiscal year while noting marked increases in Q1 FYE09. Crisis.. What Crisis?!?

More from around the web:

http://fukumimi.wordpress.com/2008/12/20/grees-ipo-and-service-outage/
Gree, Japan’s #2 (and original) SNS had its IPO on Dec 17th, instantly valuing the company at an eye popping JPY110B ($1.2B), with PER of 170 and PBR of 104. This makes Gree worth more than the #1 SNS, Mixi, which is currently valued at $900M, which is trading at a PER of 43.

Gree has approx 7 million “users”, which puts it far behind Mixi which claimed it passed 15million in the summer. The interesting thing about Gree is that it is, for all intents and purposes, a mobile internet SNS, with more than 98% of page views from mobile devices, although it originally started as a PC service. Mixi has a more even split between PC and mobile, 33:67 according to the most recent published figures.

http://www.washingtonpost.com/wp-dyn/content/article/2008/12/22/AR2008122201143.html
It seems the stock market sees a lot of room for growth in GREE’s business model even though the company doesn’t own valuable IP; the site’s big idea is easy to copy and Japan’s mobile market is saturated and bound to shrink considerably in the future for a variety of reasons (declining birth rate in Japan, government ban on handset subsidies). The combination of ads and fee-based sales is working out in today?s weak online ad market: From all of GREE’s sales, 70% comes from virtual items and 30% from ads. That’s a high ratio of virtual sales for a mobile site. In contrast, Mixi is heavily dependent on advertisements (the site generates less than 10% of its revenues through premium accounts and has no avatar system).