Japan's Gree aims to triple users, boost games

TOKYO (Reuters) - Gree Inc (3632.T), Japan's No. 3 social networking service provider, is keen to expand into overseas markets and new businesses but for now will focus on offering more, improved games in Japan as it aims to triple its membership.

Yoshikazu Tanaka, Gree's founder and chief executive, said he viewed the current economic downturn as a chance to attract more users and boost per-user spending, as people rein in big-money purchases and enjoy more of small luxuries like $1 accessories for their online personas.

Gree is part of a select group of companies whose earnings are thriving this year and it expects its profit to jump seven-fold, while the global economic crisis batters large corporations such as Sony (6758.T) into massive annual losses.

Tanaka believes there is substantial growth potential in Japan for businesses like Gree, which combine games and social networking services for users to interact with friends online. Gree users mostly use mobile phones to access its services.

Speaking at the Reuters Global Technology Summit in Tokyo, Tanaka said Gree aims to have 20 or 30 million users, up from the current 10 million, by improving its game offerings to keep attracting fickle Internet users. He did not specify the time-frame for the growth in users.

"In this quickly changing market, it is crucial to be the one that proposes new products, rather than just asking users what they want," he said.

"If we can do that, we can keep up with the new times, but if not, we would always be one step behind."

Gree, which competes with bigger rivals Mixi Inc (2121.T) and DeNA Co (2432.T), relies less on advertising revenue than rivals, having a business model that earns some 70 percent of income through paid contents.

Tanaka founded Gree in 2004 and listed its shares on the Tokyo Stock Exchange's Mothers market for start-ups in December. KDDI Corp (9433.T), Japan's second-biggest mobile phone operator, holds a stake of about 7 percent in Gree.

The number of Gree's users more than doubled in a year to exceed 10 million last month, nearing Mixi's 16 million and DeNA's almost 14 million. But compared to global leader Facebook, which had some 295 million unique visitors in March worldwide, it is still a tiny fraction.

LOCAL PLAYERS DOMINATE MARKET

In Japan, home-grown social networking sites still dominate the market, and the rapid growth of Gree helped its shares rise 14 percent since its market debut, making 32-year-old Tanaka, Japan's 24th richest person this year, according to business magazine Forbes.

The stock outperformed an 8 percent rise in the Mothers market index .MTHR in the same period.

Tanaka said Gree will focus on Japan for the time being, but the company would look into overseas expansion, while it may also start new businesses for future growth. E-commerce, financial, and music services are likely categories of new businesses that can use Gree's SNS platform.

"If we can secure a big domestic market and produce strong services, that would make us globally competitive as well," he said. "We are not considering ourselves as just an SNS company or game company. We see ourselves as an Internet company."

Reflecting his admiration for Silicon Valley, Gree's Tokyo office has meeting rooms named after technology cities, including Mountain View, home to Google Inc (GOOG.O) and Sunnyvale, home to Yahoo Inc (YHOO.O).

(For summit blog: blogs.reuters.com/summits/)

(Editing by Anshuman Daga)