How one Japanese gaming startup is generating $3.8 million in revenue per day!

Puzzles and Dragons is currently the number one top grossing free to download application in Japan for iOS and Android. Reports suggest the app is currently making around USD$3.8 million a day or around USD$54 million per month USD$114 million per month.

Puzzles and Dragons is owned by GungHo Online Entertainment launched in February 2012 and it was not long before the game out ranked the revenues of viral hits suchs as Candy Crush Saga.

GungHo have had media coverage in the last 12 months eluding to the fact that their strategy around building an audience was too slow, however clearly it has worked with them instead being focused on a consistent monthly revenue model and local growth easy to scale and manage instead of trying to get critical mass too quickly.

The other interesting fact is that the bulk of it’s users come from within it’s own country of Japan, in fact they have not long hit 16 million users in their own country [that’s over 10% of the population], proving that you don’t necessarily need to have a global focus in order to build a successful app based gaming business. There are only four other markets it currently plays in South Korea, Canada and the US.

So what is the strategy they are using that makes them so profitable?

The game is free to download, but people must purchase certain things within the game for real dollars. As difficulty increases users need to evolve their monsters in order to have a successful chance of winning battles, this cost money to help the process along, for the impatient player. Whilst you can win “magic stones” they come in handy to give you a competitive edge so users are encouraged to purchase them here and there. The big draw card however is in a strategy they have integrated which is the same one that has been used by arcade games since the beginning, and that is the feature to continue playing once you die by paying a dollar, or starting from the very beginning again.

There is a lot to be learnt by studying the GungHo business model.

****UPDATE ON NUMBERS:

GungHo Entertainment made $3.76 million each day in April, with Puzzle & Dragons garnering 13 million players in that time.

GungHo reported ¥12 billion ($118 million) in revenue for the month of April, marking a 1,142% increase in revenue over last year. Puzzle & Dragons was $113 million in revenue.

The company’s share price rose 28.79% on the Osaka Stock Exchange this morning, and the market closed with GungHo’s market cap sitting at $10 billion.