(BN) Japan Passes U.S. as Top App Spender as Smartphone Use Rises

(Bloomberg ) Japan surpassed the U.S. as the top-grossing market for apps in October as smartphone use surged and wireless carriers started billing customers directly for downloads from Google Inc. (GOOG)'s online store.

App revenue in Japan more than tripled from a year earlier as the rising popularity of games including GungHo Online Entertainment Inc.'s "Puzzle & Dragons" helped Google Play close the gap with Apple Inc. (AAPL)'s store, defying the trend elsewhere, according to a Dec. 11 report by researcher App Annie. Downloads also increased after NTT Docomo Inc. (9437), the country's largest mobile-phone operator, started offering the iPhone in September.

Japanese consumers are quickly adopting smartphones after previously lagging behind other markets, with 42 percent of the population using the devices in 2013 compared with 28 percent a year earlier. That proportion is expected to jump to 62 percent in 2014, outpacing the 50 percent penetration rate estimated for the U.S., App Annie said.

"Japanese are accustomed to spending money on mobile phones," said Hiroshi Naya, an analyst at Ichiyoshi Research Institute Inc. based in Tokyo. "If you see revenue per user for companies like GungHo, which distribute apps globally, Japanese users spend more than the rest of the world."

GungHo Downloads

Consumers in Japan traditionally relied on cash rather than credit cards for purchases. In 2011, Google introduced carrier billing with Docomo, KDDI Corp. (9433) and SoftBank Corp. (9984) that allowed apps downloaded through Play to be added to customer phone bills, helping spark downloads, App Annie said.

"Puzzle & Dragons" has been downloaded more than 21 million times since its launch in February 2012. App makers Colopl Inc. and Sega Sammy Holdings Inc. also have seen growth in game revenue, according to App Annie.

Mixi Inc. (2121), a Japanese game and social network operator, rose 661 percent between Nov. 19 and Dec. 10 on expectations of profit from its game "Monster Strike" and the "YYC" social app. The shares fell the daily limit in Tokyo trading yesterday after Goldman Sachs Group Inc. cut its recommendation to sell from neutral and said the shares have risen too high.

Tokyo-based Colopl, which provides game platforms and applications for smartphones, has risen 730 percent this year. GungHo gained more than 700 percent in the same period.

Docomo added the iPhone in September, becoming the last of Japan's three national carriers to offer the handset. The company had resisted selling the device because Apple's iTunes store competes directly with Docomo's dmarket.

SoftBank, Japan's third-largest carrier, led a $1.53 billion agreement for Supercell Oy this year that valued the maker of "Clash of Clans" at $3 billion. The Finnish game maker is seeking a bigger slice of Japan's market for downloaded games, which is forecast to triple to $3 billion this year amid the shift to smartphones, said Ilkka Paananen, a co-founder of Supercell.