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How ripe is the Indonesian market for digital entertainment monetization?

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Key takeaways:

  • Transaction processed in the digital entertainment sector has grown significantly since March 2020, coinciding with lockdown measures
  • Strong user preference for e-Wallets payments in gaming and live-streaming apps
Photo by Jonas Leupe on Unsplash

Indonesia is a booming market for digital entertainment. including live-streaming apps and gaming platforms. With a large, young and technologically savvy population, the country poses a significant opportunity to be tapped.  Internet penetration in the country has also increased rapidly in recent years, with 74% of the population having internet access in 2020, enabling the adoption of digital entertainment. 

Digital entertainment platforms include gaming across mobile, PC and console and extends to live-streaming. With the rise of mobile adoption, there has been cascading effects to video game development, with mobile games being the highest revenue generator since 2017 with consoles coming in second and PCs in third. What’s more telling is that the percentages are declining for both PC and consoles, while mobile games are rising.

Key revenue streams for mobile gaming include:

  • Paid games (or also known as Pay to Play, usually adopted by established mobile game publishers. Users are often willing to pay upfront and avoid ads or having to pay for coins, gems, and other content. )
  • Freemium (free-to-play model with in-game purchases and transactions. Users can unlock extra lives, special items, extra content, or to simply buy a cool looking piece of armor for style and status points within the gaming community, that has no real benefit in or outside the online game.)
  • In-game advertisement (Players can enjoy a mobile game for free, while the developer earns revenue from mobile ads that show up in the game. Advertisers are also happy to show their ads and acquire new users.)
  • Mobile ad mediation (Adding several ad networks and working with them all in one place. They are basically an intermediary between the publisher, and ad networks. This contributes towards more ad revenue and is a highly effective monetization technique.)
  • Data monetization (Usually collecting aggregated, non-personal data, and for games with high daily active users (DAUs)
 

We analyzed aggregate transactions processed on our payments platform by digital entertainment companies, where there was a notable uptake in transactions processed within the sector over the last 3 years.

Closely correlated to the lock-down measures imposed due to COVID, transactions in the digital entertainment sector doubled in 2020. With restrictions to physical gatherings and entertainment options, consumer discretionary spending was diverted to digital mediums, leading to a larger number of transactions and higher value spent.

The average transaction size in the sector is between US$3 and US$5, and are largely considered to be micro-transactions. Despite the lower transaction value, it is notable that Free To Play (F2P) games have begun to dominate the market in recent years, making up 80% of the total digital games revenue in 2018. Microtransactions now make up a huge portion of gaming industry revenue, with the console microtransaction market alone bringing in $2.94 Billion in 2017. This has also coincided with the rise of mobile gaming popularity, with 64% of freemium mobile gaming users making in-app purchases in 2016.

To succeed in this growing industry, one of the main factors video game publishers and companies should consider optimizing for – is the user experience, ease and preference in making payments. In a fragmented payment landscape like Indonesia, enabling locally preferred payment channels is of utmost importance.

Charts below detail the split of payment channels across different industry sectors, where for the Entertainment category e-Wallets contribute to the largest volume by share of payments, followed by Credit/ Debit Cards and Virtual Accounts.

e-Wallet payments are most popular in the digital entertainment space

e-Wallets usage is considerably high across different industries with the exception of retail eCommerce. Its popularity can be attributed to its convenience. With e-Wallet payments, users will just need to enter their mobile number and verification will be sent directly into their e-Wallet app. This takes fewer steps compared to other payment methods such as virtual account (bank transfers) where users are required to open their mobile banking apps to send payments.

Low e-Wallet usage in the retail eCommerce sector is possibly driven by the large basket size. As shown in the chart below, e-Wallets are popular for transactions lower than US$7 (Rp 100,000) while the basket of retail eCommerce tends to between US$7 (Rp 100,000 to US$17 (Rp 250,000).

e-Wallets popularity in the digital entertainment space can also be attributed to microtransactions scheme in gaming and live-streaming apps. Entertainment apps typically charge users between US$3 to US$5 (Rp 50,000 to Rp 80,000) per transaction, a range where e-Wallet payments are most optimized for.

e-Wallet is less popular in making higher amount transactions due to regulatory barriers. Bank Indonesia and Financial Services Authority (OJK) have introduced the maximum total balance limit that can be stored in e-Wallet accounts which are Rp 2,000,000 for non-verified users and Rp 10,000,000 for verified users.

What does this mean for business?

Businesses need to dedicate resources to turn users into paying customers and maximize average revenue per user (ARPU). This includes optimizing checkout experience to suit the local market preference. Consider enabling e-Wallet payments for microtransactions on your platform. In addition, also consider enabling credit / debit cards and virtual account payments for larger ticket in-app purchases.

About Xendit

Xendit is a financial technology company that provides payment solutions and simplifies the payment process for businesses in Indonesia, the Philippines and Southeast Asia, from SMEs and e-commerce startups to large enterprises. Amidst the fragmented payment landscape in Southeast Asia, Xendit enables businesses to accept payments from direct debit, virtual accounts, credit and debit cards, eWallets, retail outlets, and online installments

For many businesses, accepting payments online is new territory, but we’re here to help. We have helped 1000s of businesses come online and we’d love to help you too.

Find out more about Xendit, or sign up to try our dashboard!

Learn more about payments in Indonesia

Understanding the opportunities and challenges of the local market is key to staging an effective entrance.

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