Japanese gaming giant GREE continues cost cutting with closure of messaging app Tellit

Japanese games giant GREE continues to restructure its struggling business, after the company shut down Tellit, the mobile messaging service that it released last year, as part of its ongoing streamlining initiative.

GREE, which shut its UK office in June and made 25 redundancies in the US and 120 layoffs in China earlier this year, is struggling to turn its successful Japanese social games network into a global business. That’s despite hefty investments and acquisitions, such as the $210 million purchase of Funzio last year and $109 million deal for Openfeint, the social games platform that was transitioned to Japan.

A GREE spokesperson confirmed to TNW that Tellit will cease to be from September 1, and is part of the aforementioned restructuring:

In recent weeks we have been optimizing our global operations and product lineup strategically based on a policy of selection and concentration. As part of that process, we decided, after much deliberation, to close Tellit so that we can focus our efforts on other opportunities.

We’re checking back in with the company to see if there are any layoffs related to this. We’re told there will be no layoffs as a result.

Tellit was first launched in December 2012 as ‘GREE Messenger’. It was never released in Japan (though it was available everywhere else worldwide), but it had been promoted with ad and marketing pushes in many countries. Its closure raises a number of questions.

Firstly, that of the future of GREE’s investment in Netherlands-based eBuddy, which designed the messaging app. GREE took a “strategic” minority share of the company for an undisclosed amount in October 2012, and the deal was one that could eventually become an acquisition of the messaging startup.

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Given that it is now ditching Tellit, that prospect of further investment or a full-out acquisitions seems unlikely.

More pressing is the question of whether GREE has what it takes to rival the competition on mobile.

Mobile messaging apps are increasingly looking like the future of Internet gaming. Just yesterday, popular messenger Kik launched its first third-party title — with an exclusive game from Zynga — and Facebook launched a new program with publishers to promote games on mobile. The US is playing catch-up to Asia, where Line and Kakao Talk have seen plenty of success for some time.

Line’s social gaming service has seen more than 150 million game downloads, helping it rake in $58 million in revenue for Q1 2013. Kakao Talk, which has 100 million registered users, says its games service grossed $311 million in the first half of 2013 and has seen more than 400 million games downloaded.

GREE’s Japanese rival DeNA also has a mobile messaging app, and they are widely heralded as a key platform gaming now. Which makes GREE’s withdrawal from the space all the more significant.

In reality, GREE (and DeNA’s) plan to make mobile messaging apps was always going to be difficult, given that they were late to the game. Line and Kakao Talk have overwhelming dominance in Japan and Korea respectively, two prime markets for game makers, and are going global.

Likewise, WeChat, WhatsApp and others compete on an international level that neither Tellit nor DeNA’s Comm app are likely to ever reach.

These businesses plough considerable investment into messaging apps because it is their entire business, not just a product they run. DeNA was actually rumored to have scaled back its efforts on Comm, but the company dismissed concerns, telling TNW at the time that it is normal to ease up on the number of developers running a product once it has launched. Might DeNA’s app also be for the chop?

So it’s back to the drawing board for GREE, where it — and others in its position — must again consider how they can crack the boom in smartphones and mobile gaming.

Here’s the message sent to Tellit users today:

Dear Tellit Users,

We launched Tellit last year in an effort to make it easy for people to connect with their friends and share interesting content with each other. Although the product has seen steady usage and has loyal users, we are facing strong competition in other areas of our business.

In order to focus our efforts and succeed in this competitive environment, unfortunately sometimes we need to make difficult decisions. As a result, today we’re announcing that the Tellit application is scheduled to be closed down on September 1, 2013.

In accordance with our Terms of Service and to protect your privacy, within 90 days after the service has been suspended we plan to erase your personal data associated with the application. Should you want to retain any of your data, we advise you to do so prior to the suspension date since it will not be accessible after that time.

We hope you have enjoyed using our product as much as we’ve enjoyed building it for you.

Sincerely,

The Tellit Team

Headline image via Thinkstock