In the mid-1990s, a cell phone game meant one thing—a digital snake scrolling across a monochromatic screen. But nearly a decade after Nokia embedded handsets with its first Snakes cell phone game, the company’s new N-Gage gamer phone mirrors the upward trajectory of the mobile gaming market.

With this market heating up, companies looking to mine the bank need to follow a few fundamentals: convince serious gamers to give cell phones a go, exploit mobility, and distribute goods globally.

Mobile gaming should bring in $4 billion in worldwide revenues this year, according to Boston-based telecom consulting firm Adventis. In 2008, revenues will exceed $8 billion. South Korea and Japan dominate handheld gaming, with more than half of worldwide revenues last year. Europe and the United States are quickly gaining ground as the leading revenue markets, and India and China are expected to see explosive growth several years down the road.

The mobile gaming market is new, but the more potential revenue the billion-dollar market starts to generate, the more companies will swarm the space. Over the past several years startup publishers like Sorrent, MFORMA, IN-FUSIO, and Digital Chocolate raised millions in venture money. JAMDAT went public in September, proving that successful exits are a real possibility.

Traditional gaming companies are now turning their best games into mobile moneymakers. Electronic Arts plans to release a mobile version of The Sims this year. For their part, cellular carriers are looking to use game publishers to justify the cash spent on new networks and to tap the burgeoning mobile content market.

In the U.S., Sprint and Verizon have led the way with Sprint’s PCS Vision plan and Verizon’s Get It Now game system. Japan’s Vodafone and NTT DoCoMo provide extensive gaming content and European carriers like Nokia and T-Mobile are leveraging their gaming platforms. Though carriers crave all types of mobile entertainment, mobile games are pushing to the front of the pack. Technology research firm IDC recently released a report saying that by the end of 2005, mobile gaming will replace ring tones as the largest mobile content market in the U.S.

Bank shot

Filling commute hours and downtime during meetings has been the backbone of the mobile gaming market. “Right now mobile gaming is a time killer,” says Gartner analyst Daren Siddall. Still, the casual gamer is the industry’s bread and butter. JAMDAT found huge success with its basic JAMDAT bowling game. It may seem like a snore, but the game triggered the market and helped priced the company’s initial stock at $16 per share. So far, simple games have convinced most major wireless carriers to sign up.

The tactic has worked until now, but with so many companies developing basic games and fighting over the small amount of casual commute time, the market will need to lure new blood. “How many poker games can you sell before the market can’t handle anymore?” asks Ben Zackheim, managing editor of gaming blog Joystiq.com and a cell phone game tester. Enter the traditional video game player.

Tap the gamer market and you get an audience willing to pay to download complex games and play them for extended periods of time. Tech research firm Informa Telecoms & Media says that multiplayer networked games, like those driving the PC and console markets, present the greatest revenue potential.

Mr. Zackheim says he loves and fears the idea of mobile gaming. If the game is compelling enough and always at the user’s fingertips, the right audience will no doubt keep the meter running.

Too small to play?

The only problem is that serious gamers have so far shied away from the cell phone. Mr. Zackheim is still waiting for the market’s first killer app—“and no, it’s not JAMDAT Bowling,” he says. A gaming experience to rival or even come close to a first-person shooter or a real-time strategy game on the PC or console might be years away.

The latest Nokia N-Gage, the company’s attempt to use the gaming platform on a cell phone, has received mixed reviews. Avid gamers nicknamed the device the “sidetalker” for its awkward handset. According to Gartner’s Mr. Siddall, “the mobile platform has not been optimized yet to enable the rich gaming experience of the large digital home screen.” Limited handset capabilities, which require Java as a minimum, mean a lot more tinkering before gamers cut the wires.

That’s not to say that companies aren’t moving in that direction. Greg Ballard, CEO of San Mateo, California-based Sorrent, says his company recently released several “gamer” titles like Atari’s DRIV3R and Deer Hunter. Mr. Ballard says the “gamer games” have done well and he partially attributes this success to titles that are recognized franchises in the game-playing world. The brand name is critical. Imagine the response to Halo 2 on a handheld.

But the trick is not simply to convert PC and console games to the cell phone. “The key to the mobile device world is leveraging the mobile platform,” says IDC analyst David Linsalata. A 40-inch flat screen with surround sound will never compete with a handheld gadget. Ideas abound, like adding use of the cell phone’s camera, location-based applications, or using SMS to interact with other players in real time.

In Europe, where SMS-messaging has flourished, companies like Edinburgh-based Digital Bridges are adding interactive testing to multiplayer games. Digital Bridges CEO Brian Greasley says viral, multiplayer games with incorporated text messages are one of the newest categories for the company. He estimates this market is a little over a year away. IN-FUSIO includes what it calls Massive Multiplayer Online Role Playing Games (MMORPGs) to its next-generation strategy.

‘It’s all about distribution’

Beyond devising applications and cutting-edge technology, which will push the market forward, companies looking to dominate will have to cover the globe. “It’s all about distribution,” says Gartner’s Daren Siddall. A company without a global game plan will sink before it can even set sail. Sorrent acquired London-based Macrospace last December and the acquisition has developed Sorrent’s European arm.

The company now sees close to 50 percent of its revenues coming from Europe. “As the battle in mobile gaming becomes increasingly about who has the best brand, the company who has the best distribution will have a leg up on companies who don’t,” says Sorrent CEO Greg Ballard.

Sorrent also is trying to get into the most advanced markets like South Korea by creating an initial partnership with SK Telecom. But while South Korea and Japan have booming revenues this year, the next-generation growth markets will lie in fast-developing countries like China and India. JAMDAT has been aggressively pursuing the Chinese market, and recently invested in Chinese wireless content distributor C-Valley. JAMDAT CEO Mitch Lasky says that even though the Chinese market is volatile at the moment, the sheer might of the numbers will justify an early gamble in the next two or three years. MFORMA also made an investment in Chinese game developer Magus-Soft and formed “MFORMA China” last June.

It’s only been a few years since the current form of mobile gaming has landed on consumer’s cell phones. The global projections for mobile gaming are estimated at billions of dollars in revenues per year, and the cash grab will lead to a competitive and consolidated market. Recently Nokia re-released its late 1990s Snakes classic as a multicolor, 3-D gaming experience. If Snakes can survive an upgrade, so can the industry.