SAN FRANCISCO (Reuters) - To get a sense of how investors view the promise of mobile gaming, one need look no further than Japan's GungHo Online Entertainment 3765.OS. With just one game under its belt, its stock has risen tenfold since October and its market cap almost equals that of decades-old Nintendo 7974.OS.
From veterans like Electronic Arts (EA.O) to rising stars such as "Clash of Clans" maker Supercell, the $66 billion video game industry is scrambling to devise games and experimenting with ways to appeal to a generation of players that spends more time on mobile devices than on computers or consoles.
Most are having scant success in an industry peppered with one-hit wonders like OMGPOP and where even established players like Zynga (ZNGA.O) are faltering, industry sources say.
"It's sort of like all the chess pieces have been thrown in the air, and the industry has not yet landed on what the chess board looks like," said Owen Mahoney, CFO of Japanese online gaming giant Nexon Co Ltd (3659.T), which has in the past year bought two companies to accelerate its mobile foray.
In recent years, the model has been to offer games for free, then encourage players to spend real money on in-game purchases - a system perfected by Zynga in its online games. But its rapid decline in just the past year illustrates the challenge of hooking new players, and loosening gamers' purse strings.
The company that shot to fame on the back of Facebook (FB.O) games like "Farmville" bought OMGPOP, developers of the mobile sensation "Draw Something" - for $180 million. After months of losing users that once peaked to 14.5 million players over a year ago, Zynga last week shut its New York-based studio, effectively laying off the OMGPOP team.
Industry executives say mobile gamers today are spoiled for choice as the industry has exploded. In 2007, when Apple Inc (AAPL.O) launched the iPhone, there were but a handful of developers. Today, there are hundreds, whose apps sell across the globe on Apple and Google Inc's (GOOG.O) Android devices.
"You see these rocket ships in the industry that explode on the scene with a casual game that's easy to develop with not much money and they gain users quickly. But users get bored or angry because they can't progress without paying more money," Nexon's Mahoney told Reuters in an interview.
Nexon has had some success boosting its mobile portfolio, a likely factor behind revenue growth of 24 percent in 2012 to 108 million yen.
To stand out from the crowd, developers big and small are seeking ways to build a sustainable business.
EA, as one of the best-funded competitors, is turning to data analytics to keep track of its players' gaming patterns and behavior.
Japanese gaming giant DeNA (2432.T) is experimenting with on-the-spot tweaks to its games by employees, who adjust conditions depending on what players do, CEO of DeNA West Clive Downie said.
Canadian indie studio Noodlecake, known for games like "Zombie Road Trip", is employing loyalty programs similar to airlines with daily virtual currency rewards for first-time and frequent players.
Others resort to tricks like seasonal deals and holiday-themed content to boost their rankings on app-download charts during the crucial holiday period.
Up-and-coming GungHo, which has seen its shares rise tenfold since October as investors bet on its ability to rise above the fray with its sole title "Puzzle & Dragons," is turning to costly TV advertising to place its brand front-and-center.
Japanese telecoms giant Softbank Corp (9984.T) owns a majority stake in GungHo.
Even Rovio - backers of pop-culture phenomenon "Angry Birds" - has reported that it now leans on stuffed toys, mugs and other merchandise for 45 percent of its revenue.
"Everybody wants a manual" with the best user acquisition techniques, said Doug Smith, an independent developer who launched his kids game "Chugga Bugga" on the Apple App Store in early April but has had only about 3,500 downloads. He is disappointed that it's becoming "harder and harder for new entrants to come in without a big budget."
As E3, the industry's largest annual convention, kicks off in Los Angeles next week, console games going up against mobile games will be an underlying theme.
Revenue from games on mobile and portable devices is expected to grow about 38 percent to $8 billion in 2013 and touch $20 billion in 2018, according to David Cole, an analyst at research group DFC Intelligence. That's why mobile developers won't give up.
Game publishers are now rushing to hire people with data science and analytics skills dedicated to acquiring users and analyzing their behavior, said Ville Heijari, European general manager for PlayHaven, which helps developers monetize and market games.
EA has made investments in data analytics to build a suite of back-end proprietary software to break down its players by region and preferences, to help development of future games, said EA's President of Labels Frank Gibeau.
For now, consumer spending remains concentrated on the decades-old console gaming industry. But the situation is fast changing: in just a few years, mobile gaming has grown to account for about 9 percent of overall revenue.
Mobile is "an absolutely critical, if not 'the' growth driver for the industry for the next several years," Gibeau said.
Despite the success of a number of companies, "a lot of the industry is still in a learning phase," PlayHaven's Heijari said.
Editing by Ben Berkowitz, Edwin Chan and Lisa Shumaker