Online and Mobile Gaming Growth Explodes

Three significant online gaming transactions announced already this week are evidence of the explosive growth the online, mobile and social gaming sector is witnessing.  TA Associates and Summit Partners today announced a $350 million recapitalization of Bigpoint GmbH, a Hamburg-based online gaming company. On Monday, Japanese mobile social network Gree purchased mobile social game platform operator OpenFeint for $104 million, and publicly-traded online game developer Changyou.com announced plans to acquire a majority stake for $101 million in Shenzhen 7Road Technology Co., a web-based game company in China. Even Google is jumping into the gaming arena:  after investing $100 million into social gaming giant Zynga last year, the company is now looking for a Product Manager to “grow its brand-new business – Games at Google,” according to a recently posted job offer.

Investments in mobile and online games have been igniting over the past year or so, as mobile technology continues to blossom and a multitude of app stores make distribution easier than ever. Worldwide spending on mobile games is expected to more than double over the next few years, reaching  $11.4 billion by 2014, according to Gartner. Currently, online and mobile games generate about a third of all games software revenues globally. By 2015, these games are expected to generate 50% of all games software revenue, or around a fifth more revenue than pure console games.

Low barriers to entry make this market high-growth and profitable, an alluring combination for investors. In 2010, investments in online, mobile or social gaming reached more than $770 million — representing about 75% of the entire gaming sector’s record year of investments, according to research by VentureBeat.

There’s no doubt leaders are beginning to emerge in this area. Zynga, for one, has raised more than $327 million over the past two years and recently resigned-Electronic Arts COO John Schappert is rumored to be heading to the company. This new avenue of gaming combines the hottest areas of technology at the moment – cloud, advertising and mobile technology. As innovations continue to drive the market, we expect to see serious cash flowing into the space, as well as increasingly healthy M&A valuations.

Select Online & Mobile Gaming M&A Transactions, 2011

(Click image to enlarge)

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