Videogames: private equity plays to win

John Bakie
20 October 2010

Tweet
Facebook
LinkedIn
Google plus
Send to

Web-based and mobile games have seen a rapid rise in popularity in recent years, with popular products such as Farmville even making mainstream news headlines. Private equity has kept a keen eye on the industry, and a number of firms operating in the sector have been snapped up in recent years. John Bakie gives an overview

Despite generally small upfront price tags or even free games funded by micro-transactions, mobile and online games have become big business in recent years. Just last week, mobile game maker ngmoco was acquired by Japanese trade player DeNA for a huge $400m. The eye-wateringly large price tag is even more amazing when one considers the target company was founded just two years ago.

While ngmoco is perhaps an unusual case, mobile and internet games have seen a rapid rise in popularity, and private equity investors want a share of the action. With several recent deals involving games companies, investors will hope the recent momentum in the sector will be maintained.

This week, High-Tech Gründerfonds led a €2m funding round for Neonga, a German videogames developer. The company specialises in free-to-play online games, particularly massively multiplayer games, and offers them across various platforms, including PC downloads, social networking sites and mobile phones.

UK-based Connect2Media follows a similar distribution strategy to Neonga, selling games across mobile phone, web and PC platforms. It uses in-game micro-transactions and download charges to generate revenue, and has recently received investment from YFM Private Equity and Acuity Capital. The investment will help the business expands its operations in North America, where it recently acquired mobile phone game specialist Sennari.

Similarly, London-based Zattikka received a $5.5m investment from Nation Capital Partners and individual investors. The firm has a portfolio of over 100 web-based games, and is expected to see revenue in the near future. The funding will focus on marketing and pushing the company's presence in the all-important social networking space.

The proliferation of smartphones and low-cost PCs and laptops means casual gaming is likely to continue to prosper. The market seems to have already weathered the economic story due to its relatively low cost and easy accessibility. With ngmoco attracting such a large price, private equity investors will hope they too can win big in the casual games market.