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Social gaming comes of age: Social gaming companies trouser half a billion dollars in just one week

By on November 18, 2009

For anyone who thinks that social games are not real business, last week proved them so wrong. Between 10th and 17th November nearly every major social games company raised money or was bought, and one or two smaller ones as well. And when those sums add up to nearly half a billion dollars, even the most tenacious naysayer (are you listening, boxed product companies) needs to pay attention.

Playfish acquisition by Electronic Arts

Playfish logo

Monday: The biggest news was Electronic Arts’ acquisition of Playfish for $275 million in cash, $25 million in equity retention arrangements and an earnout of $100 million, bringing the potential total to $400 million. The purchase, timed as it was with the announcement of 1,500 layoffs, marked a clear change in the EA’s strategy and demonstrated John Riccitiello’s determination to turn the former 800-lb gorilla of gaming onto a new path to regain that crown.

Jolt Online acquisition / investment by GameStop

Jolt Online logo

Sunday: Meanwhile, no-one seems to have noticed the steps by GameStop, the major physical retailer of boxed games in the US, to buy into the social/casual gaming space. It has taken a majority stake in Jolt Online. It’s the second success for founder Dylan Collins, who sold middleware provider Demonware to Activision three years ago for $15 million.

The deal was reported on 8th November 2009 (a Sunday!). And then was overshadowed by the Playfish deal. No wonder no-one noticed it.

Jolt Online offers free-to-play browser games such as Legends of Zork and Playboy Manager. The company was only founded last year and this early investment by GameStop is testament to the current focus on casual games amongst traditional games companies.

Playdom raises $43 million in its first funding round

Playdom logo

Tuesday: Just as the ink was drying on the EA acquisition of Playfish (I almost said “swoop for Playfish”, I’m becoming more tabloid), TechCrunch confirmed that Playdom has completed its first round of funding.

Playdom raised $43 million at a pre-money valuation of $260 million. Investors include New Enterprise Associates, Lightspeed Venture Partners, NorWest Venture Partners and chairman Rick Thompson.

Playdom acquires Facebook developer Green Patch and iPhone developer Trippert Labs

Green Patch logo

Tuesday: Not content with the capital raising, Playdom also announced that it had acquired Green Patch, developers of Facebook games like (Lil) Farm Life and (Lil) Green Patch. That moves Playdom up to being the #5 game developer on Facebook, according to AppData, with Monthly Active Users of 22.8 million (behind Zynga, Playfish, Crowdstar and 6 Waves).

And one acquisition wasn’t enough. Playdom also bought Trippert Labs, an iPhone developer in Menlo Park. Terms were not disclosed for either transaction.

Balderton invests €5 million in wooga

wooga logo

Thursday: In any other week, this would have been big news. Balderton Capital have invested €5 million in wooga, a Berlin-based developer of games of Facebook. Holtzbrinck Ventures, which invested earlier this year, also participated in the round.

wooga (which apparently stands for “world of games”) was only launched in January 2009. The company’s main game is Brain Buddies, and wooga is the #14 game developer on AppData with 5.3 million Monthly Active Users.

Balderton is no stranger to games and virtual worlds, with investments in Big Fish Games, Sulake (Habbo Hotel), Codemasters, Wee World, Metaversum and NaturalMotion.

Bonus: Did Zynga just raise a further $15 million?

Zynga logo

Yesterday: And then, just as the flurry of activity looked as if it was all over, rumours surface that Zynga, the clear social gaming leader, had just raised another $15 million at an estimated valuation of $625 million.

The announcement appeared in a regulatory filing with the Securities and Exchange Commission dated 3rd November 2009 and lists only existing investors (Zynga has previously raised nearly $40 million in two rounds).

Inside Social Games argues that this is, in fact old news: it’s an extension to a previous round, possibly completed in July. I’m a little unclear as to whether this can be true (if anyone knows that relevant SEC rules, please let  me know in the comments) but whatever the truth, Zynga has now raised $55 million in total.

Social gaming is red hot

If anyone was in any doubt that social and casual gaming are red hot, they can’t be any more. There may be many nay-sayers still arguing that this is an overvalued boom like the frenzy for mobile gaming companies earlier in the decade.

But I see a different picture:

  • The second largest independent games publisher in the world making a sharp change in strategy
  • A games retailer becoming a games publisher/developer
  • Consolidation starting amongst the lower echelons of Facebook game developers
  • And continued appetite for investment in fast-growing social/casual gaming companies.

Put it all together and you see that social gaming has come of age.

About Nicholas Lovell

Nicholas is the founder of Gamesbrief, a blog dedicated to the business of games. It aims to be informative, authoritative and above all helpful to developers grappling with business strategy. He is the author of a growing list of books about making money in the games industry and other digital media, including How to Publish a Game and Design Rules for Free-to-Play Games, and Penguin-published title The Curve: