InfoSpace Goes for the Prize

It was only December of last year when start-up tech company Atlas Mobile launched three games on Verizon (NYSE: VZ  ) . The company's mobile phone games are skilled-based -- such as card games, puzzles, and so on -- involving multiplayer formats. With the tag line "For Prizes," the company has various giveaways to encourage more and more play.

In fact, the company hosts about 30,000 multiplayer games per day. What's more, expect the growth rate to continue at a rapid clip. A recent IDC report forecasts the cell-phone gaming market to increase from $394 million in 2004 to $1.7 billion in 2008.

InfoSpace (Nasdaq: INSP  ) also wants to play and yesterday agreed to purchase Atlas Mobile (the price was not disclosed).

Why does a company with the deep resources of InfoSpace need to buy a tiny company like Atlas? Well, mobile gaming is a tricky business: There are complexities with the design for the small-format factor and the X factor of developing compelling content. This explains another recent deal: VeriSign's $273 million purchase of Jamba!, a leading provider of wireless content services in Europe. There is likely to be a scramble for other deals. After all, there are myriad mobile gaming companies, such as Sorrent, JamDat, Wirejack.com, just to name a few.

One of the beneficiaries of the trend appears to be Qualcomm (Nasdaq: QCOM  ) . Atlas Mobile, for example, uses Qualcomm's BREW platform for its gaming products -- allowing for easy billing, publishing, and application management.

But there are other players. A few days ago, Sun Microsystems (Nasdaq: SUNW  ) and Nokia (NYSE: NOK  ) announced a deal for Java-powered cell-phone games. Essentially, the companies have a new platform that integrates across different platforms, which allows for incremental downloads and the running of different applications at the same time.

The market potential for mobile gaming is huge, given the customer base of cell-phone users globally. Billing is also easier, since the carriers already have the infrastructure in place. Finally, mobile gaming is a good way to pass the time during idle moments.

The potential for mobile gaming is quickly becoming a reality. Just look at Verizon's "Get It Now" service. Within eights months of its launch, there are already 11.7 million downloads -- of which most are ring tones and games.

Fool contributor Tom Taulli is the author of The EDGAR Online Guide to Decoding Financial Statements. He does not own shares in any stocks mentioned.