Google (Nasdaq: GOOG) ups its ante in the social gaming segment, plans to add social gaming and application developer Slide to its kitty at a cost of $182 million, TechCrunch reported.
However, NY Times reported that Google paid around $228 million for the Slide. still, the valuation of Slide is a lot less than an earlier estimate of $500 million.
Google's buy of Slide reinforces its strategic push in the social gaming segment, an area that it left untended. Presently, the segment is ruled by Facebook and Twitter. The acquisition follows its $150 million investment in Zynga, the maker of popular Facebook games Farmville and Mafia.
With this, Google expects to dent Facebook's increasing dominance in the social networking domain. Google recognizes that Facebook is masquerading as a social network platform and simultaneously encroaching on its key business areas -- advertising and search. Just last week, Facebook introduced a search service that allows its members to ask their friends or the Facebook community at large any question on any topic.
Also for advertisers, it pays to be on social networks as users engagement with the ad is for a longer duration than a search engine site -- a dream for any advertiser.
Google's CEO Eric Schmidt recognized this threat in a statement issued earlier this week. He said, "Search is going to get better with more social information," underscoring Facebook's threat.
Also, with Google's Android toppling BlackBerry as the number one smartphone OS in the U.S. and the increasing number of smartphones being configured around Android, it can tap the applications market -- designing Android-based social games applications for Android phones. The burgeoning applications market is due to register 21.3 billion downloads by 2015, a jump from 2.69 billion in 2009, Ovum a Datamonitor company reported.
Last month, Disney (NYSE: DIS) bought Playdom in a deal worth $760 million and last year Electronic Arts (Nasdaq: ERTS) bought Playfish for $400 million. Google also acquired LabPixies, a game company last year.
Slide was founded by Max Levchin, a Pay-Pal co-founder, and its famous game SPP Ranch allows users to raise virtual animals on Facebook. The sales of virtual goods in social games are expected to reach $835 million this year, according to Inside Network.
Slide was able to pool in $78 million in venture capital from high-profile investors such as Khosla Ventures, Mayfield Fund, BlueRun Ventures and Founders Fund.
The demand for social games is on the rise with Zynga's "Farmville" boasting about 60 million monthly users. Zynga posted $300 million in revenues for year 2009 and bagged some $520 million in venture capital funding.
Thus, Google's buy of social gaming companies recognizes both the emerging threat from Facebook and the potential revenues that can come from social games.
