Social gaming industry is heading for a massive consolidation with the likes of Google
Companies ranging from multi-media conglomerates, traditional game distributors to Internet giants want to take a pie in the social gaming space, which has the potential for explosive revenue growth.
Social games are free to play and generate revenue by charging users to buy virtual goods. Those games are tied with social networking platforms, which are presently being ruled by Facebook and Twitter.
The real attraction of social gaming is its scalability as once the software is developed, the additional cost of servicing new customers is negligible. No wonder Disney, Google, and others believe they have identified an incredible investment opportunity.
"FarmVille"-maker Zynga, which reportedly got a $100 million investment from Google, said last week it has acquired Tokyo-based Unoh, one of Japan's leading social games companies.
Unoh will be part of the foundation of Zynga Japan's mobile product efforts, which will be a joint venture between SoftBank Group and Zynga, accelerating Zynga Japan's entry into the Japanese social gaming market.
In addition to maintaining Unoh's games on mixi, Mobage-town, and GREE, Zynga Japan will also localize Zynga games and develop new games targeted at the Japanese market.
Zynga, the giant in the social gaming space, is said to be generating revenue between $500 million and $700 million a year, and many analysts expect the company to pursue an initial public offering as early as next year. Zynga boasts over 200 million monthly users on Facebook.
Search giant Google is reportedly planning to develop a competing social networking platform to Facebook, which recently surpassed Google as the world's most visited website.
Given its strong cash position, Google may pay large sums to acquire social gaming developers rapidly.
Last week, Google upped its ante in the social gaming segment by agreeing to buy social gaming and application developer Slide for undisclosed amount. TechCrunch reported that Google will pay $182 million for Slide.
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 -- something advertisers hope for.
Google's CEO Eric Schmidt in a statement issued recently said, "search is going to get better with more social information," underscoring Facebook's threat.
Other recent deals in Social Gaming Industry
In recent weeks, a flurry of press releases confirmed the acceleration of consolidation efforts in the social gaming industry.
Late July, Walt Disney Co. said it will buy social game-startup Playdom for $563.2 million. The Playdom deal followed Disney's purchase of iPhone app developer Tapulous in July for an undisclosed amount.
Last month, U.S. video game retail giant GameStop Corp. announced its purchase of social gaming website Kongregate for an undisclosed sum to diversify its business to digital game distribution.
Recently, social games company Playfish was acquired by Electronic Arts
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