Glu Mobile (Nasdaq: GLUU) might be a relatively small company in terms of market capitalization, but for a small fry it certainly has the potential to become a huge winner in the mobile gaming space.

The company has been suffering from losses since it went public back in 2007. Its total revenue has also been on a downward trend. However, I feel that Glu could still be a good long-term bet. Here's how.

Gaming the smart way
Glu Mobile once derived most of its revenue from feature phone-based games. But with the growing popularity of smartphones running operating systems such as Google's (Nasdaq: GOOG) Android and Apple's iOS, the company has shifted its focus to smartphones and tablets.

A look at Glu's revenue breakup for the past three years highlights this trend:

Source: Glu Mobile 10-K for fiscal 2011.

While feature-phone-based gaming revenue dropped by more than 58% in the past two years, smartphone gaming revenue shot up by a staggering 700%. Glu is showing great growth momentum in the right area.

Riding the smartphone and tablet gaming wave
Gartner predicts that out of all the existing segments, mobile gaming is set to witness the fastest growth in the coming years. And with the introduction of more powerful tablets and smartphones, game publishers such as Glu have the liberty to introduce better, console-quality games.

To make this possible, Glu even formed a strategic partnership with NVIDIA (Nasdaq: NVDA), which will help the company develop games that make full use of the latter's Tegra line of processors. But does a small company like Glu really have the potential to compete against larger rivals? Surprisingly, yes.

Big steps ahead
Glu's games are among the most popular in the Google Play store. It has about six to eight gaming titles, which are among the top grossers on any single day. But that's not all...

Glu's monthly active user numbers have been rising steadily. From a figure of just 12 million in the fourth quarter of 2010, the company's user base has soared to 31 million in the comparable quarter of 2011. The company's daily active users have tripled from 944,000 to 2.8 million during the same period.

The Foolish bottom line
With no debt on its balance sheet and $32 million in cash, Glu Mobile has a lot of headroom to expand its business and gain more revenue from its wide range of smartphone- and tablet-based games. Despite posting a series of losses, the company expects to break even in terms of adjusted EBITDA by the end of this year.

Even though Glu Mobile may be a good bet in the mobile gaming space, there are many other companies that would benefit from the smartphone and tablet revolution. You can check out The Motley Fool's report on three hidden winners of the iPhone, iPad, and Android revolution to find out more. This report will be available only for a limited period. Get it before it's gone!

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Keki Fatakia does not hold shares in any of the companies mentioned in this article. The Motley Fool owns shares of Apple and Google. Motley Fool newsletter services have recommended buying shares of Google, NVIDIA, and Apple. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. Motley Fool newsletter services have recommended writing puts on NVIDIA. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.