$FRZT will be bought out if history repeats itself
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Both companies have big bankrolls (GREE earned $508 million in revenue last quarter, DeNA earned $609 million) to fund the outlays. Both also view their user acquisition programs as a long-term investments. They pay now for loyal platform users that will monetize across a variety of first and third-party games over the next several years.
Multiple gaming acquisition articles include GREE & DeNA
DeNA pays $92M for 20% share in Rage of Bahamut developer Cygames
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Kathleen De Vere•Nov 7th, 2012Acquisition, DeNA, Games
DeNA has entered into a strategic business alliance with Japanese mobile social developer Cygames, announcing today it has reached an agreement to purchase a 20 percent share of the company for 7.4 billion yen ($92 million).
As our readers are no doubt well aware, Cygames is the third party developer behind Rage of Bahamut, DeNA’s biggest international hit. The card-battle game has held the No. 1 spot on the Android top grossing app chart since April 22 — an eye-popping 28 straight weeks. On iOS, it hasn’t dropped below the No. 10 spot on the top grossing iPhone app chart since the beginning of June. According to DeNA’s most recent earnings report, the title is seeing average revenue per daily active user (ARPDAU) in excess of $1, a figure 5 to 10 times higher than the typical mobile game generates.
As industry watcher Dr. Serkan Toto points out, the deal also significant because Cygames is actually a wholly owned subsidiary of CyberAgent, another Japanese mobile social gaming platform operator, and therefore, direct DeNA competitor.
The deal is expected to close on Dec. 28, 2012 and pegs Cygames value at more than $460 million, putting the company in a similar range as Gloops, another Japanese mobile social gaming company that was just acquired by Nexon for $469 million in cash.
That valuation is interesting, given that Gloops likely generates more revenue than Cygames. According to Nexon, Gloops generated 23.7 billion yen ($303.8 million) in revenues between June 30 2011 and June 30 2012. Gloops also has a much larger catalogue of titles — 21 in all, including hits like Japan Pro Baseball, Warriors of Odin and Three Kingdoms Guild Battles. Cygames by comparison has released 7 titles, three of which are different versions of Rage of Bahamut.
Current financials aside though, it seems DeNA is willing to spend heavily on Cygames to keep it, and its games under the Mobage umbrella. The company been able to accomplish something both DeNA and its arch-rival GREE have struggled with — launching a breakout hit in the North American market.
Fiksu: Despite iPhone 5 launch, September user acquisition costs fall to lowest point since May 2011
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Kathleen De Vere•Nov 1st, 2012Acquisition, Advertising, featured, iOS
Developers may finally be seeing some relief from the summer’s high user acquisition prices reports Boston-based user acquisition and marketing company Fiksu. According to the company’s latest figures, the cost to acquire a loyal iOS user — defined as someone who will open an app at least three times — fell by 16 percent in September, hitting the lowest price seen since Apple’s offer wall crackdown.
While many had predicted the iPhone 5 launch would follow the precedent set by the 4S, which saw user acquisition costs hit $1.47, the price actually fell by 21 cents, hitting an average of $1.13 for the month.
The last time the Fiksu reported numbers this low was in May 2011, when Apple’s ban on offer walls dropped user acquisition costs to $1.10 per loyal user. User acquisition costs took a similar dive in January 2012, falling to $1.14 after the holiday advertising frenzy subsided.
According to Fisku CEO Micah Adler, app marketers did a much better job planning their iPhone 5 launch advertising campaigns than they did for the 4S, a move that allowed them to pick up new users more cheaply than anticipated.
“Brands held off on advertising in the run-up to the iPhone 5 launch, then jumped into the fray as the phones hit stores and mailboxes,” he said. “Despite the increase in advertising volume and CPCs, marketers who went after these new users were rewarded with a nice drop in overall costs for acquiring loyal users.”
On the download front, Fiksu found that the volume of free app downloads per day hit 4.07 million during September — a slight increase over August’s 4.05 million. That said, the company reported a clear delineation in download activity before and after the launch of the iPhone 5. Downloads for the month were actually down three percent before the iPhone 5 began arriving in consumer’s hands on on Sept. 21, but jumped by 33 percent after launch. One Fiksu clients reported a 20 percent increase in organic downloads and 35 percent revenue gains during the post-launch period.
Overall, Fiksu’s report seems to indicate that mobile marketers have gotten much better at planning for significant events like the launch of the iPhone 5. While download volumes and user acquisition costs are likely to rise in October, overall the costs should be lower year-over-year.
Yahoo picks up Stamped in talent deal to bolster its mobile business
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Kathleen De Vere•Oct 25th, 2012Acquisition, iOS, Mobile, Yahoo
Mobile recommendations service Stamped has been acquired by Yahoo. The deal was confirmed on the Stamped blog this afternoon after an Instagram photo of Yahoo CEO Marissa Mayer posing with the Stamped team began to circulate online.
Founded in April 2011, Stamped positioned itself as a social recommendation service that allowed its users to share their opinions about restaurants, movies, music and books with their friends.
According to Stamped’s blog post, the deal was a talent-based one. Stamped has said it will discontinue its products by the end of the year, and the app has already disappeared from the iTunes App Store. Going forward, the Stamped team will join Yahoo as part of a new product and engineering office in New York. According to the company’s blog post, they will be working on “something big, mobile and new.”
While the acquisition price was not disclosed, TechCrunch is reporting it was in “the double digit millions.” It’s a successful end for the company, all things considered. According to our traffic tracking service AppData, Stamped had just 3,000 monthly active users and 100 daily active users connecting to their Facebook accounts through the app at the time of purchase. The service peaked in August with 14,000 MAU and 3,300 DAU, but saw sharp declines in usage shortly afterwards.
Before it was acquired, Stamped had raised $3 million in seed funding from Google Ventures, Bain Capital Ventures, CrunchFund and celebrity investors like Ryan Seacrest, Justin Beiber and Ellen Degeneres.
GREE purchases mobile social game developer Pokelabo for $173M
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Scott Reyburn•Oct 24th, 2012Acquisition, GREE, Mobile, Social
Japanese mobile-social gaming giant GREE announced today it will acquire mobile-social game maker Pokelabo on Oct. 30 for 13.8 billion yen ($173 million) in cash.
Founded in 2007, the Tokyo-based Pokelabo has developed several successful titles for the Japanese mobile market such as mobile-social RPG Clan Battle of Fate, and the English card-battle game Mystic Monsters. Last year, Pokelabo entered into a co-development deal with Sega to develop social games particularly for smartphones.
This is the second big mobile-social developer acquisition we’ve seen come out of Japan this month — the Tokyo-based company, mobile-social game developer Gloops was bought out by free-to-play gaming giant Nexon for 36.5 billion yen ($469 million) back on Oct. 1.
This is also the third acquisition for GREE this year. The company bought mobile-social game developer App Ant Studios (makers of its North American title Dino Life) for an undisclosed amount of sum in September, and the mid-core focused Funzio for $210 million in May.
Pokelabo, which currently has 91 employees, generated $7 million in revenue and $2 million in profit in the fiscal year that ended Sept. 2011.
Opinion: Why user acquisition prices are going through the roof, and why it’s bad news for the mobile ecosystem
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Kathleen De Vere•Oct 19th, 2012Acquisition, featured, Games, Monetization
It costs a lot of money to acquire users for a mobile game right now. Over the past six months, we’ve heard companies throwing around per-user figures ranging from $1.50 (borderline unaffordable) to $3.00 (insane) to $6 (ludicrous).
For most developers, this is just way too much. Companies are only profitable when they earn more than they spend, and since mobile users are typically hard to convert and not terribly valuable even when they do, it’s either very hard — or mathematically impossible — to break even at these rates.
For example, if a developers buys 100 new users at $3 each, and 10 percent of them convert (which would be a very good rate), then each of those users needs to deliver at least $30 in lifetime value in order for the company to break even on its initial advertising outlay. That figure is high even by the standards of mid-core developers, even though their games typically monetize at a higher rate than most mobile apps.
The amount of time it will take to break even is another issue. While companies like NaturalMotion and Supercell are earning tens of millions of dollars a month, their earnings are special cases, not the norm. Mobile developers measure their average revenue per daily active user (ARPDAU) in the cents. Even if every single daily active user a company had was generating $0.10 a day in revenue, it would take a long time for those users for them to pay for themselves if they were bought for $3 each.
So how did rates become so unaffordable?
One factor is the time of year. Apple just released the iPhone 5, and the company’s hardware releases typically push up the cost of marketing on iOS. User acquisition costs are rising on Android too, as more and more evidence comes out that there is money to be made on the platform. The upcoming holiday season will also compound the problem, as developers rush to catch users as they try out brand-new apps on their brand-new devices.
But aside from all that, there are two large Japanese elephants in the room. Quietly engaged in a turf war, both GREE and DeNA’s U.S. subsidiary Ngmoco are willing to pay top dollar for installs in order to lock up what they see as relatively uncontested international markets.
Both companies have big bankrolls (GREE earned $508 million in revenue last quarter, DeNA earned $609 million) to fund the outlays. Both also view their user acquisition programs as a long-term investments. They pay now for loyal platform users that will monetize across a variety of first and third-party games over the next several years.
It’s a smart strategy for both companies — as big players they stand to benefit from consolidation. According to Eiji Araki, GREE’s senior vice president of social games, his company expects that in two to three years, the mobile gaming ecosystem will look a lot like the traditional one, dominated by two or three large players. Buying your way into an industry at a loss to ensure a future market share isn’t a new business strategy — both Microsoft and Samsung have used it to great effect. But it does mean smaller companies will have a very hard time competing and staying independent.
All of these factors are the reason so many companies are looking to alternate user acquisition strategies. Cross-promotion inventory trading is more popular than ever, with companies like Chartboost and publishers like 6waves, PapayaMobile and even Zynga choosing to leverage their existing player bases as a resource for downloads. TinyCo’s new Tiny Partners program is also designed to help the company avoid the rising costs of user acquisition. TinyCo’s promise to share as much as 75 percent of the revenue generated with its partners is generous, but the move also ensures TinyCo gets top quality advertising with no up-front cost, since the company only pays out when users spend money. Even if TinyCo only takes home $2.50 of the $10 a Tiny Partners program user spends, it didn’t actually have to spend any money or do any work to earn that $2.50 — a good deal for TinyCo
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