Zynga’s $150 million investment from SoftBank was one of the two largest sums invested in gaming-related companies this year, according to Venture Beat. It tied with $150 million invested in traditional games publisher ZeniMax Media by Providence Private Equity Partners. Other top ten game-related investments of interest to Engage Digital’s coverage are $60 million invested in virtual world developer Gazillion, $59 million invested in Korean MMO developer GameHI, $33 million invested in Playdom prior to its acquisition by Disney, $30 million invested in Brazilian social game developer Vostu, $25 million invested in ngmoco prior to its acquisition by DeNA, $20 million invested in social game developer Booyah, and $20 million invested in game-like location-based social network Foursquare.
The total amount invested in games-related business in 2010 was $1.05 billion across 91 companies. This is a record high for the sector, up 58% from 2009’s $663.1 million investment total. The soaring investment totals spring primarily from online games that operate according to the software-as-a-service model. These games and game-like services are predominantly free and monetize purely through in-game microtransactions or advertising support.
Previously the games industry focused on sale of product in packaged goods format, which made the business fundamentally hit-driven. Investors tended to shy away from investing huge sums in this form of video game distribution, since it was too hard to figure out what would be a hit ahead of time. Online games, particularly social games that operate on networks like Facebook, can be developed on lower initial budgets and monetized over much longer periods of time.
Major technology VC firms Sequoia Capital, Kleiner Perkins Caulfield & Byers, and Andreessen Horowitz all invested in online games or game-like services this year. While the traditional games industry is clearly not going away, as evidenced by the massive ZeniMax investment, there’s growing opportunity in the online game sector. Of the 91 games industry investments Venture Beat reported, 63 were made in companies or games industry business sectors that Engage Digital covers regularly.
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