apan’s GREE Acquires Social Mobile Game Developer Pokelabo
By Lizette Chapman
Marking its third such purchase in the past 18 months, Japanese Internet media giant GREE International has acquired social mobile gaming company Pokelabo for $175 million in cash.
The deal comes as competing social gaming giant Zynga re-trenches, slashing 5% of its workforce, closing studios, discontinuing older games and writing off half of the $180 million price it paid for gaming company OMGPOP just seven months ago.
For GREE the deal marks its latests bid to expand via acquisition, having acquired both Funzio and OpenFeint to bolster it mobile and social gaming prowess. For investors DCM and Japanese firm Incubate Fund, which invested a combined $11 million in Pokelabo, it means a six-times return.
- Gen Isayama
- DCM Partner Gen Isayama.
We talk with DCM partner and Pokelabo board member Gen Isayama about what compelled him to bankroll Pokelabo over its competitors in 2010, how it’s pulling in $5 million in monthly revenue and why the team decided joining forces with GREE was a better idea than competing against them.
There are tons of social mobile gaming companies. It feels like a new one is launching almost daily at this point. What set this one apart when you saw it?
It was 2010 and it was still all about Zynga with games based on PCs. Even in Asia, most phones were feature and Android didn’t really exist. Pokelabo was a team of very young game developers who were known to create good games. They were all in their early 20s and l knew if I could put together a real business team they would do well.
Who did you add and how fast did you do it?
The first person we added when we invested our $6.5 million was a CFO. Then we added a VP of Biz Dev.
So what did Pokelabo do since then to increase its value so much that GREE wanted to pay $175 million cash plus stock ?
One thing we did right was to focus on smartphones and that was good because it was one of the very early companies in Japan to do so. Now it has four titles in the top 20 sales ranking (in the AppStore).
What about monetization?
Every two to three hours there’s an event happening within each of the games where all the players get together to form a team and fight against monsters and whatnot. That event creates a very sticky environment and engages users. People end up buying a lot of weapons and other items. The company is monetizing very well.
How well? What’s their 2012 revenue look like?
They’re doing close to $4 million or $5 million a month and it’s growing. They are very profitable. They have maybe 1.5 million registered users and about 200,000 are daily active users.
So why sell? Why not build the next GREE rather than be acquired by GREE?
That’s something I’ve struggled with over the past few weeks. Just thinking they could maybe go all the way and compete against DeNA or GREE which are multi-billion dollar companies. But I’m seeing way too many other companies out there trying to do that. In the smartphone game we were the leader , but people catch up really fast.
I imagine Pokelabo had conversations with more than just Gree. Who else did the company consider selling to?
We had four other real companies actively engaging on this level. Sorry, I can’t name names.
And Pokelabo chose GREE because why?
It was the best cultural fit plus is gives them a chance to go global fast.
You see any more consolidation happening in the sector?
Yes. I think it will continue for a while. With DeNA and GREE so profitable, unlikeZynga ZNGA -3.33% or Facebook FB +16.06%, they have the ability to play aggressively and really think about how they can accelerate through acquisition.
Write to Lizette Chapman at lizette.chapman@dowjones.com. Follow her on Twitter at @zettewil
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