October 12, 2010 10:34 pm

Japan’s DeNA snaps up US rival

A two-year-old San Francisco gaming start-up that raised $40m in funding has been sold for up to 10 times that amount to Japanese social gaming company DeNA.

The acquisition of ngmoco for up to $400m is another example of the dealmaking taking place in mobile and social gaming.

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Disney Interactive paid $563m for two-year-old social gaming company Playdom in July and will pay $200m more if it hits stipulated growth targets.

Electronic Arts, the second-largest video game publisher, paid $300m for Playfish last November, with a further $100m dependent upon future performance.

Ngmoco has won the same deal with DeNA, with $100m of the deal dependent upon reaching performance milestones by the end of next year.

The company, which began by focusing on games for the iPhone, was founded by video game industry veterans, including former Electronic Arts executive Neil Young, who became its chief executive. It was one of the first start-ups to benefit from an investment from the iFund, a $100m fund set up by venture capital firm Kleiner Perkins Caufield & Byers to back iPhone developers. Initial funding of $5.6m was followed by further injections of $10m and $24.2m.

The rising popularity of the iPhone and iPod Touch as games platforms has coincided with the growth of social gaming on networks such as Facebook, where Zynga, a Silicon Valley start-up, dominates. Zynga is expected to pursue an initial offering.

Nearly 57m people in the US played a game on a social network over the three months of summer, according to a report in September by the NPD research firm. Of those, a 10th spent real money buying virtual currency or goods for their game.

DeNA is a leading mobile gaming company in Japan, whose purchase will be helped by the strong yen against the dollar. The two companies will merge mobile and social gaming.

In a blog note, ngmoco’s founders said they would launch a Western smartphone version of DeNA’s social games network, Mobage, which has tens of millions of users in Japan playing hundreds of applications woven together by a connected service. Ngmoco also aims to bring its games to Android devices.

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