This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Up Next for Tech IPOs: Social Gaming

NEW YORK ( TheStreet) -- Led by positive reception for newly-public social media firms -- and Zynga's impending $10 billion IPO -- early-stage investors are scrambling to pour funding into the social gaming space.

Their big bet: Social gaming start-ups will be the next big thing to hit the public markets.

Offering fresh alternatives to established gaming firms like Activision Blizzard (ATVI - Get Report) and Electronic Arts (ERTS), Zynga and companies like PopCap Games could light up the gaming sector if they go public.

It's no secret that the traditional video game sector as a whole has slowed, with sales of hardware, software and accessories dropping 6% last year to $18.6 billion, according to industry tracker NPD Group.

Just one example is Activision, which despite claiming title to the best-selling video game of all time -- Call of Duty: Black Ops, sales of which topped $1 billion six weeks after its debut -- posted sluggish growth over the past year. Its stock price has also remained largely flat since the beginning of the year, as investors question the company's ability to drive growth beyond its core titles.

Video game watchers are now turning their attention to the global social gaming market, which is forecast to reach almost $4 billion in 2015, up from $1.5 billion last year, according to market research firm Business Insights.

Companies receiving investment and pre-IPO buzz are plentiful. Kabam, a maker of Facebook games like Dragons of Atlantis, raised $85 million last month in a financing round led by Google (GOOG) Ventures.

CrowdStar, which has developed hits like Happy Aquarium and Happy Island, took in $23 million in its first funding round in May from Intel Capital (INTC) and Time Warner Investments (TWX).

And Wooga, known as the Zynga of Europe, scored $24 million, which was led by Highland Capital Partners.

Besides tapping into a whole new generation of gamers -- Zynga's popular FarmVille and CityVille Facebook titles are played mostly by women ages 25 to 44, for example -- the social gaming space is attractive to investors because it's not as capital intensive as the traditional gaming industry, said Maha Ibrahim, a partner at Canaan Partners who was an early investor in Kabam.

"You're spending $1 million to develop a game rather than $50 million," she said.

Social gaming start-ups also have a less risky business model. If a title initially flops, these companies can pull the plug quickly, a process that is much more difficult for large publishers who spend millions of dollars to develop a game franchise's deep story lines, high-resolution graphics, huge marketing push and global retail rollout.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
THQI $0.31 0.00%
ATVI $28.63 -2.02%
AAPL $112.76 -0.47%
FB $89.43 -1.74%
GOOG $618.25 -1.92%

Markets

Chart of I:DJI
DOW 16,528.03 -114.98 -0.69%
S&P 500 1,972.18 -16.69 -0.84%
NASDAQ 4,776.5080 -51.8170 -1.07%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs