Alibaba buys US$120m stake in mobile games firm Kabam
E-commerce powerhouse Alibaba Group Holding is looking to heat up the fast-growing mobile games market on the mainland, after making a US$120 million investment in San Francisco-based developer Kabam.
Under the deal, about 10 of Kabam's popular mobile games will be published and distributed across Alibaba gaming platform Taobao Mobile and social messaging application Laiwang over the next three years.
The two companies announced the new investment and their mobile gaming alliance yesterday at ChinaJoy, the annual digital entertainment expo and conference in Shanghai.
"Alibaba is committed to collaborating with great games companies like Kabam to deliver captivating digital entertainment offerings to our users," Patrick Liu Chunning, the president of Alibaba's digital entertainment business unit, said in a statement.
Liu was formerly a senior executive at mainland internet giant Tencent Holdings, which runs the world's largest games business by revenue.
Alibaba's increased outlay on mobile games follows recent expansion initiatives in this market segment by the top mainland games companies, led by Tencent, Perfect World, NetEase and Changyou.com
Tencent accounted for 12 of the top 20 mobile games for Android-based smartphones in China in May, according to the latest monthly rankings by research firms Newzoo and TalkingData. Android devices make up the majority of smartphones in use in China, the world's second-biggest games market behind the United States.
TalkingData has forecast China's mobile games market will reach US$3 billion in revenue this year.
Kabam, a leading developer and publisher of free-to-play games that was founded in 2006, sees China and other markets in Asia as vital to further developing its business.
The company opened an office in Beijing four years ago and develops many of its marquee mobile game titles there.
"Truly successful games companies have to be globally successful," Kabam co-founder and chief executive Kevin Chou said.
"This strategic collaboration with Alibaba provides Kabam with the resources, infrastructure and distribution to help bring our current and future durable franchise games to China and elsewhere in Asia and make an immediate impact."
The Alibaba investment has helped push the valuation of privately held Kabam to US$1 billion, Kabam chief operating officer Kent Wakeford said.
Kabam initially made apps for Facebook based on popular US television shows and movies. Its mobile business has prospered in the so-called "freemium" market segment, in which games are initially downloaded for free by users and then virtual merchandise is offered to help players take on a game's advanced levels.
Chou forecast Kabam's revenue will rise to between US$550 million and US$650 million this year from US$360 million last year. Alibaba has joined a roster of other high-profile investors in Kabam, including Google Ventures, Warner Bros, MGM, Intel, Canaan Partners, Redpoint Ventures and Pinnacle Ventures.