Alibaba Invests $120 Million in Mobile Gaming Company Kabam
Alibaba Group Holding Ltd. is backing another California startup, announcing a $120 million strategic investment in gaming company Kabam Inc. and a partnership to publish and distribute its free-to-play mobile games.
The deal, which values San Francisco-based Kabam at more than $1 billion, comes after The Wall Street Journal reported Alibaba had held talks regarding a financing round for Snapchat Inc. that would have valued the mobile messaging startup at $10 billion. It also marks Alibaba's latest push to reach more users before its coming IPO.
The strategic infusion into Kabam is akin to recent moves by Chinese tech giants, including Baidu Inc. and Tencent Holdings Ltd., to establish a foothold in new geographies by investing in tech startups. Alibaba has invested in nearly two dozen companies in recent years, specializing in everything from the delivery of large appliances to social networks and soccer clubs.
Since launching its investment group in Silicon Valley in October, Alibaba has bankrolled at least 10 startups, including mobile deep-linking company Quixey Inc., mobile messaging platform TangoMe Inc., transportation app Lyft Inc., smartphone remote-control company Peel Technologies Inc. and now Kabam.
With users in more than 150 countries playing its three dozen games, Kabam represents a way for Alibaba to reach people through play. Although Alibaba has offered mobile games on its Taobao marketplace app and its Laiwang messaging service since January, joining with Kabam marks a major push into a sector that has long been a sweet spot for competitors. For example, Tencent has invested $231 million in Riot Games Inc., $330 million in Epic Games Inc. and an undisclosed amount in Activision Blizzard Inc. to bring games to its users.
For Kabam, which has 70% of its users on mobile and is tracking to do more than $550 million in revenue this year, Alibaba provides a much-needed publishing and distribution platform in its target market.
"Asia is 50% of the gaming market. It is a strategic priority for us," Kabam Chief Operating Officer Kent Wakeford said, adding that Kabam talked to Baidu, Tencent and "every major player in China" before selecting Alibaba as a strategic investor.
"It was a very competitive process," he said.
The arrangement also includes a commitment by Kabam to launch 10 games during the next three years through Alibaba, starting with one based on the "Lord of the Rings" that is now in development.
The other games will be a mixture of existing titles that could include top-grossing games "Kingdoms of Camelot" and " Dragons of Atlantis," along with new ones that may come from studios Kabam intends to acquire.
Much of the $120 million investment will be used to purchase what Mr. Wakefield described as a string of " transformational" acquisitions in Asia and other regions. He said Kabam is in active discussions with several companies now, but hasn't completed anything.
The investment brings total outside funding for the profitable eight-year-old company to $240 million. The cash and the Alibaba connection are designed to help it further diversify by geography and content and distinguish itself from free-to-play gaming companies Zynga Inc. and King Digital Entertainment PLC, which have struggled to wow investors since going public.
The funding could also help set a benchmark valuation for when Kabam goes public, which Kabam Chief Executive Kevin Chou previously told VentureWire could happen in November, around the time it plans to launch a game based on the " Hunger Games" franchise.
Mr. Wakefield declined Thursday to comment on the timing of an IPO.
Through a spokesperson, Alibaba declined to comment on the Kabam investment, citing SEC regulations governing companies in registration to go public.
Previous venture investors in Kabam include Canaan Partners, Redpoint Ventures, Intel Capital, Pinnacle Ventures and Google Ventures.
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