Disney buys the social gaming start-up Playdom for $563.2 million in cash, plus up to $200 million based on performance. Disney previously invested in MMOs such as Club Penguin but social media, including MMOs, remain a very small part of total revenues. The acquisition follows closely on the take-over of the iPhone gaming start-up Tapulous.
It seems that Playdom also talked to Google, just as PlayFish (Electronic Arts) and “connecting the world through games” Zynga.
In the background looms a war between two very major platforms: Facebook and Google. The Wall Street Journal has a story about Google developing a Facebook rival and doing so it can use social games.
I’m fascinated by those developers of social and mobile games. Individuals and small companies seem to do very well in that fledgling industry and now it seems that bigger start-ups are being acquired for lots of money by the very big players.
However, it seems that being acquired is the destiny of those companies. They depend on the major platforms: Facebook, Apple, the Android ecosystem, and maybe a new Google network. They use Facebook for instance to reach a huge audience, and they can use the payment systems of the platform – typically 30 percent of those payments go to Facebook. Companies such as Zynga actively try to talk to more platforms so as to lessen the dependency. Ultimately however the platforms have by far the deepest pockets.
Let’s look at Second Life now. The virtual world boasts a tremendous content production by the users, many of them not very specialized amateurs, but some are professional content providers. They too try to look beyond Linden Lab’s Second Life to lessen their dependency, but Second Life is in its category the major platform.
I remember that at a certain moment their was speculation about an IPO for Linden Lab, in the meantime it seems the company has other things to do, such a reorganizing and getting its priorities right. Please correct me if I’m wrong, but there never was any content creator who was even vaguely rumoured to consider an IPO.
So, for a regular individual stock market investor, the question where to put her money, in platforms or in content providers, is rather rhetorical: there are no listed MMOs or social games companies (please correct if this is wrong), they are either privately financed or part of bigger groups (typically engaged in lots of other activities).
Does this mean that ultimately the winners are the platforms? The barriers of entry seem higher there compared to the social games and MMO companies. Gathering some smart developers and developing cool games en applications is not terribly hard, creating the next Facebook or mobile ecosystem is a different matter.
Roland Legrand
