Alibaba injects in $120 Million in Kabam and Linked with Snapchat
It has been a busy week for Alibaba Group Holdings as it prepares for its upcoming IPO. The company continued with its huge investment spree this week as it has poured $120 million into Kabam, social and casual game developer. Yesterday, there were reports that the company is also in talks with Snapchat Inc. for possible financing.
Kabam Investment
Kabam Inc., through its CEO Kevin Chou, today announced that it has entered into a strategic partnership with Alibaba Group, which the game developer defined as the world’s largest online and mobile commerce company.
The partnership will see Alibaba publish its new partner’s popular mobile games in China on its mobile applications that include Mobile Taobao and Laiwang. In addition, Kabam will receive an estimated sum of $120 million from Jack Ma’s company, but subjected to undisclosed customary closing conditions.
Kabam is the leading developer in core players’ free-to-play games. It has identified China and other Asian economies as key to its growth and success. Its popular games have generated at least $100 million each, they include:
- The Hobbit: Kingdoms of Middle-earth
- Kingdoms of Camelot: Battle for the North
- Fast & Furious 6: The Game
- Dragons of Atlantis: Heirs of the Dragon.
About four years ago, the company opened offices in Beijing where it has developed its hit titles such The Hobbit: Kingdoms of Middle-earth and Kingdoms of Camelot: Battle for the North. It has also setup a $50 million World Developers’ Fund, to help deliver more marquee games from Asia developers to its global audience.
The news on strategic collaboration hits the headlines today at China and Asia’s top digital entertainment expo and conference (ChinaJoy) attended by about 180,000 people.
Snapchat Rumours
As aforementioned, Alibaba is rumoured to be in talks with Snapchat for a possible investment. Snapchat, an ephemeral message service provider, is seeking to raise its valuation to $10 billion.
The technology start-up rejected Facebook Inc.’s (NASDAQ:FB) $3B+ offer, and is also rumoured to have rejected Google Inc.’s (NASDAQ: GOOGL) $4 billon.
According to Snapchat, there are at least 700 million ephemeral messages sent per day and at least 500 million stories viewed daily on its platform. Perhaps it will be joining the crowded mobile-messaging service market, which saw its unsuccessful bidder, Facebook, acquire WhatsApp Inc. in February for $19 billion.
Snapchat now competes with Facebook, which after being rebuffed started its own similar service that include ephemeral photos and videos.
Why Kabam and Snapchat?
The Chinese e-commerce giant has continued to divest its portfolio to increase its presence in the East and build its presence in the U.S. ahead of its IPO on the New York Stock Exchange possibly next month. Last year, it setup a U.S.-based investment fund for emerging technologies and e-commerce start-ups. The fund is led by the former internet strategy head at Liberty Media Corp., Michael Zeisser.
Alibaba has invested in a number of technology start-ups including ride-sharing app Lyft Inc., a search engine for mobile apps Quixey Inc., and messaging app TangoMe Inc. It has also done the same for U.S. e-commerce start-ups, for instance ShopRunner which offers subscription-based shipping service to U.S. retailers. Therefore, its Snapchat investment is seen as a U.S. foray!
However, Alibaba’s move to invest in Kabam is directly aimed at taming Tencent (OTCPK:TCEHY), which has continued to grab the Chinese gaming market. In Q1 2014, Tencent’s mobile game revenue stood at $292M, accounting for 17% of its total gaming revenue. This was a 200% quarter-over-quarter revenue growth.
