Social Rumors about Chinese Gaming Companies: Tencent Looked at CrowdStar, Shanda Going for RockYou?

It’s not just US game and media companies who are looking around at buying big social game developers. Chinese media and gaming leaders Tencent and Shanda Games are, too, according to rumors going around some technology circles in Asia.

Although neither company has showed much interest in Facebook applications over the past few years, that began to change in 2009. Tencent launched games it had developed on its own. Shanda, meanwhile, made a watershed move in January, when it acquired Flash games platform company Mochi Media for $80 million. It was the first time that a big Chinese online game company has bought a meaningful US one.

With acquisition precedent set and Facebook looking more significant than ever, Tencent and Shanda — both of whom are publicly traded, wealthy companies — have good reasons to buy. So while the rumors are not well-substantiated, they’re worth examining.

Tencent-CrowdStar

The first is that Tencent has looked at acquiring CrowdStar. The price is “up to $200 million,” says one of our sources. While CrowdStar has been a small and very Facebook game-focused company, its size and ability to get users would give an immediate and potentially long-term presence on Facebook. However, when we asked CrowdStar chairman Peter Relan if Tencent talks are currently happening, he said it was “absolutely not true.” To which he added, “Many people have approached us. That’s all I will say.”

Still, there have been a lot of acquisition rumors around the company since its sudden and massive traffic gains last fall. The company went from being relatively small and unknown in a matter of months, launching a line of hits including Happy Aquarium. It now has 48.4 million monthly active users (MAU) and 8.98 million daily active users (DAU), according to our AppData service. That’s fifth and fourth most out of all Facebook developers, respectively.

Microsoft was looking at the company in February, according to Bloomberg, while CrowdStar was also considering a move to raise more funding at the same $200 million valuation. We also heard in February that the company had signed a letter of intent, meaning it appeared to be in the later stages of the acquisition process, although we couldn’t specifically confirm Microsoft’s involvement. Whatever else has been going on, the Microsoft talks fell through last month, according to a follow-up report from Bloomberg, last week.

Shanda-RockYou

We also hear that Shanda has been looking at RockYou. There are some good reasons why RockYou would be an especially interesting target. The most obvious is that it has maintained a considerable presence on Facebook over the years, and appears to be transitioning well from make simpler social apps to more complex social games, like Zoo World. It now has 73.5 million MAU and 4.43 million DAU, according to AppData, the second and eighth most out of all developers on the platform. It has also built a big app advertising business, selling cost-per-install ads for years so developers can attract each others’ users. It has also added in brand and performance advertising options over the years.

These are all things Shanda appears to want, as the Mochi Media acquisition showed. That company had built up a business providing advertising, analytics and virtual goods services to Flash game developers, meaning Shanda gets access to both these tools and the games using its platform. Another reason for that acquisition, though, is the fact that Mochi-powered games were starting to get popular with the rising number of Chinese users who wanted simple Flash games. We’ve heard that although heavier, massively multiplayer online and downloadable games have historically defined much Chinese gaming, the cheap netbooks and other computers that consumers are snatching up can’t always handle the processor requirements. Flash games are a cheap way to get more games in front of this growing market, and Mochi can do that and make money at the same time.

Social apps are similarly easy for users to access. RockYou is an even better fit given Shanda’s dual focus on its big local market and the broader world, because the developer has spent years building for a wide variety of social platforms. Although it grew early on MySpace, and spread to a variety of different international networks’ platforms, it has also been very busy in Asia — and for years. RockYou Asia, a regionally focused part of the company, has games and other apps live on Mixi in Japan, Xiaonei (now RenRen) in China and Cyworld in Korea; from what we can tell, they’re a mix of translated standard RockYou titles like Speed Racing, and new ones.

The fact that RockYou is active in China is especially significant. RenRen has the most open platform for third party developers, but the word in the street in China is that all of the big social networks are looking to make their developer platforms far more open than they have been. Until now, as we’ve been covering, these platforms have been mostly or entirely closed to third-party apps, resulting in many Chinese app developers deciding to focus on Facebook and other platforms instead.

RockYou has lots of experience launching on new platforms, and with a backer like Shanda — and all the necessary relationships that would come with it — the company would have a clear shot at whichever new rival opened up well enough to allow it to build a business.

The thing is, RockYou hasn’t said much about its expansion plans. The company raised a big $50 million fourth round of funding from Japanese firm SoftBank, and at that point sources said it was looking at acquiring gaming companies in Korea and Japan. We really don’t know how big or profitable it is at this point. Given the recent funding, in any case, it likely doesn’t need to raise more money. But Shanda can afford to pay, and it has already hinted that it’s looking to make more big purchases.

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5 Responses to “Social Rumors about Chinese Gaming Companies: Tencent Looked at CrowdStar, Shanda Going for RockYou?”

  1. RockYou Looks Past China’s Internet Users - China Real Time Report - WSJ says:

    [...] asked about rumors that Chinese online games company Shanda may acquire RockYou, Shen said they are “just [...]

  2. RockYou Licensing Chinese Social Games to the World says:

    [...] has been been on something of a rebound on Facebook. It has also been rumored to be considering an acquisition from Chinese gaming giant Shanda, as we covered last week. Rockyou has not directly denied talking with Shanda and it has framed the [...]

  3. A Look at Recent Social Gaming Deals in Asia says:

    [...] April, we also reported that two of China’s biggest gaming companies, Tencent and Shanda, were looking at acquiring Crowdstar and RockYou, respectively. Tencent itself has also built Facebook games, while there are a number of smaller [...]

  4. Quora says:

    Just heard Crowdstar is going to be acquired? Anyone heard anything?…

    http://www.insidesocialgames.com/2010/04/07/social-rumors-about-chinese-gaming-companies-tencent-looked-at-crowdstar-shanda-going-for-rockyou/ According to this, Tencent had already looked at Crowdstar and nothing worked out.  Same for m$….

  5. Quora says:

    Is Crowdstar going to be acquired? By whom?…

    Microsoft and Tencent have already spread the word: http://www.insidesocialgames.com/2010/04/07/social-rumors-about-chinese-gaming-companies-tencent-looked-at-crowdstar-shanda-going-for-rockyou/ It didn’t work out. Actions speak for itself….

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