Japan’s GREE Picks Up Mobile-Social Gaming Network OpenFeint for $104 Million

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By Kim-Mai Cutler Comment

It looks like Japan’s GREE is feeling the heat from rival DeNA to break into the U.S. market for mobile-social gaming.

The company said today that it acquired Burlingame-based OpenFeint for $104 million, which follows on DeNA’s purchase of ngmoco:) last fall for $400 million. The idea is that together, GREE and OpenFeint will build better distribution channels for mobile game developers globally, although their solution will not be a unified global network, but rather a set of locally-targeted services.

OpenFeint provides social features for games like leaderboards and ways for players to share achievements with others. It says it reaches 75 million users through 5,000 games and it produced a net loss of $6.6 million through the end of the fiscal year 2010, according to financial documents accompanying the announcement. It had net sales of $282,500. Chief executive Jason Citron and the rest of the employees will stay on board with incentive packages to keep them.

Rival DeNA will actually pick up just over $19 million through the acquisition as it had a 18.3 percent stake in the company, according to the documents. Citron owned 17.4 percent of the company, meaning he’ll bring in around $18 million. YouWeb LLC was the largest shareholder with a 24.8 percent stake, while The9 Limited owned 14.3 percent and Intel Capital owned 10.7 percent. Intel invested $3 million in OpenFeint last fall and the fund looks like it will make a nice exit by making more than triple the cash it invested back.

It’s a smart time for OpenFeint to sell. Not only does it have competition from a natural incumbent, Apple’s Game Center (flawed as it may be), Facebook has gradually built a set of tools making it easier for mobile developers to acquire users such as single sign-on. While Facebook’s mobile platform does not have a formidable footprint quite yet, deeper viral channels for mobile apps have been on roadmap for a very long time and we would not be surprised to see an announcement around this at the next f8.¬†Facebook’s games team and the biggest mobile developers have been deepening relationships over the past few weeks and we had heard at the beginning of the year that the company was experimenting with Credits through HTML5.

It was also unclear exactly how OpenFeint would make money. It has all the power to build a social layer for the iOS platform, but none of the power to monetize it since developers have to use Apple for payment processing. OpenFeint was making some revenue through an affiliate model whereby it would receive a 5 percent cut on every iOS download it drove. But it wasn’t clear how easy it would be to grow that revenue source.

From GREE’s announcement to shareholders on the acquisition: