As Mobile Gaming Acquisitions Heat Up, Is Storm8 Next?

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By Kim-Mai Cutler Comment

Founded by a few Facebook alums, RPG and casual game-maker Storm8 has long kept itself out of the spotlight. It didn’t raise any venture funding and quietly amassed a reach of 4 million daily active users on iOS and Android through last month with titles like iMobsters, World War, Fashion Story and Bakery Story.

But the company is open to, if not aggressively pursuing, a sale, according to sources familiar with the matter. The company approached EA recently. But the gaming giant, which just agreed to swallow PopCap Games for up to $1.3 billion, didn’t move the discussion forward.

Zynga is another leading possibility for the Redwood Shores-based company, which is said to be on track to make between $40 and $50 million this year from its suite of iOS and Android games. Zynga has been stepping up its marketing spend on mobile gaming in recent months and even listed Storm8 as a competitor on its IPO filing three weeks ago. One of the risks Zynga outlined to potential investors is that its growth prospects will suffer it doesn’t establish strong mobile franchises.

If Zynga were to purchase the company, it would gain a distribution network and know-how about monetization and user acquisition on iOS and Android. But it wouldn’t pick up the same caliber of unique brands that a company like PopCap has. Storm8 is split into two studios: one side, TeamLava, handles casual, female-focused games like Fashion Story and Restaurant Story. The Storm8 brand is for RPGs like Zombies Live or iMobsters.

Storm8 declined to comment. “It’s our vision to grow a profitable and independent company and we have a policy on not commenting on industry rumors,” said chief executive Perry Tam.

The bootstrapped company has curiously been more vocal in recent months. It touted a day where it pulled in more than $1 million in revenue in early June because of a sale on virtual currency. It did another 40 percent-off sale at the end of June.

And today, it’s having yet another 40 percent off sale, which has pushed eight of its games into the top grossing 50 in the U.S. Both of its top-performing RPGs World War and iMobsters popped to the #1 and #2 spots. Yesterday, they were ranked #44 and #47 respectively where they’ve hovered for weeks. Vampires Live, which was ranked #245 yesterday, is now at #25 on the top-grossing charts in the U.S.

The company also pushed a story to TechCrunch, boasting of 210 million downloads across iOS and Android. Tam said in an interview with us last month that the company would either take venture funding or an acquisition offer with the right partner.

This is going to be a huge space and there are many people interested in coming into it either through investing or acquiring. We’ve had interest, but we would be very thoughtful and cautious about who to partner with. We’d want to make sure we’d fine the right one to go to the next level together. This is a huge market. It was growing really fast and it will only grow faster in the next year or two.

He stressed, “My intention is to figure out how to conquer it and become the biggest social gaming company on mobile platforms.”

In general, acquisition activity in mobile gaming has picked up over the past year. The PopCap deal is the biggest one in recent memory, but EA also picked up Firemint for less than $25 million and publisher Chillingo. Zynga also bought Newtoy for $53.3 million in cash and stock. Japanese companies DeNA and GREE bought mobile-social gaming networks ngmoco:) and OpenFeint.

Pocket Gems is said to have been approached by Zynga earlier this year, but the company declined. At the same time, Apple cracked down on offer wall revenue, raising uncertainty about the free-to-play business model so discussions didn’t move forward. Another notable player in the space, Glu Mobile, also recently accelerated vesting for its two top executives if there is a change of control at the company. The company trades at a $308.1 million market capitalization and said that it had 953,000 daily active users at the end of the first quarter.