Tapjoy Actively Explores a Sale With Zynga, Japanese Giants DeNA & GREE as Candidates

Tapjoy, which works with developers to distribute and monetize their apps, is actively exploring a sale, according to several sources with knowledge of the company’s discussions. Possible candidates include Zynga and the Japanese mobile gaming giants GREE and DeNA.

The company’s chief executive Mihir Shah denied that the company was for sale. “I can’t comment on rumors or speculation.”

He added, “We’re at a level of scale and the market opportunity is so large and we’re so clearly in the lead that there isn’t really any direct viable competitor. We just continue to be focused on building this ridiculously exciting business.”

However, sources familiar with the company’s discussions say it has been actively pursuing talks with strategic acquirers like Zynga, Electronic Arts, GREE and DeNA and that it has been filling out its executive ranks ahead of either a sale or a public offering. The company did hire a chief financial officer in July named Al Wood who had led two companies through the IPO process.

But with market conditions looking increasingly stressed due to uncertainty over the stability of the European Union plus a lackluster performance from Angie’s List and Groupon offerings, a sale is looking more attractive than an IPO. Given that company has raised more than $70 million in venture funding over several rounds and in its past life as a company on the Facebook platform called Offerpal, it would probably take several hundred million dollars or around a half-billion to move the board on a transaction.

With 10,000 apps and 35 million daily active users, Tapjoy arguably has the largest network for driving downloads of mobile apps through incentivized video ads and offer walls.

But the company has always faced platform risks. Over the years, both Apple and Facebook have tinkered with platform policies that have cut into the profitability of the company. And while the company has been nimble in seizing opportunities on Facebook, then iOS and more recently on Android, it’s possible Google could follow suit on its mobile platform.

The company recently launched a direct-to-consumer play through a web app that helps consumers discover and share mobile apps. If successful, it could reduce the company’s vulnerabilities on iOS and Android.

Also, if the company did end up being sold to a large game developer like Zynga, there might be concerns among third-party developers about being too exposed to or too dependent on a well-capitalized competitor.