Why Microsoft Is Pursuing Crowdstar for $200 Million

Bloomberg is reporting that Microsoft Corporation is in talks to acquire Crowdstar, the third largest Facebook Application Developer, for $200 million. This follows the recent acquisition of competing social game developer Playfish by Electronic Arts for up to $400 million. The Social Gaming space has been heating up most recently with Zynga expanding their application distribution through a partnership with Microsoft-owned MSN .

One of the most attractive characteristics of Crowdstar, the third largest Facebook Developer, is their user base, hovering around 49 million Monthly Active Users (MAU) , which is comparable in size with Playfish, with less than 600 thousand MAU difference. One key difference here is that 700,000 MAU of Crowdstar’s total comes from their Happy Acquarium Community application, which is a support application for their leading application, Happy Aquarium. Those would certainly count as double users, but is also a testament to the high engagement for the game, which is at 26,000,000 MAU, making up over half of the Crowdstar traffic base.

Microsoft has not made any announcements regarding the rumor, and neither has Crowdstar, so at this point there is no reasoning behind the move. MSN Games is a successful online games division of Microsoft, and theoretically the acquisition would fall under that label. There’s no doubt that it would be a great segway to allow MSN Games to drive traffic to an upcoming MSN Games Facebook Application. A lot of the early success of companies like Zynga and Playfish came from properly advertising new games from their biggest first hits, Mafia Wars and Texas Hold’ Em for Zynga, and Pet Society and Who Has the Biggest Brain for Playfish. Zynga experimented with a variety of cross-link bars which at one point included chat and user profiles, before settling on a bar similar to Playfish’s.

There is also potential in the fact that XBox Live has no real connection with Facebook gaming in any way. Xbox Live did release the ability to post updates and browse Facebook, but there is no official connection into the Facebook Gaming world, and perhaps the idea of connecting casual games on XBox Live to the huge new Facebook Social Games audience could help broaden the XBox live appeal from its mainly hardcore demographic.