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Softbank's Supercell Buy Tops Mobile M&A

Softbank's Sprint acquisition may have been the most impactful, but it's not the only significant purchase the Japanese carrier has made this year. Its acquisition of mobile gaming company Supercell represents the largest valuation for a mobile app M&A transaction ever, according to Rutberg & Company.

Last month, SoftBank Corp. agreed to purchase 51% of the Finnish game maker for $1.5 billion, a deal that valued the company at $3 billion. In its latest mobile M&A report, Rutberg & Co. says this huge valuation could be just the start for private companies in the mobile sector. It anticipates $10+ billion exits among venture-backed mobile-first startups over the next three to five years. (See The Best-Funded Mobile Startups of 2013 and Softbank Invests $1.26B in Brightstar.)

For Supercell, which only has a couple of freemium games and about 100 employees, Rutberg Managing Director Rajeev Chand says the transaction drivers included the "company's tremendous financial results, early position in the free-to-play games market, notorious discipline at game testing and killing, and entrepreneurial culture that retained sharp developers."

For its part, Softbank CEO Masayoshi Son has stated his intentions to own the mobile gaming market… and then the mobile Internet market… and then become the world's biggest company, so Supercell was a strategic acquisition on its path to domination.

Although mobile games may seem like a tangential business for a network operator, a recent study by AppLift and Newzoo says they will generate $23.9 billion in revenues by 2016, a 25% annual growth rate from $12.2 billion in 2013.

Overall for the month of October, Rutberg says private companies raised $905 million in 122 venture capital deals. That brings the total deals for 2013 to 936, with private companies raising a total of $7 billion. Last month's biggest wins went to mobile device trade-in company eRecyclingCorp, which raised $105 in financing, location intelligence vendor Telogis' $93 million in financing, and mobile security company LookOut's $55 million round.

— Sarah Reedy, Senior Editor, Light Reading

DanJones 11/21/2013 | 1:06:16 PM
Re: Tablet games That was definitely the point of the T-Mobile tablet data promo, Legere explictly said that he wanted to get people used to using tablets on LTE, bit-by-bit, as it were.
Sarah Thomas 11/21/2013 | 12:43:07 PM
Re: Tablet games Great point, Dan. You'll see a lot of commuters playing smartphone games, but the tablet is the best screen for them. I'm sure the carrier goal is to get those tablet gamers playing them over LTE instead of WiFi.
DanJones 11/21/2013 | 11:54:49 AM
Re: Tablet games Also speaks to  how much more important tablets are becoming to carriers as well, SoftBank is looking ahead to what will drive data revenues on networks in years to come.
Sarah Thomas 11/20/2013 | 1:36:24 PM
Tablet games Supercell focuses on tablet games, and it has done exceptionally well so far. I think it was smart of Softbank to take majority ownership of the company. It's one of the few that is doing the freemium model right.

Anyone played a Supercell game? Got a favorite?
Sarah Thomas 11/20/2013 | 1:09:36 PM
AT&T AdWords Rutberg's monthly look at the mobile market is always good for interesting news bits. Another one from this month was that AT&T shut down its AdWords business unit last month. It was pretty quiet -- I didn't hear much about it. But, I think it indicates that carriers are still struggling to find a role in mobile ads, despite the big opportunities there.

Rutberg suggests that AT&T also didn't do a good job executing. The report reads: 

"The failure of AT&T AdWorks mobile represents both AT&T-specific and operator-wide challenges in the advertising business. 1) The advertising industry is fundamentally different than the telecom industry. 2) AdWorks mobile did not have an organizational home within AT&T. 3) AT&T attempted to build a broad offering and failed in the overreach. Advertising stands as one in a long series of adjacent vertical markets where operators have failed to capitalize on major market trends and opportunities."

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