CrowdStar is best known for the facebook game Happy Aquarium.
Originally Posted by Bloomberg
Feb. 11 (Bloomberg) -- Microsoft Corp. is among companies in talks to buy CrowdStar, the creator of games for social- networking site Facebook, according to two people familiar with the matter.
A decision on a sale may be weeks away, and closely held CrowdStar might choose to stay independent with investment from a private equity firm, said one person, who declined to be identified because the talks are private. CrowdStar, whose offerings include the virtual fish-care game “Happy Aquarium,” may be valued at $200 million, the other person said.
Games on Facebook gained popularity in the U.S. last year, prompting Electronic Arts Inc. to purchase Playfish Inc., the maker of “Pet Society” and “Restaurant City,” for as much as $400 million. CrowdStar is the fourth-largest developer of applications for Facebook Inc.’s social network, with more than 50.8 million monthly active users, according to AppData.com, a Web site that tracks application usage on Facebook.
Peter Brooks, a spokesman for Burlingame, California-based Crowdstar, declined to comment, as did Microsoft General Manager Mike Ybarra, who heads the company’s Windows games unit.
The U.S. market for games played on social networks, including Facebook and News Corp.’s MySpace, will triple to more than $2 billion by 2012, according to ThinkEquity LLC. The growth contrasts with a 9.8 percent drop last year for U.S. purchases of games played on Nintendo Co.’s Wii, Microsoft’s Xbox 360 and Sony Corp.’s PlayStation 3, NPD Group Inc. said.
MSN Games, a unit of Redmond, Washington-based Microsoft, offers more than 1,000 online games, including “Bejeweled,” “Mah Jong Tiles” and “Spades.” The Web site competes with services from Yahoo! Inc. and AOL Inc.
This month, Zynga Inc. began letting users of Microsoft’s game site play its “FarmVille” game. San Francisco-based Zynga has more than 232 million monthly active users, according to AppData.
Valuations for Zynga and its peers were established when Electronic Arts bought Playfish, Jesse Divnich, an analyst with researcher Electronic Entertainment Design & Research, said last year. Zynga may be valued at $1 billion should the company be taken public, said Terry Schallich, head of capital markets at Pacific Crest Securities, a technology-focused investment bank.
Games on social networks such as Facebook and MySpace are free. The makers of the titles generate revenue by selling virtual goods.
Microsoft’s Xbox Live online game service, which allows players to access their Facebook accounts, has about 23 million users. The company is trying to develop more online and community-based games, Phil Spencer, the vice president of Microsoft’s game studios, said in July.
Microsoft rose 13 cents to $28.12 at 4 p.m. New York time in Nasdaq Stock Market trading. The shares have fallen 7.7 percent this year.
Originally Posted by Industry Gamers
Microsoft seems intent on making a big entry into the social games space. The company announced a week ago that it would bring titles from social game giant Zynga to its online properties, including MSN and Windows Live Messenger, and now Bloomberg reports that Microsoft is in talks to buy CrowdStar, the social game company behind the Facebook hit Happy Aquarium. CrowdStar hasn’t gotten the attention of Zynga or Playfish but it’s the fourth biggest developer on the social network, according to AppData. And Happy Aquarium, which launched only last fall, is the sixth most popular game.
Microsoft hasn’t been much of a force on the online gaming market—a contrast to the company’s historical success with video game titles and desktop games: Its MSN Games online portal has slipped in popularity over the last year, according to comScore, even as overall online gaming has jumped. A notable exception has been its online gaming service for the Xbox 360, Xbox Live.
Two-year-old CrowdStar has taken a different approach than rivals like Zynga and PlayFish. Rather than focus on putting up big revenue figures, it has instead focused on being profitable and this fall was making about $1 million a month in profits. In an interview with InsideFacebook earlier this year, CrowdStar Chairman Peter Relan said the company only had 20 employees (By contrast, Zynga has more than 600). The company has been able to keep its staff roster down in size by only making money via the direct sale of virtual goods, instead of with in-game ads or offers, according to Forbes.
In a sign of the ballooning valuations being put on social games firms, CrowdStar is reportedly being valued at $200 million; over the last several months, Electronic Arts has bought Playfish for $275 million upfront, in addition to a $100 million earnout, Playdom raised cash at a $260 million valuation, and Zynga got $180 million in a round. A sale of CrowdStar at $200 million would represent quite a return for its investors; the company has raised less than $100,000 in funding from its chairman.
Microsoft says it doesn’t “comment on rumors or speculation.”