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Report: $1.38B Invested In Online Game, Virtual Goods Firms In 2009

Financiers invested over $1.38 billion in 87 online game and virtual goods firms in 2009 -- three times the amount invested in 2008 -- with much of it for acquisitions, according to new research.
Despite the past year's economic hardships, financiers invested over $1.38 billion in online game and virtual goods-related businesses in 2009, more than three times the amount invested in the same market in 2008, according to a new research report. The number of companies receiving investments more than doubled, too, increasing from 34 in 2008 to 87 in 2009. The 2009 Virtual Goods Investment Report, compiled by Engage Digital Media, tracked investments from the past year relating to MMOs, online casual/social games, mobile games, virtual worlds, digital goods, avatars, payment services, and development/analytics tools in a virtual goods context. The report's authors note that of the 87 investments in 2009, financial terms were not disclosed for 29 of the deals. Because estimates for those values are not included in the total, it's likely that the actual amount of money invested in the online game and virtual goods space far exceeds $1.38 billion. Most of the deals took place in 2009's fourth quarter -- nearly $1 billion for 30 companies -- helping offset an freeze in new investments during the first and second quarters. 18 acquisition-related investments made up $398.3 million of the $1.38 billion, most of that owing to Electronic Arts's $300 million purchase of Pet Society developer PlayFish last November. The second biggest chunk came from Chinese mobile company KongZhong’s recent $80 million acquisition of free-to-play 3D MMORPG developer Dacheng (World of Kung Fu). Global internet investment group Digital Sky Technologies was the largest investor in this segment in 2009, sending $200 million to Facebook and $180 million to FarmVille developer Zynga last month. Though Facebook primarily serves as a social network, the report justifies its inclusion by pointing to its virtual currency platform and estimated annual virtual gift sales of around $75 million. Behind EA, KhongZhong, and DST, the fourth largest investment went to social gaming and applications developer RockYou!, which received $50 million from Asian backer Softbank. Another social gaming studio, Playdom (Mobsters) saw the next biggest investment when it raised $43 Million in November. More than $600 million was invested in the social game space alone in 2009, compared to $82 million in 2008. "Virtual goods was the hot story of 2009, driving investment that crossed over into game development, virtual currency, payment services, and social networks," says Engage Digital Media CEO Christopher Sherman. "In the fourth quarter alone companies raised an astounding $944 million, more than double the amount raised in all four quarters of 2008."

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