WSJ writes about the growing VC interest in mobile gaming companies:
the mobile-game investments show a renewed willingness by venture financiers to back companies that aren’t built on a unique technology but rather are trying to grab a share of a fast-growing market. A similar approach spun out of control in the late 1990s, when the breakneck growth in Internet usage drove venture firms to invest in many new Internet businesses. Some like eBay and Amazon succeeded, but many were ill-conceived and failed.
This time venture capitalists are betting that the spread of powerful cellphones and advanced wireless services will drive demand for games like baseball, poker, bowling and solitaire that can be downloaded over a cellular network and played on a mobile phone.
The market was pioneered in Europe and Japan and reached the U.S. two years ago with the advent of more-advanced cellular phones and wireless carriers eager to find new revenue sources.
The drive to be big could have a huge payoff. John Fisher, managing director of Draper Fisher Jurvetson, figures there are about 500 million cellular subscribers in the world with game-capable phones.
If a game maker can get 1% of that market — five million subscribers — and charge subscribers $3 to $4 a month for one game, that’s equal to annual revenue of between $180 million and $240 million. (Wireless carriers get a cut of the fees.)
Mr. Fisher estimates that a mobile-game maker’s market value could be three or four times annual revenue, so for a company with $240 million in revenue, its value could approach $1 billion. “In many ways I view this as the next wave of the rollout of the Internet across the globe,” Mr. Fisher says.