The Live Gamer/Two Fish acquisition signals the end of the distinction between social games and hardcore MMOs

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The recent acquisition of TwoFish by LiveGamer was justified by the need to offer a full-service ecommerce solution across all genres of games, not just MMOs. Does this mean the end of the distinction between hardcore and casual?

LiveGamer was formed to offer ecommerce services to MMO publishers. Headed by Mitch Davis (of Massive – sold to Microsoft for $200-$400m – and Brash Entertainment), it has raised $24 million in funding from Charles River Ventures, Kodiak Venture Partners and FirstMark Capital.

TwoFish offers analytics and ecommerce tools to social and casual gamers and raised $4.5 million last year from Triplepoint Capital, Rustic Canyon Ventures and Venrock. But according to TwoFish’s Lisa Rutherford (in an interview with InsideSocialGames), “small players [like TwoFish] can’t keep up if they stick to social.”

Mitch Davis also said that Live Gamer had to broaden out from its hardcore audience: “Social game developers are a major customer category for us, because we’re seeing an explosion in the number of game developers and games in the market,”

We are beginning to see categories collide as developers offering games for the hardcore market find that they need the same tools and technologies as those offering games for the casual market. Much as it pains many games developers to admit it, the days of a clear distinction between core games and casual games on the web are rapidly coming to an end.

Meanwhile, social games publishers and virtual world developers raised almost $1 billion in venture money in 2008. They have to spend it somewhere. And tools providers will be one of the beneficiaries of this largesse.

But now the tools providers have a key strategic challenge: how to ensure that they will be the last man standing when the venture money dries up, the web-based games companies consolidate and there are fewer customers to go around.

One solution is for the tools companies to merge or be acquired, as this transaction demonstrates. Acquisitions like these will continue, as companies like Live Gamer use their market-leading position (and their VC money) to ensure that they are the strongest providers when the ready flow of VC money into the social gaming and virtual world space ceases.

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