ngMoco’s purchase by DeNA cements the freemium model on iPhone

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Widely trailed last week, ngmoco today confirmed its $400m acquisition by Japan’s DeNA.

Not bad for a business that is barely two years old. Kudos to Neil Young and the rest of the team.

ngMoco was one of the first companies to forecast the success of gaming on the smartphone (and specifically iPhone – although they have just announced that they will be fully supported Android in the future.)

It coped with the transition from premium games to cut-price Lite games to free-to-play games. It has powered past competition from EA and Gameloft and has created a publishing and community platform in Plus+ that offers a compelling competitive advantage.

I’m not close enough to the company to say whether $400 million was a good deal for DeNA or not. The company has raised $40 million to date, on the strength of what I understood to be low single digit revenues, so I am assuming both some substantial ramp-up during 2010 and some aggressive forecasts.

So what does this acquisition mean?

Social mobile is big, and getting bigger

At the Games Invest 2010 event earlier in the month, Phil Harrison of London Venture Partners said that the next big thing in gaming was social mobile. It looks like DeNA agrees – and it should know, as one of the most successful social networks in Japan. Expect the social mobile sector to get very hot for a while.

Freemium has won

ngMoco famously shelved Rolando 3 earlier this year as a direct result of its commitment to free-to-play games. CEO Neil Young said:

"When we made the decision to go free-to-play, we said to ourselves, ‘Look. If we can’t make the game free-to-play, we’re not going to release it.’"

ngMoco has weathered the transitions on the iPhone and has committed to the same model that has worked so successfully on Facebook and the wider web.

Life is going to get tougher for people trying to sell paid downloads on smartphones

Cross-border acquisitions are on the rise

The rapid rise of new technologies and ways of consuming content has allowed different business models, game types, platforms and companies to flourish in different countries. Games are consumed in a very different way in Japan, China, the US and Europe. One of DeNA’s rationales for the transaction was:

“We’re only active in the Japanese market, and we haven’t figured out how to cover the Western market. We want to enable developers to go cross-device and to go cross-border. And we need this to happen quickly, in about the next one or two years.”

That means more cross-border deals are likely.

Here comes the money

Investors are nothing if not herd-like. Expect this acquisition to raise the profile of social and mobile gaming even further.

Before you get too excited though, I don’t expect investors to get that excited about companies who just develop games or don’t have a platform to reach consumers.

I’ve been struggling to find the *really* exciting mobile games businesses in Europe. If you know of any, let me know.

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