Online game developer Changyou’s agreement yesterday to acquire a majority stake in US-based mobile browser developer MoboTap highlighted the increasing consolidation among internet companies as the sector gravitates toward mobile devices.
China-based Changyou paid $91m to acquire a 51% stake in MoboTap, and will invest an additional $30m by purchasing a five-year convertible bond. The bond can be converted at any time to shares that would increase Changyou’s share of MoboTap to 60%.
MoboTap is the developer of Dolphin, a free mobile browser for the Android and iOS platforms that has been downloaded by more than 100 million users. It also has several customisable features not commonly available on built-in browsers, such as mobile gesture and voice control.
Founded in March 2010, MoboTap raised $10m in series A funding from venture capital firms Sequoia Capital and Matrix Partners in July 2011. Qualcomm Ventures, the corporate venturing arm of wireless telecommunications technology maker Qualcomm, invested an undisclosed sum the following year.
Tao Wang, chief executive of Changyou, said: “The success of Dolphin Browser clearly reflects the MoboTap team’s ability to translate their solid understanding of mobile users’ needs and strong technical expertise into successful products and a global business.”
Spun out of internet services provider Sohu in 2007 before going public two years later, Changyou develops online games in addition to owning game information portal 17173.com.
The investment in MoboTap can be seen as part of a strategy by MoboTap to penetrate the wider mobile sector, particularly as it follows the $50m acquisition of a 62.5% stake in social communication app RaidCall in November.
Although RaidCall is at present used mostly in gaming, its group communication capability could theoretically be adapted for a variety of social activities centred around mobile devices and the deals together point towards an expansion across the mobile sector.
Despite Changyou being a smaller company, the strategy is reminiscent of that being followed by rivals such as Facebook and Alibaba, internet giants ensuring they can maintain dominance of the market by shoring up their mobile offerings as online activity becomes increasingly centred around smartphones and tablets.
Facebook came of age at a time when most of its users interacted with it through desktops and laptops, but some if its largest acquisitions over the past two years points to a definite shift towards strengthening its mobile capabilities.
The first major acquisition by the company, just prior to its 2012 flotation, was Instagram, the online photo sharing service that was moving towards dominance in the market. In addition to buying mobile intelligence and development companies like Onavo and Little Eye earlier this year, it spent $19bn in February to buy instant messaging service WhatsApp.
The purchases enabled Facebook to incorporate what were the leading mobile communication and photo sharing apps to its social network. Acquiring a gaming company is less important because Facebook already operates as one of the biggest platforms for social game developers.
E-commerce company Alibaba is pursuing a similar strategy as it approaches its IPO later in the year, making substantial investments across the mobile sector in a bid to become a one-stop service.
Alibaba has invested nine-figure sums in ride sharing app Lyft and mobile social network Tango so far in 2014, adding them to a portfolio that also includes microblogging platform Sina Weibo. It has also fully acquired two more of its portfolio companies, mapping service AutoNavi and UCWeb, the developer of several mobile services including a mobile browser.
Changyou is also seeking to expand its mobile offering, albeit on a smaller scale and in a different direction to the likes of Facebook and Alibaba. Its investment in MoboTap is a sign that the consolidation taking place in the mobile IT sector is taking place on multiple levels, and this could well be borne out as it becomes more dominant.