"Wooga GmbH is one of a handful of rising stars in the competitive world of online social games. It is also the only one not in Silicon Valley."
This slightly myopic opening to a Wall Street Journal article about social gaming and the risks of relying on US-based social network Facebook to provide users misses perhaps the most important rising stars of the gaming firmament: those in Asia.
While Facebook was the subject of a (very enjoyable) film once it crossed 500 million users, its Chinese peer Tencent has 650 million. China passed the US as the largest internet market in terms of users in 2008, according to Euromonitor International.
Backed by media group Nasper’s corporate venturing unit, Tencent has developed into a social media giant and as an investor in Russia’s Digital Sky Technologies (also backed by Naspers) it also has a vested interested in US peers Zynga, Groupon and Facebook.
Tencent also sent the most number of people of any corporation to the Shanghai Venture Capital Association’s corporate venturing event as it is well aware the power of being an investor (having set up a $760m fund earlier this year) and partner to a global network. One Tencent partner is Japan-based gaming group Gree, which has just quadrupled its user base by buying US peer OpenFeint for $104m. Gree – a name made out of the social game Six Degrees of Separation to connect anyone in the world by no more than six steps – has also invested in Asian peer mig33 and become the cornerstone investor in a fund supporting the Android operating system.
Android as an open source platform promoted by Google to counter the closed world of Apple is rapidly expanding, partly due to the growth in smartphones. By next year, smartphones will outnumber personal computers and with this success will come new challenges to incumbents based on the Windows software and Intel semiconductors.
It will not be much of a leap of imagination, therefore, to see Intel also commit alongside Gree in the Android-focused fund, having just sold its 10.7% stake in OpenFeint to the Japanese company led by wunderkind Yoshikazu Tanaka.
While a departure for Intel, which historically has preferred to invest directly in companies from its balance sheet rather than indirectly in third party-managed funds, the importance of building open innovation-style collaborations with other firms could tip the balance. As IBM reasoned a decade ago after some heavy internet-era losses, its aim was to build the market and find and work with the best entrepreneurs and this could sometimes best be done by acting as a limited partner in funds.
The challenge for corporations is one of resource. Even Intel Capital with more than 100 investment professionals and double that number in support staff cannot be everywhere, although the media hubs remain in Japan, China, Singapore, and the UK and US.
Finding innovative ways to partner across borders and understand the developments happening across sectors is an increasing challenge requiring a clear vision and flexibility to invest long-term.