Tencent, one of the world’s biggest videogaming companies by revenue, today made another move to help cement that position. The Chinese firm has made an offer to fully acquire Funcom, the games developer behind Conan Exiles (and others in the Conan franchise), Dune and some 28 other titles. The deal, when approved, would value the Oslo-based company at $148 million (NOK 1.33 billion) and give the company a much-needed cash injection to follow through on longer-term strategy around its next generation of games.

Funcom is traded publicly on the Oslo Stock Exchange, and the board has already recommended the offer, which is being made at NOK 17 per share, or around 27% higher than its closing share price the day before (Tuesday).

The news is being made with some interesting timing. Today, Tencent competes against the likes of Sony, Microsoft and Nintendo in terms of mass-market, gaming revenues. But just earlier this week, it was reported that ByteDance — the publisher behind breakout social media app TikTok — was readying its own foray into the world of gaming.

That would set up another level of rivalry between the two companies, since Tencent also has a massive interest in the social media space, specifically by way of its messaging app WeChat . While many consumers will have multiple apps, when it comes down to it, spending money in one represents a constraint on spending money in another.

Today, Tencent is one of the world’s biggest video game companies: in its last reported quarter (Q3 in November), Tencent said that it make RMB28.6 billion ($4.1 billion) in online gaming revenue, with smartphone games accounting for RMB24.3 billion of that.

Acquisitions and controlling stakes form a key part of the company’s growth strategy in gaming. Among its very biggest deals, Tencent paid $8.6 billion for a majority stake in Finland’s Supercell back in 2016. It also has a range of controlling stakes in Riot Games, Epic, Ubisoft, Paradox, Frontier and Miniclip. These companies, in turn, also are making deals: just earlier this month it was reported (and sources have also told us) that Miniclip acquired Israel’s Ilyon Games (of Bubble Shooter fame) for $100 million.

Turning back to Funcom, Tencent was already an investor in the company: it took a 29% stake in it in September 2019 in a secondary deal, buying out KGJ Capital (which had previously been the biggest shareholder).

“Tencent has a reputation for being a responsible long-term investor, and for its renowned operational capabilities in online games,” said Funcom CEO Rui Casais at the time. “The insight, experience, and knowledge that Tencent will bring is of great value to us and we look forward to working closely with them as we continue to develop great games and build a successful future for Funcom.”

In retrospect, this was laying the groundwork and relationships for a bigger deal just months down the line. 

“We have a great relationship with Tencent as our largest shareholder and we are very excited to be part of the Tencent team,” Casais said in a statement today. “We will continue to develop great games that people all over the world will play, and believe that the support of Tencent will take Funcom to the next level. Tencent will provide Funcom with operational leverage and insights from its vast knowledge as the leading company in the game space.”

The rationale for Funcom is that the company had already determined that it needed further investment in order to follow through on its longer-term strategy.

According to a statement issued before it recommended the offer, the company is continuing to build out the “Open World Survival segment” using the Games-as-a-Service business model (where you pay to fuel up with more credits); and is building an ambitious Dune project set to launch in two years.

“Such increased focus would require a redirection of resources from other initiatives, the most significant being the co-op shooter game, initially scheduled for release during 2020 that has been impacted by scope changes due to external/market pressures with increasingly strong competition and internal delays,” the board writes, and if it goes ahead with its strategy, “It is likely that the Company will need additional financing to supplement the revenue generated from current operations.”

“Flying cars” — airborne vehicles designed for urban and other short-distance commutes to replace conventional private automobiles — are (at best) still years away from being a reality, with significant safety, technology and business model hurdles to clear before they ever hit the sky. Now, sources tell us that one of more promising startups in the field, the German startup Lilium, wants to put itself into pole position, by ramping up its financial position.

Lilium has been talking to investors to raise a big round of funding, between $400 million and $500 million, according to those familiar with its plans. “It’s a very large round at a very large valuation,” one VC told TechCrunch.

It’s not clear yet who is investing in this latest round, or what that valuation might be.

Lilium already has some deep-pocketed investors behind it. In addition to WeChat owner and Chinese internet giant Tencent; it counts Atomico, founded by Skype co-founder Niklas Zennström, as a repeat investor. Obvious Ventures, the early-stage VC fund co-founded by Twitter’s Ev Williams; LGT, the international private banking and asset management group; and e24, a fund from Christian Reber (co-founder of Wunderlist and now Pitch), have also backed it, among others.

In all, Lilium has raised over $100 million in financing to date in previous rounds. But given that its plans involve not only building ground-breaking aircraft but then operating them in fleets, that’s not nearly enough to establish its service and have the impact that founder and chief executive, Daniel Wiegand, hopes he can have.

“It’s not only a benefit in terms of relieving society from transit traffic, but the much, much bigger benefit would be that everyone can use it and that people can get to their destination five times quicker, basically a five times increase of their daily radius of life,” Wiegand said in 2017. “This connectivity is going to be a huge benefit to society but also economic growth.”

Tencent, Atomico and Obvious were among the investors backing Lilium in its most recent $90 million raise. Sources tell us that Tencent is again in this latest round, and the startup has been pitching potential new investors since at least this spring, visiting with firms in Silicon Valley.

It seems this latest, bigger round has yet to close. The target size implies the involvement of big names, with big funds behind them.

“I sincerely hope they get the funds to transform transportation,” one source said.

When (if) the round closes, that would make it the biggest fundraising to date for flying taxis, an area that has lots of potential, but is still far from tested — a fact that one source suggested could contribute to the longer period needed to close the outsized round.

“It’s a known secret how hard it is to raise growth rounds in this space because it’s such a new and untested market,” an executive from another air-taxi startup noted. “Early investments were betting on the market vision and the concept of radically new mobility, but now it’s dawning on investors and others that it’s also a regulation play, and more.” That translates potentially to sustained costs, “and that may be one reason why it’s taking some time.”

Add to that the ambition at hand — designing completely new transportation hardware, then manufacturing the aircraft at scale, and then finally building a transportation, taxi-style service around them — and you can start to see why the round might be very large.

Lilium, Atomico, Tencent and Obvious all declined to comment for this story. We’ll update the post if that changes.

Up, up and away

It’s been a little over two years since Lilium and others in the same space such as Volocopter began publicly discussing their visions for the future of mobility alongside incredibly well-funded industry giants like Uber and established aerospace companies like Airbus, Boeing, and others.

Lilium raised its first round of funding in December 2016 and only a few months later, Uber convened its first Elevate conference, which included discussions on the transportation industry’s flying future.

Since those initial discussions, the companies developing technologies and services to bring those plans to fruition have made significant strides.

Earlier this year Lilium announced the first successful flight for a new five-seat electric vertical take-off and landing (VTOL) vehicle. Others are readying pilot projects in their first launch cities, with the timeline for first full-launch services currently hovering around the three-year mark from now (note: dates do get pushed back).

For Lilium and its competitors, the development of completely new, air-borne vehicles are a means to solving a specific problem: roads in and between cities are too congested with traffic; and electric, air-based options can be a way to offset that situation in an environmentally-friendly way.

Many companies building these new craft are considering taxi-style services as the first or primary point of market entry because — similar to fully-autonomous cars — the cost per vehicle will likely be too high for most individuals to consider buying for private/sole use, notwithstanding the safety features of being able to manage a full fleet autonomously that would be harder to execute with single users (who would have to be pilots, in the case of flying cars).

Lilium’s new vehicle claims to have a top speed of 300 kilometers per hour and a 300 kilometer range, which would make it capable of covering longer distances than its competitors. Lilium says this is partly because it’s designed it in the form of a small jet aircraft instead of mimicking the mechanics and form factor of drones or helicopters (the latter is the approach that Volocopter, another startup out of Germany backed by the likes of Intel and Daimler, is taking). The fixed-wing design of the plane means that it can rely on lift to stay aloft, cutting down on the power demands on the electric 2,000 horsepower engines when it’s aloft.

“This efficiency, which is comparable to the energy usage of an electric car over the same distance, means the aircraft would not just be capable of connecting suburbs to city centres and airports to main train stations, but would also deliver affordable high-speed connections across entire regions,” Lilium said in a statement at the time.

But physics is just one part of the complex system of moving pieces that would need to come together to get Lilium (or any of its rivals) off the ground.

For one, any system will need to integrate with existing air traffic control infrastructure as well — as local and national regulators grapple with increasingly crowded skies.

Another involves the logistical components to operate a service. The company also established a software engineering base in London to help build out the fleet management software and mobile phone application that will connect customers to the jets for transit, and it has been hiring.

Although we have yet to see any commercial services emerge built on the concept of fleets of providing short/medium-distance, air-based taxi-style transportation, there are a number of hopefuls that have identified the opportunity of both designing aircraft and building services around them.

Companies like Kitty Hawk, eHang, Joby and Uber all hope to play a role in offering short-range flights as an affordable alternative to road-based transportation. (Blade and SkyRyse, two other air taxi services of sorts, are offering more conventional helicopters and other vessels in limited launches for well-heeled travelers willing to spend the money.)

Last week at San Francisco Disrupt 2019, Kitty Hawk announced its latest vehicle, Heaviside. It’s an electric aircraft designed to be a personalised vehicle, less obtrusive than a helicopter, ableto go anywhere and land anywhere fast and quietly, and as easy to operate as “pushing a button,” according to CEO Sebastian Thrun.

Chinese social media and gaming giant Tencent is taking a 29% stake to become the largest shareholder in Oslo-based Funcom.

The indie games developer is responsible for multiple adaptations involving the Conan the Barbarian franchise, such as Age of Conan and Conan Exiles, as well as a number of other multiplayer titles — including a forthcoming open world sandbox game that will be set in the Dune sci-fi universe.

The news that Tencent has entered into a share purchase agreement to acquire almost a third of the company was announced in a press release today. The Chinese giant has agreed to acquire all the shares belonging to the Norway-based KGJ Capital AS, which is currently the largest shareholder in Funcom.

Commenting in a statement, Funcom CEO Rui Casais said: “Tencent has a reputation for being a responsible long-term investor, and for its renowned operational capabilities in online games. The insight, experience, and knowledge that Tencent will bring is of great value to us and we look forward to working closely with them as we continue to develop great games and build a successful future for Funcom.”

Tencent, which has a substantial games operation of its own, also holds stakes in a number of other major games makers — including Riot Games, Epic, Supercell, Ubisoft, Paradox, Frontier and Miniclip.

A prolonged games licensing freeze in China dented Tencent’s profits last year. And earlier this year, while it reported record profits in its Q1 it also recorded its slowest revenue growth since going public.

Regulatory risk at home is one reason for Tencent to expand its stakes in overseas games developers and tap into a global audience to stoke growth.

Tesla is rolling out a new software update that adds a slew of new features to its cars. These include the new ‘Smart Summon’ feature which will allow cars equipped with the optional $5,000 full-self driving package to automatically drive themselves from a parking spot to collect you in a parking spot.

This is one of the most advanced semi self-driving features that Tesla has yet released to the general public, and the company still says you should use it only in lots and when you have a clear view of your car. The company also notes that you’re ultimately responsible for the vehicle, so definitely be aware of what’s going on with the car and its surroundings if you’re planning to use this one – and you can stop the car remotely should you feel the need to. Smart Summon has been out in a limited preview beta for some customers, but now it’s going to be rolling out to all vehicles that have purchased the FSD option

Other new features included in this update include the much-requested native Spotify support, which is available to all Spotify Premium account-holders across all markets where it’s available. That should go a long way towards satisfying Tesla owners who have been less than satisfied with playing audio via Bluetooth from this extremely popular streaming music option. In China, Tesla is also rolling out Ximalaya, a podcast and audiobook streaming service.

Tesla Theater Mode, also new in version 10.0, connects your infotainment system to your Netflix, YouTube and Hulu/Hulu+ (including Live TV if you’re subscribed to that feature) accounts, giving you access to streaming video from all these platforms while the car is safely in park. In China, the automaker is also adding IQiyi and Tencent Video, and it says it’ll be adding more options globally “over time” to supplement these offerings. The new Theater Mode will also provide access to Tesla vehicle tutorials for owners to watch in-car, again only while parked.

A lot of these updates focus on entertainment options, including the new “Car-aoke” mode, which, as you might have guessed, adds an in-car karaoke experience that includes a “massive” library of music and lyrics, Tesla says, with multiple languages supported. Singing along on road-trips has long gotten by with low-tech options only, but official support might encourage more amateur James Cordens.

Last but not least for new entertainment features, there’s the launch of the Cuphead port on Tesla Arcade, the in-car gaming software Tesla launched earlier this year. Cuphead is a cult smash hit indie game, with an iconic art style reminiscent of early Disney animation, and this is definitely a nod to Tesla’s core geek audience (and probably a treat for the Musk man himself). Again, this is only available while parked in case you were worried about distracted driving.

Tesla also added some new navigation features that suggest interesting restaurants and sightseeing opportunities along your way, w which could result in some more interesting spontaneous adventures. There’s also a new file system tweak that separates videos captured by the car’s camera when in Dashcam and Sentry Mode to make it easier for users to find them, and they’ll be auto-deleted when there’s a need to free up storage.

This is a big ol’ update packed with new features, and it’s going to be rolling out over-the-air to vehicles beginning this week. As mentioned a couple of places above, you might see some slight differences region to region but Tesla says you can also check out the updates in-store at its showrooms if you want a sneak preview.

Zhihu may not be as well known outside of China as WeChat or ByteDance’s Douyin, but over the past eight years, it has cultivated a reputation for being one of the country’s most trustworthy social media platforms. Originally launched as a question-and-answer site similar to Quora, Zhihu has grown to be a central hub for professional knowledge, allowing users to interact with experts and companies in a wide range of industries.

Headquartered in Beijing, Zhihu recently raised a $434 million Series F, its biggest round since 2011. The funding also brought Zhihu two important new partners: video and live-streaming app Beijing Kuaishou, which led the round, and Baidu, owner of China’s largest search engine (other participants in the round included Tencent and CapitalToday).

Launched in 2011, Zhihu (the name means “do you know”) is most frequently compared to Quora and Yahoo Answers. While it resembled those Q&A platforms at first, it has grown in scope. Now it would be more accurate to say that the platform is like a combination of Quora, LinkedIn and Medium’s subscription program.

For example, Zhihu has an invitation-only blogging platform for verified experts and since launching official accounts, it has become a channel for companies and organizations to communicate with users. A representative for Zhihu told TechCrunch that the platform had 220 million users and 30,000 official accounts as of January 2019 (for context, there are currently about 800 million Internet users in China), who have posted a total of 130 million answers so far.

The company’s growth will be closely watched since Zhihu is reportedly preparing for an initial public offering. Last November, the company hired its first chief financial officer, Sun Wei, heightening speculation. A representative for the company told TechCrunch the position was created because of Zhihu’s business development needs and that there is currently no timeline for a public listing.

At the same time, the company has also dealt with reports that its growth has slowed.

Zao went viral in China this weekend for its realistic face-swapping videos, but after controversy about its policies, WeChat restricted access to the app on its messaging platform.

Developed by a unit of Momo, one of China’s most popular dating apps, Zao creates videos that replace the faces of celebrities in scenes from popular movies, shows and music videos with a selfie uploaded by the user.

The app, currently available only in China, went viral as users shared their videos through WeChat and other social media platforms in China. But concerns about the potential misuse of deepfake technology coupled with a clause (now deleted) in Zao’s terms of use that gave it full ownership and copyright to content uploaded or created on it, in addition to “completely free, irrevocable, perpetual, transferrable, and re-licensable rights,” caused controversy.

In case you haven’t heard, #ZAO is a Chinese app which completely blew up since Friday. Best application of ‘Deepfake’-style AI facial replacement I’ve ever seen.

Here’s an example of me as DiCaprio (generated in under 8 secs from that one photo in the thumbnail) pic.twitter.com/1RpnJJ3wgT

— Allan Xia (@AllanXia) September 1, 2019

By going viral quickly and being very easy to use (Zao’s videos can be generated from a single selfie, though it suggests that users upload photos from several angles for better results), the app has also focused more attention on deepfake technology and how it can potentially be used to spread misinformation or harass people.

Users can still upload videos they created with Zao to WeChat, but if they try to download the app or send an invite link to another WeChat user, a message is displayed that says “this web page has been reported multiple times and contains security risks. To maintain a safe online environment, access to this page has been blocked.”

Zao was released last Friday and quickly became the top free iOS app in China, according to App Annie. A statement posted on Sept. 1 to Zao’s Weibo account says “we completely understand everybody’s concerns about the privacy issue. We are aware of the issue and we are thinking about how to fix the problems, we need a little time.” Its terms and conditions now say user-generated content will only be used by the company to improve the app and that all deleted content will be removed from its servers.

TechCrunch has contacted Zao for comment.

By the end of 2019, the global gaming market is estimated to be worth $152 billion with 45% of that, $68.5 billion, coming directly from mobile games. With this tremendous growth (10.2% YoY to be precise) has come a flurry of investments and acquisitions, everyone wanting a cut of the pie. In fact, over the last 18 months, the global gaming industry has seen $9.6 billion in investments and if investments continue at this current pace, the amount of investment generated in 2018-19 will be higher than the 8 previous years combined.

What’s interesting is why everyone is talking about games and who in the market is responding to this and how.

The gaming phenomenon 

Today, mobile games account for 33% of all app downloads, 74% of consumer spend, and 10% of all time spent in-app. It’s predicted that in 2019, 2.4 billion people will play mobile games around the world – that’s almost one third of the global population. In fact, 50% of mobile app users play games, making this app category as popular as music apps like Spotify and Apple Music and second only to social media and communications apps in terms of time spent.

In the US, time spent on mobile devices has also officially outpaced that of television – with users spending 8 more minutes per day on their mobile devices. By 2021, this number is predicted to increase to over 30 minutes. Apps are the new primetime and games have grabbed the lion’s share.

Accessibility is the highest it’s ever been as barriers to entry are virtually non-existent. From casual games to the recent rise of the wildly popular hyper-casual genre of games which are quick to download, easy to play, and lend themselves to being played in short sessions throughout the day, games are played by almost every demographic stratum of society. Today, the average age of a mobile gamer is 36.3 (compared with 27.7 in 2014), the gender split is 51% female, 49% male, and one-third of all gamers are between the ages of 36-50. A far cry from the traditional stereotype of a ‘gamer’.

With these demographic, geographic, and consumption sea-changes in the mobile ecosystem and entertainment landscape, it’s no surprise that the game space is getting increased attention and investment, not just from within the industry, but more recently from traditional financial markets and even governments. Let’s look at how the markets have responded to the rise of gaming.

Image courtesy of David Maung/Bloomberg via Getty Images

Games on Games 

The first substantial investments in mobile gaming came from those who already had a stake in the industry. Tencent invested $90M in Pocket Gems and$126M in Glu Mobile (for a 14.6% stake), gaming powerhouse Supercell invested $5M in mobile game studio Redemption Games, Boom Fantasy raised $2M from ESPN and the MLB and Gamelynx raised $1.2M from several investors – one of which was Riot Games. Most recently, Ubisoft acquired a 70% stake in Green Panda Games to bolster its foot in the hyper-casual gaming market.

Additionally, bigger gaming studios began to acquire smaller ones. Zynga bought Gram Games, Ubisoft acquired Ketchapp, Niantic purchased Seismic Games, and Tencent bought Supercell (as well as a 40% stake in Epic Games). And the list goes on.

Wall Street wakes up

Beyond the flurry of investments and acquisitions from within the game industry, games are also generating huge amounts of revenue. Since launch, Pokemon Go has generated $2.3B in revenue and Fortnite has amassed some 250M players. This is catching the attention of more traditional financial institutions, like private equity firms and VCs, who are now looking at a variety of investment options in gaming – not just of gaming studios, but all those who had a stake in or support the industry.

In May 2018, hyper-casual mobile gaming studio Voodoo announced a $200M investment from Goldman Sachs’ private equity investment arm. For the first time ever, a mobile gaming studio attracted the attention of a venerable old financial institution. The explosion of the hyper-casual genre and the scale its titles are capable of achieving, together with the intensely iterative, data-driven business model afforded by the low production costs of games like this, were catching the attention of investors outside of the gaming world, looking for the next big growth opportunity.

The trend continued. In July 2018, private equity firm KKR bought a $400M minority stake in AppLovin and now, exactly one year later Blackstone announced their plan to acquire mobile ad-network Vungle for a reported $750M. Not only is money going into gaming studios, but investments are being made into companies whose technology supports the mobile gaming space. Traditional investors are finally taking notice of the mobile gaming ecosystem as a whole and the explosive growth it has produced in recent years. This year alone mobile games are expected to generate $55B in revenue so this new wave of investment interest should really come as no surprise.

A woman holds up her cell phone as she plays the Pokemon Go game in Lafayette Park in front of the White House in Washington, DC, July 12, 2016. (Photo: JIM WATSON/AFP/Getty Images)

Government intervention

Most recently, governments are realizing the potential and reach of the gaming industry and making their own investment moves. We’re seeing governments establish funds that support local gaming businesses – providing incentives for gaming studios to develop and retain their creatives, technology, and employees locally – as well as programs that aim to attract foreign talent.

As uncertainty looms in England surrounding Brexit, France has jumped on the opportunity with “Join the Game”. They’re painting France as an international hub that is already home to many successful gaming studios, and they’re offering tax breaks and plenty of funding options – for everything from R&D to the production of community events. Their website even has an entire page dedicated to “getting settled in France”, in English, with a step-by-step guide on how game developers should prepare for their arrival.

The UK Department for International Trade used this year’s Game Developers Conference as a backdrop for the promotion of their games fund – calling the UK “one of the most flourishing game developing ecosystems in the world.” The UK Games Fund allows for both local and foreign-owned gaming companies with a presence in the UK to apply for tax breaks. And ever since France announced their fund, more and more people have begun encouraging the British government to expand their program saying that the UK gaming ecosystem should be “retained and enhanced”. But, not only does the government take gaming seriously, the Queen does as well. In 2008, David Darling the CEO of hyper-casual game studio Kwalee was made a Commander of the Order of the British Empire (CBE) for his services to the games industry. CBE is the third-highest honor the Queen can bestow on a British citizen.

Over to Germany, and the government has allocated 50M euros of its 2019 budget for the creation of a games fund. In Sweden, the Sweden Game Arena is a public-private partnership that helps students develop games using government-funded offices and equipment. It also links students and startups with established companies and investors. While these numbers dwarf the investment of more commercial or financial players, the sudden uptick in interest governments are paying to the game space indicate just how exciting and lucrative gaming has become.

Support is coming from all levels

The evolution of investment in the gaming space is indicative of the stratospheric growth, massive revenue, strong user engagement, and extensive demographic and geographic reach of mobile gaming. With the global games industry projected to be worth a quarter of a trillion dollars by 2023, it comes as no surprise that the diverse players globally have finally realized its true potential and have embraced the gaming ecosystem as a whole.

By the end of 2019, the global gaming market is estimated to be worth $152 billion with 45% of that, $68.5 billion, coming directly from mobile games. With this tremendous growth (10.2% YoY to be precise) has come a flurry of investments and acquisitions, everyone wanting a cut of the pie. In fact, over the last 18 months, the global gaming industry has seen $9.6 billion in investments and if investments continue at this current pace, the amount of investment generated in 2018-19 will be higher than the 8 previous years combined.

What’s interesting is why everyone is talking about games and who in the market is responding to this and how.

The gaming phenomenon 

Today, mobile games account for 33% of all app downloads, 74% of consumer spend, and 10% of all time spent in-app. It’s predicted that in 2019, 2.4 billion people will play mobile games around the world – that’s almost one third of the global population. In fact, 50% of mobile app users play games, making this app category as popular as music apps like Spotify and Apple Music and second only to social media and communications apps in terms of time spent.

In the US, time spent on mobile devices has also officially outpaced that of television – with users spending 8 more minutes per day on their mobile devices. By 2021, this number is predicted to increase to over 30 minutes. Apps are the new primetime and games have grabbed the lion’s share.

Accessibility is the highest it’s ever been as barriers to entry are virtually non-existent. From casual games to the recent rise of the wildly popular hyper-casual genre of games which are quick to download, easy to play, and lend themselves to being played in short sessions throughout the day, games are played by almost every demographic stratum of society. Today, the average age of a mobile gamer is 36.3 (compared with 27.7 in 2014), the gender split is 51% female, 49% male, and one-third of all gamers are between the ages of 36-50. A far cry from the traditional stereotype of a ‘gamer’.

With these demographic, geographic, and consumption sea-changes in the mobile ecosystem and entertainment landscape, it’s no surprise that the game space is getting increased attention and investment, not just from within the industry, but more recently from traditional financial markets and even governments. Let’s look at how the markets have responded to the rise of gaming.

Image courtesy of David Maung/Bloomberg via Getty Images

Games on Games 

The first substantial investments in mobile gaming came from those who already had a stake in the industry. Tencent invested $90M in Pocket Gems and$126M in Glu Mobile (for a 14.6% stake), gaming powerhouse Supercell invested $5M in mobile game studio Redemption Games, Boom Fantasy raised $2M from ESPN and the MLB and Gamelynx raised $1.2M from several investors – one of which was Riot Games. Most recently, Ubisoft acquired a 70% stake in Green Panda Games to bolster its foot in the hyper-casual gaming market.

Additionally, bigger gaming studios began to acquire smaller ones. Zynga bought Gram Games, Ubisoft acquired Ketchapp, Niantic purchased Seismic Games, and Tencent bought Supercell (as well as a 40% stake in Epic Games). And the list goes on.

Wall Street wakes up

Beyond the flurry of investments and acquisitions from within the game industry, games are also generating huge amounts of revenue. Since launch, Pokemon Go has generated $2.3B in revenue and Fortnite has amassed some 250M players. This is catching the attention of more traditional financial institutions, like private equity firms and VCs, who are now looking at a variety of investment options in gaming – not just of gaming studios, but all those who had a stake in or support the industry.

In May 2018, hyper-casual mobile gaming studio Voodoo announced a $200M investment from Goldman Sachs’ private equity investment arm. For the first time ever, a mobile gaming studio attracted the attention of a venerable old financial institution. The explosion of the hyper-casual genre and the scale its titles are capable of achieving, together with the intensely iterative, data-driven business model afforded by the low production costs of games like this, were catching the attention of investors outside of the gaming world, looking for the next big growth opportunity.

The trend continued. In July 2018, private equity firm KKR bought a $400M minority stake in AppLovin and now, exactly one year later Blackstone announced their plan to acquire mobile ad-network Vungle for a reported $750M. Not only is money going into gaming studios, but investments are being made into companies whose technology supports the mobile gaming space. Traditional investors are finally taking notice of the mobile gaming ecosystem as a whole and the explosive growth it has produced in recent years. This year alone mobile games are expected to generate $55B in revenue so this new wave of investment interest should really come as no surprise.

A woman holds up her cell phone as she plays the Pokemon Go game in Lafayette Park in front of the White House in Washington, DC, July 12, 2016. (Photo: JIM WATSON/AFP/Getty Images)

Government intervention

Most recently, governments are realizing the potential and reach of the gaming industry and making their own investment moves. We’re seeing governments establish funds that support local gaming businesses – providing incentives for gaming studios to develop and retain their creatives, technology, and employees locally – as well as programs that aim to attract foreign talent.

As uncertainty looms in England surrounding Brexit, France has jumped on the opportunity with “Join the Game”. They’re painting France as an international hub that is already home to many successful gaming studios, and they’re offering tax breaks and plenty of funding options – for everything from R&D to the production of community events. Their website even has an entire page dedicated to “getting settled in France”, in English, with a step-by-step guide on how game developers should prepare for their arrival.

The UK Department for International Trade used this year’s Game Developers Conference as a backdrop for the promotion of their games fund – calling the UK “one of the most flourishing game developing ecosystems in the world.” The UK Games Fund allows for both local and foreign-owned gaming companies with a presence in the UK to apply for tax breaks. And ever since France announced their fund, more and more people have begun encouraging the British government to expand their program saying that the UK gaming ecosystem should be “retained and enhanced”. But, not only does the government take gaming seriously, the Queen does as well. In 2008, David Darling the CEO of hyper-casual game studio Kwalee was made a Commander of the Order of the British Empire (CBE) for his services to the games industry. CBE is the third-highest honor the Queen can bestow on a British citizen.

Over to Germany, and the government has allocated 50M euros of its 2019 budget for the creation of a games fund. In Sweden, the Sweden Game Arena is a public-private partnership that helps students develop games using government-funded offices and equipment. It also links students and startups with established companies and investors. While these numbers dwarf the investment of more commercial or financial players, the sudden uptick in interest governments are paying to the game space indicate just how exciting and lucrative gaming has become.

Support is coming from all levels

The evolution of investment in the gaming space is indicative of the stratospheric growth, massive revenue, strong user engagement, and extensive demographic and geographic reach of mobile gaming. With the global games industry projected to be worth a quarter of a trillion dollars by 2023, it comes as no surprise that the diverse players globally have finally realized its true potential and have embraced the gaming ecosystem as a whole.

Zhihu, the largest question and answer platform in China, has raised a $434 million Series F. This is not only the company’s biggest round since it launched in 2011, but also one of the largest secured over the past two years by a Chinese Internet culture and entertainment company, said China Renaissance, which served as the funding’s financial advisor.

The Series F was led by Beijing Kuaishou, the video and live-streaming app, with participation from Baidu . Existing investors Tencent and CapitalToday also returned for the round, which Zhihu will use for technology and product development. Baidu told Bloomberg that it will add 100 million Zhihu posts to its main app.

While Zhihu has downplayed reports that it is planning an IPO, it embarked on plans to hire a CFO and restructure last year.

Zhihu users tend to be educated with relatively high incomes and the platform has developed a reputation for hosting experts and organizations that are knowledgeable in tech, marketing and professional services like education. Like Quora and other Q&A platforms, Zhihu lets users post and answer text-based questions. But it also has other features, including discussion forums, a publishing platform and live videos for brands and companies to answer questions in real-time. Instead of making its streaming video feature, called Zhihu Live, open to all users, it is available to only to experts and organizations, differentiating it from other streaming apps like Douyin, the domestic version of TikTok (ByteDance is an investor in Zhihu but did not participate in this round).

In a post about the round on his Zhihu page, founder and CEO Victor Zhou wrote the company plans to keep up with rapid changes in China’s media and Internet landscape. “Over the past 8 years, users have gone from expecting simple entertainment to using the Internet to deal with real-life and work problems. The focus of competition has also shifted from traffic to traffic + quality.”

Zhihu, the largest question and answer platform in China, has raised a $434 million Series F. This is not only the company’s biggest round since it launched in 2011, but also one of the largest secured over the past two years by a Chinese Internet culture and entertainment company, said China Renaissance, which served as the funding’s financial advisor.

The Series F was led by Beijing Kuaishou, the video and live-streaming app, with participation from Baidu . Existing investors Tencent and CapitalToday also returned for the round, which Zhihu will use for technology and product development. Baidu told Bloomberg that it will add 100 million Zhihu posts to its main app.

While Zhihu has downplayed reports that it is planning an IPO, it embarked on plans to hire a CFO and restructure last year.

Zhihu users tend to be educated with relatively high incomes and the platform has developed a reputation for hosting experts and organizations that are knowledgeable in tech, marketing and professional services like education. Like Quora and other Q&A platforms, Zhihu lets users post and answer text-based questions. But it also has other features, including discussion forums, a publishing platform and live videos for brands and companies to answer questions in real-time. Instead of making its streaming video feature, called Zhihu Live, open to all users, it is available to only to experts and organizations, differentiating it from other streaming apps like Douyin, the domestic version of TikTok (ByteDance is an investor in Zhihu but did not participate in this round).

In a post about the round on his Zhihu page, founder and CEO Victor Zhou wrote the company plans to keep up with rapid changes in China’s media and Internet landscape. “Over the past 8 years, users have gone from expecting simple entertainment to using the Internet to deal with real-life and work problems. The focus of competition has also shifted from traffic to traffic + quality.”

App store spending is continuing to grow, although not as quickly as in years past. According to a new report from Sensor Tower, the iOS App Store and Google Play combined brought in $39.7 billion in worldwide app revenue in the first half of 2019 — that’s up 15.4% over the $34.4 billion seen during the first half of last year. However, at that time, the $34.4 billion was a 27.8% increase from 2017’s numbers, then a combined $26.9 billion across both stores.

Apple’s App Store continues to massively outpace Google Play on consumer spending, the report also found.

In the first half of 2019, global consumers spent $25.5 billion on the iOS App Store, up 13.2% year-over-year from the $22.6 billion spent in the first half of 2018. Last year, the growth in consumer spending was 26.8%, for comparison’s sake.

Still, Apple’s estimated $25.5 billion in the first half of 2019 is 80% higher than Google Play’s estimated gross revenue of $14.2 billion — the latter, a 19.6% increase from the first half of 2018.

The major factor in the slowing growth is iOS in China, which contributed to the slowdown in total growth. However, Sensor Tower expects to see China returning to positive growth over the next 12 months, we’re told.

To a smaller extent, the downturn could be attributed to changes with one of the top-earning apps across both app stores: Netflix.

Last year, Netflix dropped in-app subscription sign-ups for Android users. Then, at the end of December 2018, it did so for iOS users, too. That doesn’t immediately drop its revenue to zero, of course — it will continue to generate revenue from existing subscribers. But the number will decline, especially as Netflix expands globally without an in-app purchase option, and as lapsed subscribers return to renew online with Netflix directly.

In the first half of 2019, Netflix was the second highest-earning non-game app with consumer spending of $339 million, Sensor Tower estimates. (We should point out the firm bases its estimates on a 70/30 split between Netflix and Apple’s App Store that drops to 85/15 after the first year. To account for the mix of old and new subscribers, Sensor Tower factors in a 25% cut. But Daring Fireball’s John Gruber claims Netflix had a special relationship with Apple where it had an 85/15 cut from year one.)

In any event, Netflix’s contribution to the app stores’ revenue is on the decline.

In the first half of last year, Netflix had been the No. 1 non-game app for revenue. This year, that spot went to Tinder, which pulled in an estimated $497 million across the iOS App Store and Google Play, combined. That’s up 32% over the first half of 2018.

But Tinder’s dominance could be a trend that doesn’t last.

According to recent data from eMarketer, dating app audiences have been growing slower than expected, causing the analyst firm to revise its user estimates downward. It now expects that 25.1 million U.S. adults will use a dating app monthly this year, down from its previous forecast of 25.4 million. It also expects that only 21% of U.S. single adults will use a dating app at all in 2019, and that will only grow to 23% by 2023.

That means Tinder’s time at the top could be overrun by newcomers in later months, especially as new streaming services get off the ground (assuming they offer in-app subscriptions); if TikTok starts taking monetization seriously; or if any other large apps from China find global audiences outside of China’s third-party app stores.

For example, Tencent Video grossed $278 million globally in the first half of 2019, outside of the third-party Chinese Android app stores. That made it the third-largest non-game app by revenue. And Chinese video platform iQIYI and YouTube were the No. 4 and No. 5 top-grossing apps, respectively.

Meanwhile, iOS app installs actually declined in the first half of the year, following the first quarter that saw a decline in downloads, Q1 2019, attributed to the downturn in China.

The App Store in the first half of 2019 accounted for 14.8 billion of the total 56.7 billion app installs.

Google Play installs in the first half of the year grew 16.4% to 41.9 billion, or about 2.8 times greater than the iOS volume.

The most downloaded apps in the first half of 2019 were the same as before: WhatsApp, Messenger, and Facebook led the top charts. But TikTok inched ahead of Instagram for the No. 4 spot, and it saw its installs grow around 28% to nearly 344 million worldwide.

In terms of mobile gaming specifically, spending was up 11.3% year-over-year in the first half of 2019, reaching $29.6 billion across the iOS App Store and Google Play. Thanks to the fallout of the game licensing freeze in China, App Store revenue growth for games was at $17.6 billion, or 7.8% year-over-year growth. Google Play game spending grew by 16.8% to $12 billion.

The top-grossing games, in order, were Tencent’s Honor of Kings, Fate/Grand Order, Monster Strike, Candy Crush Saga, and PUBG Mobile.

Meanwhile, the most downloaded games were Color Bump 3D, Garena Free Fire, and PUBG Mobile.

Image credits: Sensor Tower

Southeast Asia’s highest-capitalized startup is sitting on even more money from investors today after ride-hailing Grab announced it has raised $300 million from Invesco.

The deal is part of Singapore-based Grab’s ongoing — feels-like-ever-lasting — Series H round which was started last June via a $1 billion capital injection from Toyota.

The round swelled to $4.5 billion thanks to contributions from a range of partners throughout 2018 and early 2019, then Grab said in April that it would add a further $2 billion to reach a $6.5 billion close before this year is out. This investment from Invesco is the first piece of that newest tranche to be announced, but there’s plenty happening under the surface, including a potential investment from PayPal, Ant Financial and others in a spinout of Grab’s financial services.

Grab declined to comment on the status of its Series H, and how much it has raised for the round so far.

Getting back to today’s news and, despite a relatively dry-looking announcement, there is an interesting takeaway to be found here.

Yes, this isn’t a SoftBank Vision Fund sized round — that $1.5 billion deal closed earlier this year — and it lacks the strategic significance of investments from backers like Toyota, Booking.com or Microsoft, but it does represent a doubling down on Grab from Invesco.

The firm merged with emerging market-focused fund Oppenheimer back in May. Oppenheimer — which has close to $40 billion in assets under management for its developing market fund alone — was among the participants in an initial $2 billion raise for that Series H, and now the merged entity is coming back to increase its position.

That first deal (from Oppenheimer) was $403 million, Grab said, so this new addition takes its spend on Grab to over $700 million. It also comes at an interesting time for the firm, which is reported to have reorganized its management team following the completion of the merger.

Based on that clearing of the decks/realignment, the decision to double down on Grab is a positive validation for the ride-hailing company. While it might not be a household name to those outside financial markets, Grab president Ming Maa played up Invesco as “one of the smartest investors in developing markets” in a statement released alongside news of the investment.

Grab acquired Uber’s regional business last year to become Southeast Asia’s undisputed ride-hailing leader, but it perhaps didn’t reckon on its local rival Go-Jek mounting a bid to finally expand its service regionally.

Having built a strong presence in Indonesia — where it pioneered ‘super app’ concepts like services on-demand and payments in the context of ride-hailing — Go-Jek has since expanded into Vietnam, Thailand and Singapore, with the Philippines also in its sights. Those moves were fuelled by investment from the likes of Tencent, Google and Warburg Pincus . As it seeks to go further and deeper in those markets, Go-Jek is currently raising a round for growth that is expected to reach $2 billion, half of which it said it had secured in January.

That accumulation of cash seemed to spark a call to arms for Grab, which turned its Series H into a gargantuan rolling round after increasing the overall round target first to $5 billion and then to $6.5 billion.

Uber may have decided to leave Southeast Asia, but the ride-hailing industry in the region is still as fascinating as ever.