Kabam valuation tops $1 billion with new Alibaba investment

The video game maker has struck an agreement to receive a large investment and publish 10 games in China.

Ian Sherr Former Editor at Large / News
Ian Sherr (he/him/his) grew up in the San Francisco Bay Area, so he's always had a connection to the tech world. At CNET, he wrote about Apple, Microsoft, VR, video games and internet troubles. Aside from writing, he tinkers with tech at home, is a longtime fencer -- the kind with swords -- and began woodworking during the pandemic.
Ian Sherr
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#7 The Hobbit: Kingdoms of Middle-earth
Kabam makes popular titles like "The Hobbit: Kingdoms of Middle-Earth." It struck a deal with Alibaba to bring its "Lord of the Rings" title to China. Kabam

Kabam notched a new high score for its valuation following an investment from Alibaba, the Chinese Internet giant poised for an IPO.

The San Francisco video game maker said Alibaba Group, one of China's largest Internet companies, will invest approximately $120 million. In return, Alibaba will occupy a seat on Kabam's board along with seven others, and it will publish 10 games in China over the next three years.

Kent Wakeford, Kabam's operations chief, said the company chose to work with Alibaba as part of a larger effort to offer its products in Asia. Alibaba, he said, has "the resources to be one of the most significant players in mobile games."

Though he declined to disclose specific terms of the deal, Wakeford said the agreement pushes Kabam's value above $1 billion.

The move is Kabam's latest effort to increase its revenue, following years of dramatic growth. The company, known for its "Kingdoms of Camelot" strategy game, has been one of the top performers among mobile games companies after successfully diversifying from offering titles on social-media websites such as Facebook to mobile devices like Apple's iPhone.

For Alibaba, the deal represents an opportunity to gain another toehold in the West ahead of its planned IPO. One of the world's largest Internet companies, Alibaba filed documents for an initial public offering that could be the biggest in U.S. history. It offers a multitude of services, including various e-commerce sites and a payments affiliate called Alipay.

Video games, however, have primarily been the domain of its competitor Tencent, which has struck numerous deals over the past several years to publish titles from game makers around the world, including a "Call of Duty" war simulation title from Activision Blizzard and a basketball sports title from Take-Two Interactive.

Kabam has for years been focusing on games aimed at enthusiasts, rather than the more casual crowds that have been attracted to titles like King Digital's "Candy Crush Saga" or Glu Games' "Kim Kardashian: Hollywood." Like them, Kabam's games are offered initially to users for free; the company charges for virtual items, such as different weapons or ways to advance through the game more quickly.

But Kabam's games tend to focus on war strategy, fighting, and other genres. The company has also struck licensing deals to make games based on the fantasy books-turned-movies "The Lord of the Rings" and "The Hobbit," as well as other franchises such as the racing flick "Fast & Furious 6."

Kabam has been profitable for the past two years, and notched $360 million in sales last year, doubling from 2012. Wakeford said at least four-fifths of the company's revenue comes from customers in the U.S. and Western Europe. Asia, he said, represents a rapidly growing opportunity for the company.

Alibaba's investment will add to $60 million Kabam already has in the bank, Wakeford said. The company is planning to use the money for "transformational" acquisitions, particularly in Asia. "We're trying to look at studios capable of making global smash hit games," he said.