Though the price GameStop paid for casual games portal giant Kongregate wasn’t divulged as part of the surprise announcement of the acquisition earlier today, one analyst has had a stab at guessing the figure.
“We view the acquisition of Kongregate as a slight positive for GameStop,” Wedbush Morgan’s Michael Pachter told investors. “While price was not disclosed, we estimate that GameStop paid a multiple of Kongregate revenues, likely three-to-four times trailing annual revenues.
“Based upon 10m unique visitors playing 40m game sessions per month, we estimate that Kongregate revenues were around $4-10m, implying a purchase price of between $12-40m. At such a price, it is likely that the transaction is immaterial to the company’s results, and that any benefits are longer-term and strategic.”
Pachter added that his company is not adjusting its GameStop guidance, maintaining its belief that GameStop can still enjoy growth in the current financial year.
“As with YouTube, we believe the majority of revenues are online advertising, which the company shares with developers (revenue share ranges from 25 per cent to 50 per cent), although the sale of virtual currency (Kreds) and virtual items is a bigger growth opportunity, in our view,” Lazard Capital’s Colin Sebastian.
“In March, Kongregate announced that micro-transaction revenues were growing 30 per cent month over month on the site. Expect GameStop website enhancements to follow.
“Following last year’s acquisition of Jolt Interactive, we view the purchase of Kongregate as a bigger step towards GameStop’s aggregator ambitions. We note that GameStop is also acquiring a number of experienced online game executives. As part of its digital ‘build out’ we also expect GameStop to roll out significant enhancements to its website (eg, more content, better discovery tools) as well as expand the number of in-store kiosks.”