Japan’s DeNA to buy iPhone game publisher Ngmoco for more than $400M? (report)

Japan’s hot social mobile gaming firm DeNA is reportedly considering buying iPhone game publisher Ngmoco for more than $400 million.

Techcrunch reported that it heard the rumors from multiple sources and that the price is above $400 million, although that likely includes a large earnout, or a payment based on whether Ngmoco hits performance targets. Ngmoco was started in 2008 by former Electronic Arts executive Neil Young, and it then raised more than $40 million, much of it from Kleiner Perkins Caufield & Byers. Kleiner’s Bing Gordon, former chief creative officer of EA, is on Ngmoco’s board.

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For a long while, it seemed like Young made the wrong choice by going into iPhone games rather than Facebook games. Zynga has much higher revenues and a bigger valuation in the billions of dollars, thanks to its focus on Facebook games such as FarmVille. But Young’s bet isn’t looking so crazy anymore.

After Apple enabled in-app purchases in iPhone games last fall, game developers started reporting much better results from iPhone games. That’s because they were able to launch free-to-play games, where they could give away the game on the App Store. Then they were able to make money through purchases of virtual goods. Companies such as Ngmoco were essentially able to operate their games as a service, much like Zynga does on Facebook. That has likely attracted the attention of DeNA, which is Japan’s largest social mobile games company.

DeNA is expecting to generate more than a billion dollars in revenue this year in the Japanese mobile games market, where mobile gaming is much more advanced. The promise of Ngmoco is that the U.S. could potentially be a much bigger market than Japan’s. That may be why DeNA is willing to pay such a high price for Ngmoco. Techrunch said Zynga reportedly looked at making a bid but balked at the high price.

DeNA acquired Mountain View, Calif.-based mobile social gaming studio, Gameview, in September. And later last month, it invested in social game studio Astro Ape. Google reportedly invested in Ngmoco in August to get it to make Android games. Besides Kleiner Perkins, Ngmoco’s investors include Norwest Venture Partners, Institutional Venture Partners, and Maples Investments.

DeNA is headed by Tomoko Namba. The company is in direct competition with Zynga to dominate the social games market. While DeNA comes at the market from the mobile side, Zynga is attacking it from Facebook gaming. Both are invading each other’s territory. Update: Both Ngmoco and DeNA declined comment.