Funzio’s Big Exit to Gree Fueled by Only Three Hit Game Titles

Funzio’s $210 million sale to Tokyo-based Gree this week makes it the second mobile game company with a relatively short operating history to be snapped up recently.

In an interview, co-founder and President Anil Dharni said the company was founded two and a half years ago, but it didn’t make its first mobile game until nine months ago. Since then, it has launched three titles, including Crime City, Modern War and Kingdom Age, all of which have generated more than 20 million downloads.

The quick multimillion dollar sale is reminiscent of Zynga’s recent $180 million purchase of OMGPOP, which had been around for awhile but only recently catapulted to the top of the iPhone charts with its overnight hit Draw Something.

Dharni said the two back-to-back sales are not necessarily an indication of a trend in mobile games.

“We tend to hear only about the successes,” he said. “If you look at some of the other mobile gaming companies, some have gained traction but there’s others struggling that have fallen off the charts. … I think the downward trend is also happening.”

All three of the company’s games are free to play and monetized through in-game items. Both Kingdom Age and Modern War are among the top 25 grossing apps on the iPad. Crime City is the company’s oldest title. Neither Funzio nor Gree disclosed how much the apps are grossing, but Dharni said what makes its games stand out from the rest of the pack is player retention. And generally, the longer players engage with the games, the more likely they are to make purchases.

Funzio, which previously raised $20 million in capital, is expecting to be completely integrated into Gree’s San Francisco operations, relocating all of its 125 employees to Gree’s offices, where the two will have more than 300 employees all told.

“From day one, the thing we proposed was that we didn’t want to be an independent studio. We want to be integrated as much as possible in Gree,” he said.

Gree, which is a mobile-gaming powerhouse in Japan, is aggressively trying to build a worldwide social network for games on mobile devices. Rivals include DeNA’s Mobage network, which came to market through the acquisition of San Francisco-based Ngmoco, and Apple’s Game Center.

Funzio will now begin developing games for Gree’s mobile social platform, although they will not necessarily be exclusive.

Dharni said both he and the company’s co-founder and CEO Ken Chiu started talking with Gree a few months back, and since then had discussions with a number of other suitors, whom Dharni characterized as the “usual suspects.”

What stood out about Gree was its vast experience and knowledge about the mobile gaming space, he said.

“Mobile games in Japan make a ridiculous amount of money and we are just getting started in America. They are two to three years ahead of us in terms of understanding game mechanics and monetization. We can learn so much from them,” he said. “They are super smart and hungry folks and their vision matched ours. We had excellent alternative options, but we found the perfect partner.”

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— Phil Zimmerman, PGP inventor and Silent Circle co-founder, in an interview with Om Malik