IAC/Interactive Takes Game Designer Stake
IAC/InterActiveCorp today plans to announce it has taken a majority stake in game developer GarageGames.com Inc. to anchor a soon-to-be launched gaming site, InstantAction. — IAC is hoping the company will help it develop a type of gaming still in its infancy …
Context & Ripple Effects
The GarageGames stake is the latest step in Barry Diller's acquisition-led expansion beyond IAC's search-and-local roots: the company opened a San Francisco Bay Area venture arm in June 2007 — a move that reportedly alarmed local start-ups — after building a games-advertising agency in early 2006. The majority stake gives IAC's planned Bay Area venture its first operating asset in interactive entertainment.
InstantAction is positioned around browser-based gaming built on GarageGames' technology, a bet that instant-play games can reach mainstream audiences without downloads or consoles. For GarageGames, an indie developer with a loyal tools community, IAC brings distribution scale and capital that a standalone studio could not match on its own.
First-order effects
- GarageGames gains IAC's capital and audience reach while ceding control to a majority owner, and IAC's yet-to-launch InstantAction site acquires its anchor technology and development talent in one move.
Second-order effects
- Casual-game portals and download-based publishers face a rival backed by IAC's cross-property traffic — Ask.com, Citysearch and the rest of the portfolio become potential distribution surfaces for InstantAction's games — pressuring them to lock up their own studio content.
- Game advertising intermediaries, including the agency space IAC touched in 2006, stand to see demand shift as advertisers follow eyeballs toward free browser-play formats.
Third-order effects
- If instant-play browser gaming scales, value migrates from packaged retail and console licenses toward portal operators who own both the technology stack and the audience — favoring conglomerates like IAC that assemble such stacks by acquisition rather than internal R&D.
The trend: Large internet conglomerates are buying small game-technology studios outright to bolt gaming onto existing portal traffic, betting browser-delivered play will widen the market beyond consoles and downloads.