Tencent poured $90 million into Pocket Gems because of two shiny jewels

Mobile game publisher Pocket Gems announced today that it has raised $90 million in new funding from Chinese Internet company Tencent, which is also the world’s largest game company.

The funding amount is high in part because Pocket Gems has had so much success focusing on just two mobile games, its Episode digital storytelling app and its War Dragons hardcore multiplayer app. The companies didn’t disclose the size of the deal, but the Wall Street Journal reported the number at $90 million. And GamesBeat has confirmed that number is correct.

“Things are better than they have ever been at the company,” said Ben Liu, CEO of Pocket Gems, in an interview with GamesBeat. “It starts with player love. We had the largest player base and number of users ever. That translated to the best numbers ever at the company.”

Pocket Gems had an estimated $17 million in revenue in April, according to mobile measurement firm Sensor Tower. If the company sustained that rate year round, it would generate revenue of about $210 million.

Liu did disclose that the company has had more than 300 million downloads to date. Episode, which is kind of like a comic book platform in which anybody can tell their own story, has had more than 90 million downloads and 3 billion episodes viewed to date. Females ages 25 to 35 are the prime audience for the game.

A spokesperson for Tencent said in an email, “We would like to highlight that Tencent is happy to reaffirm our long term support for our strategic partner.  We admire Pocket Gems’ history of focusing on top talent to create innovative new products that can delight users, and look forward to a bright future ahead.”

Above: Building defenses in War Dragons

Image Credit: Pocket Gems

Meanwhile, War Dragons is focused on the traditional hardcore gamer market, and its multiplayer has made it a perennial hit that people come back to over and over. War Dragons has both player-versus-player and team-based multiplayer combat. In it, you build and customize the ultimate dragon army to annihilate the bases of your rivals. You also build up your base and dragons to fend off the attackers. The attacks happen both in real time and asynchronously, where a team of attackers can attack in real-time against a defender who is offline.

“War Dragons had a slow start, but we never gave up on it,” Liu said. “It caters to hardcore gamers who want a beautiful 3D game and want to play with others in compelling battles.”

Pocket Gems has big rivals including Supercell, Activision’s King, MZ, Netmarble, Nexon, Zynga, Jam City and many others. But Liu said that Pocket Gems’ strategy is different. It was one of the pioneers in mobile games on the iPhone, and it has modified its strategy by focusing on few titles and working on innovative concepts for a long time.

“Tencent’s strategy includes investments in gaming companies that augment its existing games and pipeline, picking up on trends for growth areas globally,” said Daniel Ahmad, analyst at Niko Partners, in an email. “In this case, Pocket Gems is successful in the West with strength in the interactive storytelling genre and synchronous 3D multiplayer genre on mobile. Not only does this investment allow Pocket Gems to target a larger audience, it allows Tencent to utilise Pocket Gems expertise when launching its own games, in similar genres, in the West.”

The Episode title launched in 2014 as an interactive storytelling app. Fans could engage with choice-driven digital comics, which could be viewed one episode at a time. Then it responded to fan feedback by adding stories related to TV shows such as Pretty Little Liars, films such as Mean Girls, and pop stars like Demi Lovato. More than 55,000 stories have been published.

Above: Pretty Little Liars is launching on Pocket Gems’ Episode mobile app.

Image Credit: Pocket Gems

The investment will be used to support growth on the existing games and to invest in other major projects. Liu said about half of the 220 employees are working on brand new titles, including a new intellectual property that will launch later this year.

“People care about Episode and love participating in it,” Liu said.

In 2015, Tencent invested $60 million for a 20 percent stake. Liu said that relationship worked well and helped Pocket Gems reach the Chinese market, which is growing 100 percent from a year ago. He said that both Tencent and Sequoia Capital have been great supporters along the way.

“Tencent and Pocket Gems is the archetype of a new wave of East-West technology partnerships,” said Jim Goetz, partner at Sequoia Capital, in an email.

“They share our vision for taking creative risks,” Liu said. “As for the mobile game industry, the returns and opportunities are greater than they have ever been. If you have a hit, you have to double down or triple down on it.”