Applovin values video game maker Machine Zone at around US$500m

[PALO ALTO] Just four years ago, video game maker Machine Zone was a high-flying unicorn valued at US$5 billion. On Thursday, it sold for about a tenth of that amount, according to people familiar with the matter.

AppLovin paid about US$500 million for the company, said the people, who asked not to be identified because the matter is private.

Financial terms weren't disclosed in the deal announcement Thursday.

A representative for AppLovin declined to comment, while a representative for Machine Zone didn't respond to a request for comment.

Palo Alto-based Machine Zone made a commercial that played during the Super Bowl in 2015 starring model Kate Upton which helped move one of its mobile games Game of War up the top-grossing app charts.

Outsized valuations in Silicon Valley have crashed in recent years, with the high-profile flop of WeWork being a cautionary tale. The pandemic has also hurt the fortunes of well-funded startups such as Airbnb and caused others to cut staff.

This has led some startups to seek tie-ups with other private companies. Last month, Foursquare Labs and Factual, two privately held location data companies, agreed to merge. In March, the venture-backed marketplace startup OfferUp agreed to combine with the US business of Letgo, in another private deal.

Machine Zone's buyer, AppLovin, which publishes video games and also does marketing for them, is backed by private equity firm KKR & Co and has eyed an initial public offering for the past few years. It was last valued at US$2 billion in 2018 when KKR invested, according to PitchBook.

Machine Zone has raised about US$725 million in private funding since it was founded in 2008, according to PitchBook. Its last funding round in 2016 valued the company at US$5 billion, PitchBook showed.

Machine Zone had been backed by Y Combinator Management, Anthos Capital, Menlo Ventures Management and JPMorgan Chase & Co.

LionTree Advisors and Fenwick & West advised AppLovin. Houlihan Lokey advised Machine Zone, a bank spokesperson said.

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