This article is based on our Weekly News Digest #19 from 13.05.2024. If you want to receive such analyses first, subscribe to our weekly newsletter. There, we analyze the most significant deals, elaborating on the financials and strategy behind them, while also covering the smaller transactions of the week.
Israel-based UGC and modding tools developer Overwolf has acquired US-based ad tech company NitroPay. Though the sum of the transaction is undisclosed, it is reported to be an eight-figure deal.
Founded in 2017, NitroPay provides ad tech solutions, specializing in ad placement, revenue management, and detailed analytics for websites with significant monthly traffic. This enables website owners to monetize their content through targeted ads and track the performance of these ads. Among the company’s partners are Google, Yahoo, Xandr, Pulsepoint, and others. Overwolf also partnered with NitroPay before the acquisition.
Upon completion of the deal, NitroPay will be rebranded as Nitro (we’ll stick to that name hereafter) and operate as a division of Overwolf. This will eventually lead Nitro to focus more on the gaming industry, targeting gaming websites, publishers, and advertisers.
Let’s have a quick background overview to understand how an ad tech company can complement Overwolf’s existing business.
Overwolf: Building All-in-one UGC and Modding Platform
Founded in 2010, Overwolf is primarily known as a UGC tool kit developer. It offers its users tools to create overlay apps. The company’s stack allows gamers to create simple apps that enhance their gaming experience with functionalities like tracking kills, deaths, and match outcomes.
Source: Overwolf
Since its foundation, Overwolf has raised $148.3m across four funding rounds:
— In Sep’13, Overwolf raised $5.3m in a funding round for further development of the in-game app, which was in beta by that time;
— Nov’18, the company raised $16m in a Series B funding round to accelerate further growth of its platform;
— In 2021, Overwolf raised $127m in Series C and Series D funding rounds.
The company is also known as a strategic acquirer and investor. In Jun’20, Overwolf acquired gaming modding platform CurseForge, which engages in the creation of mods for such IPs as World of Warcraft, Grand Theft Auto, The Sims, and others. In Mar’22, the company acquired Tebex, a private gaming server monetization tool, for $29m. Tebex’s tools help users to create server webstores, process payments, and manage taxes. Together with the core business of Overwolf, these two divisions, in many ways, constitute the company’s core offering today.
Source: CurseForge, a division of Overwolf
As for the company’s investment activity, it has made at least nine deals since 2020. Some of the most notable participations include Forte’s $725m Series B round, Pragma’s $22m Series A round, and Red Rover’s $15m Series A round.
Though the company’s background shows its strong focus on inorganic growth, its M&A activity was pretty selective. Each of the newly acquired companies contributed to the goal of creating an all-in-one solution for the development and monetization of UGC content. Nitro is another match in this contest that can further enhance the company’s offering.
Apart from its UGC and modding solutions, Overwolf also has its own gaming ads platform, Overwolf Ads, which recently reached 45 million monthly active users. The platform offers in-game ads in titles such as Roblox, League of Legends, Valorant, PUBG, Call of Duty, Fortnite, and other online games. Nitro will support the existing ads business and significantly increase its outreach.
The deal is also a great opportunity to mention the rise of UGC. The long-term success of Roblox and Fortnite’s extensive effort to turn the game into a UGC platform shows how lucrative this segment of UGC can be.
In 2024, at least three UGC tool developers and gaming studios had already closed publicly announced investments: a $1.5m round of Playmakers, a $2.8m round of Overplay, and a $15m round of Avalon. As more companies enter the market, the request for monetization of user content and its advertising will increase.
In 2023 alone, Overwolf paid $201m to in-game creators, a 25% YoY growth. With the purchase of Nitro, Overwolf will be able to offer an even more advanced UGC ecosystem, helping its users create, distribute, and earn money from their developments. Hopefully, this will help the company reach its planned $1B creator payments by 2030.
