SoftBank-backed metaverse firm Improbable sells a key gaming venture for $97 million
Herman Narula, co-founder and CEO of Improbable, speaks during a session at the Web Summit in Lisbon.
Henrique Casinhas | Sopa Images | Lightrocket | Getty Images
Metaverse company Improbable has sold one of its key gaming ventures to London-listed video game developer Keywords Studios for £76.5 million ($97.1 million).
The company closed the deal to sell The Multiplayer Group (MPG), a multiplayer game services firm, to Keywords on Sunday, an Improbable spokesperson told CNBC.
Based in Ireland, Keywords owns more than 70 studios in locations including Los Angeles, France, Brazil, Mexico and Spain. The firm mainly develops games for third-party developers.
Keywords’ shares have fallen around 49% year-to-date. It has been on an acquisition spree lately, earmarking 91.9 million euros ($100 million) to new takeovers.
That led to a shift from a net cash position at the end of last year to a net debt position of €11.4 million as of June 30.
Keywords also reported earnings per share of 18.48 euro cents in its half-year results for the period to June 30, down 40% year over year.
Keywords said its acquisition of MPG was funded primarily through cash and its existing revolving credit facility, and would contribute double-digit revenue growth in 2024.
Keywords expects the transaction to be earnings per share accretive in its first full year post-acquisition.
MPG was founded in 2018 and is known for behind-the-scenes work on games such as Fallout 76 and Medal of Honor: Above and Beyond.
Herman Narula, Improbable’s co-founder and CEO, told CNBC the transaction was part of its “venture builder” strategy, through which it invests in or acquires gaming and metaverse-related teams with the option of expanding or spinning them off at a later point.
“The thought was, if we understand multiplayer well, and we understand metaverses, maybe we can spot opportunities where we can bring things in the den that we can do well with. And then, at the right time, if it makes sense, to either keep growing them or potentially spin them out,” Narula told CNBC in an exclusive interview.
“It became clear that working with MPG and bringing them in house would have let us learn a colossal amount and help them grow.”
Improbable acquired MPG in 2019, and it has grown dramatically since. Employee numbers rose sixfold in the past four years to 360.
And MPG’s valuation has more than doubled to £76.5 million from Improbable’s original purchase price of £30 million.
While the move suggests a potential scaling back of Improbable’s gaming-related investments, Narula disputed the idea that a sale of MPG marks any sort of retrenchment from that space.
“We’re not in any way selling any technology, or in any way ceasing to operate with games companies,” Narula said. “MPG provide a very specific, specialised service.”
A series of games built on Improbable’s original SpatialOS technology have been canceled in recent years.
They include the open-world game Nostos, developed by NetEase, Worlds Adrift, made by Bossa Studios, and the console version of Scavengers, a game developed by Midwinter Entertainment.
Midwinter was sold by Improbable earlier this year to Behaviour Interactive.
Morpheus, a technology platform developed by Improbable, is now the company’s primary product. Morpheus is designed to host mass-scale multiplayer online games.
Improbable has hosted new experiences using its Morpheus tech, including virtual Major League Baseball games, and the “Otherside” metaverse developed in partnership with blockchain firm Yuga Labs.
Trying to sell investors on ‘metaverse’
Founded in 2012, Improbable is a British firm that aims to build what it calls a network of metaverses. In June, Improbable launched MSquared, a metaverse creation suite, and granted developers access to the platform.
MSquared includes its own network, tech stack, and open-source metaverse markup language.
The deal to sell MPG, one of Improbable’s many notable bets on gaming, arrives after a series of struggles at the firm.
Improbable has undergone substantial cost reductions.
The firm, which scored a $3.4 billion valuation in October 2022, laid off dozens of staffers late last year after raising substantial sums from SoftBank and Andreessen Horowitz.
But valuations of once buzzy metaverse and Web3-related startups have been knocked this year and last year by waning investor enthusiasm for the space.
Improbable has more recently touted itself as artificial intelligence-enabled, saying this has helped lower costs. The company slashed its losses by 85% in 2022 to £19 million.
‘Tale of two metaverses’
Improbable originally set out to build large-scale computer simulations that have applications in gaming and defense.
But its metaverse bets have now become its main focus.
Improbable sold its defense business to Noia Capital in September, marking an exit from a loss-making venture for the firm.
Narula says he expects to see a “tale of two metaverses” emerge next year. Centralized gaming experiences such as Roblox and Fortnite will be eschewed in favor of decentralized, “Web3” metaverses, Narula said.
Web3 refers to the idea of a more decentralized and open version of the web, outside the control of a handful of powerful tech companies like Amazon and Meta.
Blockchain is a key technology involved.
“Ultimately, they [Roblox and Fortnite] are games with different modes made by users and by brands. But people can’t build businesses that they have control over, or that can do commercial things that would be appropriate,” Narula said.
“The other branch of the metaverse, which is driven in some ways by Web3 and in other ways by companies like ours … is really about creating a network of sovereign metaverses.”
Analysts have expressed skepticism about the ability for Improbable to commercialize its technology, not least owing to the technical limitations and high costs involved.
“The jury is still out if they have a viable business model going forward, or whether the reality will ever match the ‘virtual’ hype,” Greg Martin, co-founder and managing director of Rainmaker Securities, a private market trading firm, told CNBC.
Narula said he is hoping to sign up many more partners for MSquared in the future.
Improbable, which is focusing on putting on large-scale metaverse events, ran 30 such gatherings in 2023, up from only three last year. The company plans to raise that number to 300 in 2024.
Technology
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A Waymo autonomous self-driving Jaguar electric vehicle sits parked at an EVgo charging station in Los Angeles, California, on May 15, 2024.
Patrick T. Fallon | AFP | Getty Images
Waymo said it will begin testing in Philadelphia, with a limited fleet of vehicles and human safety drivers behind the wheel.
“This city is a National Treasure,” Waymo wrote in a post on X on Monday. “It’s a city of love, where eagles fly with a gritty spirit and cheese that spreads and cheese that steaks. Our road trip continues to Philly next.”
The Alphabet-owned company confirmed to CNBC that it will be testing in Pennsylvania’s largest city through the fall, adding that the initial fleet of cars will be manually driven through the more complex parts of Philadelphia, including downtown and on freeways.
“Folks will see our vehicles driving at all hours throughout various neighborhoods, from North Central to Eastwick, and from University City to as far east as the Delaware River,” a Waymo spokesperson said.
With its so-called road trips, Waymo seeks to collect mapping data and evaluate how its autonomous technology, Waymo Driver, performs in new environments, handling traffic patterns and local infrastructure. Road trips are often used a way for the company to gauge whether it can potentially offer a paid ride share service in a particular location.
The expanded testing, which will go through the fall, comes as Waymo aims for a broader rollout. Last month, the company announced plans to drive vehicles manually in New York for testing, marking the first step toward potentially cracking the largest U.S. city. Waymo applied for a permit with the New York City Department of Transportation to operate autonomously with a trained specialist behind the wheel in Manhattan. State law currently doesn’t allow for such driverless operations.
Waymo One provides more than 250,000 paid trips each week across Phoenix, San Francisco, Los Angeles, and Austin, Texas, and is preparing to bring fully autonomous rides to Atlanta, Miami, and Washington, D.C., in 2026.
Alphabet has been under pressure to monetize artificial intelligence products as it bolsters spending on infrastructure. Alphabet’s “Other Bets” segment, which includes Waymo, brought in revenue of $1.65 billion in 2024, up from $1.53 billion in 2023. However, the segment lost $4.44 billion last year, compared to a loss of $4.09 billion the previous year.
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