Microsoft Reportedly In Talks To Buy Social Games Maker CrowdStar

Microsoft (NSDQ: MSFT) seems intent on making a big entry into the social games space. The company announced a week ago that it would bring titles from social game giant Zynga to its online properties, including MSN and Windows Live Messenger, and now Bloomberg reports that Microsoft is in talks to buy CrowdStar, the social game company behind the Facebook hit Happy Aquarium. CrowdStar hasn’t gotten the attention of Zynga or Playfish but it’s the fourth biggest developer on the social network, according to AppData. And Happy Aquarium, which launched only last fall, is the sixth most popular game.

Microsoft hasn’t been much of a force on the online gaming market — a contrast to the company’s historical success with video game titles and desktop games: Its MSN Games online portal has slipped in popularity over the last year, according to comScore (NSDQ: SCOR), even as overall online gaming has jumped. A notable exception has been its online gaming service for the Xbox 360, Xbox Live.

Two-year-old CrowdStar has taken a different approach than rivals like Zynga and PlayFish. Rather than focus on putting up big revenue figures, it has instead focused on being profitable and this fall was making about $1 million a month in profits. In an interview with InsideFacebook earlier this year, CrowdStar Chairman Peter Relan said the company only had 20 employees (By contrast, Zynga has more than 600). The company has been able to keep its staff roster down in size by only making money via the direct sale of virtual goods, instead of with in-game ads or offers, according to Forbes.

In a sign of the ballooning valuations being put on social games firms, CrowdStar is reportedly being valued at $200 million; over the last several months, Electronic Arts (NSDQ: ERTS) has bought Playfish for $275 million upfront, in addition to a $100 million earnout, Playdom raised cash at a $260 million valuation, and Zynga got $180 million in a round. A sale of CrowdStar at $200 million would represent quite a return for its investors; the company has raised less than $100,000 in funding from its chairman.

Microsoft says it doesn’t “comment on rumors or speculation.”