Reuters reported on Wednesday that Zynga, the San Francisco-based maker of Farmville and other social games, has added yet another – and a big one at that – acquisition to its carpet. It bought OMGPOP for $200 million, its biggest acquisition by far, as the company moves forward in extending its line up of games on Facebook and other mobile devices. The company politely refused to comment on the financial details of the deal during the conference call the same day.
The giant social network game developer, which made 1 billion in its stock market launch, creates and develops most of the popular games on tablets and smartphones such as “Words with Friends” and “Scramble with Friends”. The company has been acquiring smaller companies over the past couple of years. In January, it announced its acquisition of four mobile gaming companies namely Gamedoctors – maker of “ZombieSmash”, Page44 Studio –developer of the “World of Goo”, HipLogic and Astro Ape Studios. The $200-million deal is by far its largest and second-biggest purchase since it bought Newtoy Inc., the publisher of “Words with Friends”, for $53.3 million on 2010.
OMGPOP makes the game “Draw Something”, a social drawing game where players make digital sketches of items or pop culture figures and compete to guess what the drawings are.
Zynga says “Draw Something” has become a mega-hit garnering more than 35 million downloads, causing for both its free and paid versions to top in app downloads charts on Apple and Android in 84 countries in just six weeks after its release. Even if it cannot be played directly on Facebook, it still became the most popular game on the social networking site as of last week.
The game’s popularity on mobile devices could be an advantage to Zynga, of which investors are in close watch if diversification outside Facebook, where it makes 93 percent of its revenue, is possible and feasible. On February, Zynga said that 2011 ended nicely for them with 15 million daily users, 5 times the number of regular users the earlier year.
All 40 employees will join Zynga and the company’s head office remains in New York.
Analyst Dan Ernst says Zynga could afford a deal worth $200 million without difficulty because it has a market capitalization of $11 billion and $2 billion cash on balance sheet since its initial public offering.
“But it is always a risk acquiring a company that has only produced one well-known game in recent months,” he said.
“The big risk is how long do they last? But it seems like a high quality team though and doesn’t feel like a one-hit wonder,” Ernst added.
Zynga shares closed about 2.5 percent, or 33 cents higher, at $13.72 per share on Wednesday.