Zynga to Spend Billions to Acquire Competitors
Unless you’ve been living off the social networking grid, chances are you’ve heard of Zynga. I personally know several individuals who have spent vast amounts of their precious free time on such highly-addictive titles as “Farmville” and “Mafia Wars”, among others. Just recently, Zynga dropped a substantial amount of money to acquire OMGPOP, the company responsible for crafting the popular mobile app “Draw Something”. And, yes, the aforementioned “Win, Lose, or Draw” clone has captured the attention of someone like me, who generally spends countless hours roaming the untamed wilds of Skyrim. I wish I was kidding.
Instead of simply hiring a team to design, develop, and program the next big hit, Zynga is looking to acquire as many money-making titles as humanly possible to keep their name synonymous with quality casual gaming. Barry Cottle, who was once employed by Electronic Arts, is spearheading the acquisitions team, which is charged with obtaining potentially awesome games that have already made a splash in the marketplace. In other words, the company has roughly $1.8 billion in cash, and they’re not afraid to spend it.
For the uninitiated, Zynga creates “free” games for Facebook, enticing players to spend real money on virtual items. In “Farmville”, for example, users can drop some serious coinage to bring home additions to the ever-expanding gardens. “Mafia Wars”, meanwhile, gives players the opportunity to buy weapons, vehicles, and other items in their quest for underworld domination.
However, Zynga is looking to expand their horizons by offering titles on other social media networks, as well as various mobile devices. One company that Zynga has a close eye on is ZeptoLab, creators of the popular Apple game “Cut the Rope”. Rovio Entertainment, creators of “Angry Birds”, is rumored to have turned down Zynga’s offer of close to $2 billion for the company, clearly indicating that they’re not afraid to spend vast amounts of cash to acquire their competition.
Zynga, however, isn’t the only company looking to acquire popular casual games. They recently lost a bid to purchase PopGames, which was snapped up for a very pretty penny by EA. With all of this money being tossed around, one has to wonder how long Zynga can afford to make such outrageous bids.
“I question the price they are paying,” Sterne Agee & Leach Inc. analyst Arvind Bhatia told Bloomberg. “If they have to every time go out and acquire the next number-one developer for $200 million, how long can you do that?”
Until people stop spending money on pixelated bushes, I’d say.