By Liana B. Baker and Sarah McBride
March 21 Zynga Inc is buying OMGPOP,
maker of the popular game "Draw Something" for about $200
million in its biggest acquisition to date as the company moves
to expand its games on mobile devices and Facebook.
A source familiar with the matter told Reuters Zynga bought
the New York-based company for $200 million. The company
declined to comment on the deal's financials.
Sterne Agee analyst Arvind Bhatia said Zynga overpaid for
OMGPOP, a company that does not necessarily have a proven
business model, despite having a hit game.
"I'm frankly really surprised Zynga would go out and spend
this kind of money," he said.
Bhatia added that the deal could "buy Zynga some new users,
but the larger question is, what does it mean for the top and
Zynga declined to say whether the deal was accretive on a
conference call on Wednesday, which puzzled analysts.
Zynga's chief mobile officer David Ko said in an interview
that Zynga did not buy the company just to become the owner of
"Draw Something." He said OMGPOP had "a lot of great ideas in
"It's not just about the game ... It's about what the team
has built," Ko added.
OMGPOP, founded in 2006, has 40 employees and is one year
older than Zynga. It has already released Internet games such as
"Puppy World" and raised millions in venture capital funding,
but was considered obscure until about six weeks ago when "Draw
Something" hit the mobile market.
"Draw Something" has garnered more than 35 million downloads
and risen to the top of the app charts on Apple and Android in
84 countries, according to Zynga. It makes money from
advertisements, selling items such as colors in the game and
also from a premium version that costs 99 cents.
"It's a game that is No. 1 all around the world today," Ko
In the game, players make digital sketches of items or pop
culture figures such as Lady Gaga and then compete to guess what
the drawings are.
All 40 employees will join Zynga and the company's
headquarters will remain in New York, according to a statement.
Zynga will help translate the game into more languages and
developed for more Android devices, which will help its global
popularity, OMGPOP's chief executive Dan Porter told Reuters.
The sudden success of "Draw Something" on mobile devices
could be a boon to Zynga. Investors are watching closely to see
if it can diversify outside of Facebook, where it makes most of
its revenue. Zynga said in February that it ended last year with
15 million daily mobile users, a five-fold increase from a year
Zynga, which raised $1 billion in an initial public offering
last December, already makes some of the most popular games
played on tablets and smart phones such as "Words with Friends"
and "Scramble with Friends." But these titles have been unseated
by "Draw Something" in the past few weeks on various charts.
HOT GAME DEALS
The $200 million deal, which has closed, is Zynga's largest
transaction to date and the second-biggest purchase since 2010,
when it bought Newtoy Inc, the publisher of "Words With Friends"
for $53.3 million.
Hudson Square analyst Dan Ernst said Zynga could easily
afford a deal worth $200 million because, since its IPO, it has
a market capitalization of $11 billion and $2 billion of cash on
its balance sheet.
But it is always a risk acquiring a company that has only
produced one well-known game.
"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 said.
Large video game companies have been on a shopping spree for
smaller outfits in the past few years. Electronic Arts
bought the publisher of "Plants vs Zombies" last summer in a
deal worth up to $1.3 billion.
Zynga shares closed about 2.5 percent, or 33 cents higher,
at $13.72 a share on Wednesday.