Home Did Zynga Pay Too Much For Draw Something Maker?

Did Zynga Pay Too Much For Draw Something Maker?

Zynga acquired the maker of the runaway hit mobile game Draw Something for a reported $180 million.

In addition to the purchase price, Zynga will pay $30 million in employee retention bonuses as part of its acquisition of OMGPOP, a 40-employee New York City shop, according to AllThingsD. The move is the biggest yet in Zynga’s strategy to diversify its revenue stream from Facebook, but the acquisition announced Wednesday drew immediate questions about whether Zynga had overpaid for a competitor.

OMGPOP is a four-year-old company that, up until six weeks ago, had just 20 million registered users. Since its launch, Draw Something has been downloaded 35 million times and players create one billion drawings per week.

Zynga raised $1 billion in an initial public offering last year but has striuggled, as investors worried about its dependency on Facebook. The company is in the midst of a five-year deal in which Facebook collects 30% of all revenue generates on the social network. At the time of the IPO, about 90% of Zynga’s revenue came from Facebook. Earlier this year, Zynga launched its own platform to offer its games direct to players and circumvent Facebook.

The acquisition, however, raised questions about Zynga’s ongoing ability to create hit games like Words With Friends, and whether or not it will have to undertake expensive acquisitions every time it finds itself competing with a breakout hit like Draw Something.

In a conference call Wednesday, company officials declined to disclose the terms of the deal but, assuming the $210 million price tag is right, Zynga paid $6 for each existing registered Draw Something player. About 240 million people play Zynga games each month.

“We really look for folks that focus on social and have a mission and strategy somewhat similar to our own,” Mark Pincus, founder and CEO of Zynga, said when asked about future acquisitions of the makers of hit games. “We’ve had tremendous amount of respect for this team and just can’t wait to work with them.”

OMGPOP CEO Dan Porter, who will continue as a vice president at Zynga, said the acquisition allows Draw Something to continue to grow.

“I think one of things about making network-based games is the amount of network traffic is just massive. Performance and support in games like this is so important,” Porter said. “Teaming with Zynga…takes performance to a really high level.”

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