January 23, 2012 – Despite its tepid IPO reception, Zynga (NASDAQ:ZNGA) is using its new $1B+ in cash raised in the IPO to rapidly acquire four privately-held mobile game developers in an attempt to increase its presence in the mobile gaming market. The moves put Zynga in a stronger strategic position moving forward: for one, Zynga cannot introduce new game titles fast enough to make a dent in the company's earnings or its user base, which per previous PrivCo analysis has peaked and has been in decline for several quarters. Moreover, the mobile gaming market is projected to evolve into an $11.4 billion industry by 2014 as smart phones begin to dominate the mobile market (60% of new phone sales in 4th Quarter 2012 were smart phones).
The four privately-held companies Zynga has acquired are:
Astro Ape Studios (Aug. 2011) – A NYC-based developer whose games include Office Heroes, Desert Heroes, Montsterz Revenge and Vegas Strip City. The company’s offerings are very similar to Zynga’s hit titles.
HipLogic (Aug. 2011) – A San Francisco-based game developer
Page44 Studios (Sept. 2011) – A San Francisco-based developer founded in 1998. Page44 has worked on the Madden NFL franchise games for iPhone as well as the multi-platform hit World of Goo.
Gamedoctors (Dec. 2011) – A Germany-based developer known for its hit title ZombieSmash.
The largest and most prominent company acquired was Page44 Studios, a multi-platform game developer that has done work on the Xbox 360, Wii, PC, Playstation 2, and Apple iOS platforms. These 4 acquisitions continue Zynga’s aggressive (international) growth push that began in early 2010 when Zynga acquired 15 game developers in 14 months. In particular, Zynga’s acquisitions of XPD Media, Unoh Games, Dextrose AG, and Five Mobile spearheaded Zynga’s operations in China, Japan, Germany, and Canada, respectively.
The acquisitions also mark further attempts by Zynga to gradually shift towards independence from Facebook, as mobile games are sold directly on the Android and iTunes app stores, circumventing the Facebook Credits system (and its 30% tax to Facebook on all sales) that has thus far generated the majority of Zynga’s in-game revenue.
Privately-held boutique game developers are clearly now ripe for acquisitions by Zynga, as well as traditional gaming giants, publicly traded Activision-Blizzard (NASDAQ:ATVI) and Electronic Arts (NASDAQ:EA).