Zynga buys company that knocked it off its #1 spot

OMGPOP's Draw Something game on mobile device

"Draw Something" creator OMGPOP snatched away Zynga's #1 Facebook spot, and Zynga bought it right back.

Last week, New York-based OMGPOP’s Pictionary-esque Draw Something game became the new king of daily active users (DAUs) on Facebook ahead of other Zynga titles, many of which had to make do with lower spots on the top ten list. OMGPOP’s hit game took over with more than 10 million DAUs and began this morning at 13.3 million, ahead of the 8.5 million for Zynga’s Words With Friends.

So, what was Zynga’s response? The same as it was with Words With Friends creator Newtoy, which it bought for $53 million in 2010: If you can’t beat ‘em, buy ‘em. Financial terms of the deal weren’t disclosed, but The Wall Street Journal’s All Things D columnist Peter Kafka reports that “firsthand” sources say it came in at around $200 million.

Getting this game helps Zynga retain its leadership position, but it also serves to highlight one of the underlying issues that continues to concern some investors: creativity. Besides Hidden Chronicles (itself a rehash of a genre first made popular by other developers), Zynga’s most recent hit games have either come from outside or been another dose of the “Ville” formula. That’s fine for now, but there are worries that the Ville well will run dry. And while other companies are coming up with new kinds of hit games, Zynga has developed something of a habit of just trying to buy them.

In 2011 it reportedly made a play for high-flying Angry Birds creator Rovio for $2.25 billion, but was shot down. OMGPOP wasn’t in quite as assured a position as Rovio, and has had its hands full keeping up with demand for its hit game, so it understandably accepted Zynga’s buyout.

Zynga also reportedly attempted to purchase PopCap Games for $950 million, but was again left at the door, holding onto its ring until OMGPOP came along. To make things worse, Zynga had to bear seeing rival Electronic Arts woo PopCap into its arms with a bigger offer, approaching $1.3 billion. Buys like OMGPOP will help Zynga flesh out its catalog while neutralizing rivals. Not a bad one-two punch.

Such deals also feed analysts’ worries about Zynga’s inability to innovate on its own. Will there always be affordable hit games that Zynga can wrest from the marketplace? Will these cherry deals give it the time it needs to, as they say in creative fields, “find its voice”? Or will the Ville turn into a ghost town with no prospects in sight? For the moment, it’s a bustling metropolis which just got one hit-game bigger.

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Picture by Asiatic League, used under a CC-Share Alike license.
Chris Huston

Though he relishes a dashed good book or a bit of sport (and British idioms), Chris Huston now spends much of his free time on his video game consoles, playing anything from Rock Band to Red Dead Redemption, or Need For Speed to Netflix. He finances these not-completely-innocuous vices by writing about video game companies and the technology industry for Hoover's.

Read more articles by Chris Huston.

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