Zynga Could Beat Competition by Buying it, ‘Draw Something’ Maker a Target

March 21st, 2012 by Trefis Team
9.50
Trefis
ZNGA: Zynga logo
ZNGA
Zynga

Zynga (NASDAQ:ZNGA) is the world’s largest social gaming company, with more than 240 monthly million active users. It competes primarily with other social gaming companies like Electronic Arts (NASDAQ:EA), Playdom which was recently acquired by Disney (NYSE:DIS) and other independent social gaming studios. Zynga has recently started focusing on the mobile gaming space, which is set to explode as smartphone shipments reach record highs in the coming years. Rumors suggest that Zynga may be looking to acquire OMGPOP, one of the top mobile game developers. [1]

Check out our complete analysis of Zynga

OMGPOP Acquisition Could Propel Zynga to the Top of Mobile Gaming Leaderboard

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Zynga has already launched mobile versions of its most popular games CityVille and FarmVille, and has seen success with its “with Friends” series comprising Words with Friends, Scramble with Friends, etc. We expect Zynga will continue to launch new mobile games with social integration as it continues to diversify away from Facebook.

OMGPOP’s latest release – Draw Something – has been a huge hit, and recently surpassed Words with Friends to become the number one mobile game in terms of daily active users. Following that, rumors have surfaced that Zynga may be planning to buy OMGPOP, and integrate Draw Something into its mobile gaming portfolio. The OMGPOP acquisition would also bring Zynga an experienced team of mobile gaming veterans and the ability to churn out more hits, going forward.

Zynga is already one of the top mobile gaming developers, and with its mobile focus and a speculated acquisition of OMGPOP, it could easily reach the top of the mobile gaming leaderboard and create significant gap between itself and the other players in the space. Zynga also tried to acquire Rovio Mobile, the maker of Angry Birds in the past, but that didn’t work out. OMGPOP’s rumored valuation is expected to be around $150-$200 million – which may perhaps be the best way to put Zynga’s recently acquired IPO cash to use.

We currently have a $13 Trefis price estimate for Zynga, which stands nearly 2% below its current market price.

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Notes:
  1. Zynga Is In Talks To Buy “Draw Something” Maker OMGPOP, Techcrunch [↩]