5 ms·

I don't understand Zynga's strategy. Are they trying to establish themselves as the De Beers of mobile gaming? This seems like an unsustainable strategy. If the

by dkrich 15y ago

I don't understand Zynga's strategy. Are they trying to establish themselves as the De Beers of mobile gaming? This seems like an unsustainable strategy. If they just buy out every gaming company as it begins to exhibit growth at insane valuations, they are going to run out of money. There are virtually no barriers to entry in the market, and there is no point at which there will be no emerging competitors. This is not a stock I would want to be a part of.

rwhitman 15y ago
It seems like they are hedging against allowing the mega gaming companies (EA etc) from getting too much of a foothold in the mobile / social space.
- dkrich 15y ago
  But $200mm for a company that built the electronic version of Pictionary that was released six weeks ago? That is insane! The gaming industry is not one that can be controlled by a single company. I don't mean to sound harsh, but it is pretty clear to me that Zynga has too much money and very little vision. The numbers just don't make sense.
  - hendzen 15y ago
    The network effects of Draw Something's user base add immense value. Think FB vs. G+. If Zynga had made their own Pictionary game, it would have been a graveyard.
    - dkrich 15y ago
      I'm not disputing that it is a wildly successful game. I am stating that a $200mm valuation of a single game is insane. I know the argument will be made that they bought the whole company, but this acquisition would not have happened if not for Draw Something. Given the number of developers working on producing the next big hit in games, there will be a Words With Friends or Draw Something released on an ongoing basis. Why would Zynga get in the business of buying up these companies after the hits have been produced? Seems like a losing business model.
      - qq66 15y ago
        The value of the game to Zynga is higher than the value of the game on the open market, since Zynga can cross-promote their other games and also suck up a whole ton of personal information from the Draw Something userbase.
  - smackfu 15y ago
    You say "electronic version of Pictionary that was released six weeks ago." I say "#1 paid, free, and top grossing iOS app, 12 million active users"."
    - dkrich 15y ago
      Great. Would you pay $200mm for a game that was released a little over a month ago? It seems to me that money has no value in Silicon Valley. We've seen this story play out before, but I guess we'll need another bubble to clean out the rest of the suckers.
      - anatari 15y ago
        Yes, I would pay $200mm for a game that nets $250k/day or $91.25mm/year. Assuming Zynga does nothing but maintain the revenue, it will make back it's investment in a little over 2 years. How many investments opportunities are out there that net you a ~40% yield!? Of course there is risk with an investment like this, but this is after all, their core business and they are probably very good at mitigating those risks.
        dkrich 15y ago
        Ha, right. And in related news, at its height, the Pet Rock was netting a million dollars a day. At that rate, why didn't somebody pay $700 million to acquire the company? They could have made their money back in two years.
        anatari 15y ago
        Don't know anything about the Pet Rock, and you can poke fun all you want, but it doesn't change the fact that this title has significant revenue that is more likely to go up than down under Zynga in at least the medium term due to reasons such as: - Cross promotion - platform leverage - historical performance of similar games - and all of this operating in a market segment (mobile gaming) that is exploding not contracting.
      - 15y ago

by dkrich 15y ago

rwhitman 15y ago

It seems like they are hedging against allowing the mega gaming companies (EA etc) from getting too much of a foothold in the mobile / social space.

dkrich 15y ago
But $200mm for a company that built the electronic version of Pictionary that was released six weeks ago? That is insane! The gaming industry is not one that can be controlled by a single company. I don't mean to sound harsh, but it is pretty clear to me that Zynga has too much money and very little vision. The numbers just don't make sense.
- hendzen 15y ago
  The network effects of Draw Something's user base add immense value. Think FB vs. G+. If Zynga had made their own Pictionary game, it would have been a graveyard.
  - dkrich 15y ago
    I'm not disputing that it is a wildly successful game. I am stating that a $200mm valuation of a single game is insane. I know the argument will be made that they bought the whole company, but this acquisition would not have happened if not for Draw Something. Given the number of developers working on producing the next big hit in games, there will be a Words With Friends or Draw Something released on an ongoing basis. Why would Zynga get in the business of buying up these companies after the hits have been produced? Seems like a losing business model.
    - qq66 15y ago
      The value of the game to Zynga is higher than the value of the game on the open market, since Zynga can cross-promote their other games and also suck up a whole ton of personal information from the Draw Something userbase.
- smackfu 15y ago
  You say "electronic version of Pictionary that was released six weeks ago." I say "#1 paid, free, and top grossing iOS app, 12 million active users"."
  - dkrich 15y ago
    Great. Would you pay $200mm for a game that was released a little over a month ago? It seems to me that money has no value in Silicon Valley. We've seen this story play out before, but I guess we'll need another bubble to clean out the rest of the suckers.
    - anatari 15y ago
      Yes, I would pay $200mm for a game that nets $250k/day or $91.25mm/year. Assuming Zynga does nothing but maintain the revenue, it will make back it's investment in a little over 2 years. How many investments opportunities are out there that net you a ~40% yield!? Of course there is risk with an investment like this, but this is after all, their core business and they are probably very good at mitigating those risks.
      - dkrich 15y ago
        Ha, right. And in related news, at its height, the Pet Rock was netting a million dollars a day. At that rate, why didn't somebody pay $700 million to acquire the company? They could have made their money back in two years.
        anatari 15y ago
        Don't know anything about the Pet Rock, and you can poke fun all you want, but it doesn't change the fact that this title has significant revenue that is more likely to go up than down under Zynga in at least the medium term due to reasons such as: - Cross promotion - platform leverage - historical performance of similar games - and all of this operating in a market segment (mobile gaming) that is exploding not contracting.
    - 15y ago