The game producer Zynga celebrated records ten years ago with the online game Farmville – then the stock market star crashed badly. Now the new boss is attacking again – with the help of clever takeovers.
The timing for the deal couldn’t have been better. A year ago, Frank Gibeau, head of the game provider Zynga, sold the headquarters in San Francisco for 600 million dollars – with an increase of 156 percent compared to the purchase price in 2012. In the meantime, the market for commercial real estate has collapsed due to Corona. “We could do far better things with the capital,” says Gibeau.
Instead of real estate, the 49-year-old company boss likes to collect producers of online games. Zynga landed its most expensive coup to date in June with the 2.1 billion dollar acquisition of the Istanbul game provider Peak Games, best known for two smartphone comic puzzle games: Toon Blast and Toy Blast.
Zynga has achieved a special turnaround. The company, founded in 2007, was a rising stock market star in the gaming industry a good ten years ago – before competitors from Asia and the USA overtook it. But now Zynga has once again become the largest provider of mobile games outside of China – thanks to smart acquisitions. That may not be creative. But profitable.
Developing and establishing successful games is “very hard,” says Michael Pachter, Wedbush Securities media analyst. Zynga buy proven games and the teams behind them, just continue established games: “They do well.” The share price has doubled in the past three years; Zynga is valued at around ten billion dollars. The company is profitable, with sales of around $ 1.3 billion in 2019 – an impressive comeback.
Zynga conquered the market in 2007 with an innovation, published its games on Facebook and coined a new genre: “social games”. Suddenly, “gamers” no longer dodged in front of their PCs, recruiting friends and relatives.
Zynga bought the game Farmville, it went viral, they say, spread like a virus. At its peak, 83 million users plowed virtual farms worldwide, bought fictional sheep in exotic colors and bit fuel for Byte tractors. Russia’s Digital Sky Technologies, one of Facebook’s investors, pumped $ 180 million into Zynga at the time. The number of employees expanded to 2000. The costs also rose.
But when Zynga was aiming for the Nasdaq at the end of 2011, the air was already out. Facebook restricted aggressive user advertising. And in 2013, Zynga had to admit that it had lost almost half of its users. Sales halved. Many employees were laid off.
Gibeau has been running the company since spring 2016. He was with the game company Electronic Arts for almost 25 years, enjoying his retirement, “but after a few months I got bored,” says Gibeau. He set Zynga consistently on mobile games for the operating systems Android and iOS on smartphones and tablets and issued the slogan: Just no game consoles! The advantage: “We don’t have to align our games with others,” says Gibeau. Sony has been tinkering with its new Playstation 5, which will be launched in November, for seven years.
Fantasy thanks to fantasy
On the other hand, Zynga is now dependent on Apple’s App Store and its equivalent Google Play. And? The mutiny of the game provider Epic Games against the 30 percent tariff for access to Apple is observed by Gibeau from the sidelines: “We would like to take a lowering with us, but can also cope without it.” Also the possible barriers in Apple’s new iOS 14 operating system – the user should explain what data he is passing on to the app provider – Gibeau sees it calmly. Apple postponed the function to 2021 following protests from the online advertising industry, especially Facebook. Either way: “That doesn’t change anything about the competition among each other,” says the Zynga boss. And is optimistic.
And of course: There are no limits to your growth imagination. Consulting firm Newzoo estimates that the global games industry will turn over $ 159 billion this year, more than the music and film industries combined. And Zynga wants to benefit from the trend of playing well-running games, like recently Farmville 3, with even more colorful farms, cattle and fields.
Gibeau holds such titles, including the games Poker and Word with Friends, which were launched more than ten years ago, for long-term income generators: “Forever Franchises”. He is mainly based on Disney, produces eternal games for the whole family, from 8 to 80 – and copied the Marvel Comics maneuver of the former Disney boss Bob Iger.
Iger bought the fantasy jewel Marvel, the creator of superheroes like Spiderman, Hulk and Ironman, in August 2009 for four billion dollars – and has since made more than 20 billion dollars with series films alone at the box office. Will Gibeau also succeed in such a trauma acquisition? Time will prove it. “We keep buying,” he says.
More on the subject: Battle Royale: App manufacturers like Epic-Games are fighting against Apple’s quasi-monopoly.