What are the implications of the world’s largest search and video provider – Google - putting a healthy investment into Zynga, the world’s largest social games maker? We’ll get a chance to find out in the coming months if the recently reported TechCrunch rumor that Google is about to invest up to $200 million into Zynga is true. We take a look at the situation and analyze the implications after the jump.
Zynga has been making huge strides lately, having partnered with 7-11 to bring their games, brand and virtual currency into the mainstream in a big way. This was a move to likely combat investor unease regarding their dwindling traffic (FarmVille is down from nearly 90 million Monthly Active Users to about 60 million). The question is whether the drop in traffic and the increased promotions have resulted in increased revenue, and since Zynga is not releasing any financial information, most analysis of those numbers are simply speculation.
That said, they have reported their previous deals, including their $147 million investment from Japanese company SoftBank. This led to speculation that they were planning to release their games internationally in a big way, but the interesting thing about that analysis is that when a game is released on Facebook, all it needs is a language translation to be ‘international’, as the network grows around the world. The point there is that to attain the same level of growth that got them to their current position, Zynga can’t simply look internationally: they need to examine other networks and methods of getting users to interact with their content.
What does Google have to gain? Their current action in the games space includes acquiring a small games company called LabPixies and posting a few open heads for gaming experts, but nothing has pointed to the launch of “Google Games”, which has been plastered across blogs recently. If Google is planning a dedicated games service, would investing in Zynga simply be a measure to ensure they put their games on Google’s platform? Is it a purely financial investment? I’ll take a deeper look in the coming weeks.
Check out Michael Arrington’s breaking post here.