
Looks Like Zynga Just Bought OMGPOP For $200 Million - akharris
http://allthingsd.com/20120321/looks-like-zynga-just-bought-omgpop-for-200-million/
======
untog
Kind of sad. I mean, congratulations to OMGPOP, but I'd really like to see a
decent competitor to Zynga out there. Their games are slow, buggy and overly
instrusive, but no other company has the kind of traction they do. OMGPOP
could have taken the hard route and built themselves up from the success of
Draw Something.

Oh well.

~~~
dc-tech-fan
Try Doodle or Die – it’s independently run by four random guys (disclaimer:
i’m one of them). It’s more like Telephone than Pictionary. Much more freedom
and the results are hilarious.

<http://doodleordie.com>

~~~
snsr
Just tried Doodle or Die for the first time - it's a riot! You guys are doing
fantastic work.

I dug up my wacom for the first time in years. Do you have any plans to
support mobile safari? Would be fantastic on an ipad (or any tablet for that
matter.)

~~~
dc-tech-fan
Thank you!

We are actually working on improving Doodle or Die for mobile safari right
now.

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jedc
That rivals the Heroku for the biggest YC exit so far! (Heroku was
~$212million) OMGPOP would slot in at #2.

[https://docs.google.com/spreadsheet/ccc?key=0AkkhSN3vaY4jdF9...](https://docs.google.com/spreadsheet/ccc?key=0AkkhSN3vaY4jdF90b1l1Vnl5NmZjaTBNQWlJYVozMEE#gid=0)

This likely means YC gets about $3-5million out of the deal, funding even more
startups in the future. :)

(edit: Originally wrote Flightcaster for some reason; meant Heroku. Was
thinking of Flightcaster earlier today and got confused.)

~~~
wilfra
So many great companies and so many early exits. Great for the VC's and angels
- bad for the founders and early employees. And the users. Imagine if Heroku,
reddit and others had stayed independent.

Facebook got this part right. Reject buyout offers and use them to raise
capital at ever increasing obscene valuations - and build your product exactly
as you want.

~~~
andywood
All this says to me is that YC does not directly fund Googles and Facebooks.
This is still very good for the founders. They can take their exit money and
self-fund whatever they want.

~~~
justin
The biggest companies in the YC portfolio are independent and getting bigger
all the time. It still remains to be seen whether a Facebook or Google will
come out of YC.

------
zinssmeister
Draw Something is everywhere and it's an awesome game. Good move for OMGPOP to
cash out. It's a lot of money to throw at a studio that has basically only
produced one hit game. Or maybe I am too old to recognize any of their other
games ;)

~~~
pduan
It is a lot of money in aggregate.

But when you break it down, it looks like a pretty good deal.

Revenue multiple: Based on the reported figure of $250,000/day = $91.25M/year.
At a purchase of $210M, this represents a multiple of 2.2x, far below the
price/sales multiple of Zynga and Glu Mobile, two publicly traded companies on
the US exchange. Sure, OMGPOP probably won't be hitting $250,000/day for the
entire year but even at a 50% discount, you're in the same range as Glu.

DAU cost: Assume CPI of $1.50, install/DAU conversion rate of 10%. This
equates to a DAU cost of ~$15. It's safe to say that OMGPOP has >10M DAU,
which means ZNGA bought the company at <$20/DAU. Additionally, the above CPI
and install/DAU conversion rate are quite low. I've been hearing that OMGPOP
is seeing 1-day retention rates of 50-75% which is amazingly high. This means
that with continued growth and similar retention rates, ZNGA got a pretty good
deal in terms of DAU acquisition cost.

The main advantage for Zynga is that they can leverage OMGPOP's DAU and cross-
promote their existing titles. And with their experience in monetizing titles,
it's safe to assume that ARPU will increase.

~~~
joering2
how Zynga is going to make money (advertising on DAUs) off the users that
ALREADY PAID for the no-ads Draw Something app?

$250k/day with $0.99 per user == ~252,000 installs a day. That's almost 92MM
installs per year. How many active users does App store have?

~~~
demoo
There will be plenty of places to cross promote their games. I'm thinking
loading screens, contacts database,..

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ThePinion
Well this sucks. I just got into Draw Something yesterday and have been a fan
of OMGPOP since Iminlikewithyou (hipster), but a company like Zynga does not
deserve this game, or my attention to it. Zynga is well known for being
theives and gathering as much possible data as they can about their users to
sell off to ad companies and such. Looks like I'll be uninstalling this Draw
Something once the switch takes place.

~~~
k33n
Iminlikewithyou was way ahead of its time and I'll always remember it as the
site that made me realize rich real-time user interaction was possible on the
Web.

------
ivankirigin
Congrats to Charles and team! I've loved their games for ages, and hopefully
their focus on quality will spread at Zynga.

I have some friends at another game company that was bought, and after a
recent chat recently, I'm FAR more excited by what they are building now than
what they had before. So to all those that are worried about this, I think the
studio nature of gaming companies means that their acquisitions don't
necessarily kill innovation.

~~~
phil
I believe that -- and in particular, Newtoy seems to still be doing good work
after being bought by Zynga.

------
apawloski
Bittersweet. Draw Something is a great game and it's good to see OMGPOP
rewarded for that. But then I hate that it will now be controlled by Zynga.

~~~
TazeTSchnitzel
"Play Draw Something now and earn Farmville points!"

~~~
patio11
Zynga points. You can use them across Zynga games to get e.g. exclusive
pumpkins in Frontierville. There's a cap which resets every day, so you know
when you can stop playing.

What.

[edit to add: Not currently playing any Zynga games. League of Legends pushes
my buttons much better.]

------
gyardley
Wow. Charles deserves a whole lot of credit for sticking it out over the last
six years - my impression until recently was that they were having a hard time
staying open. Congrats to all involved!

~~~
desult
Charles left a year ago.

~~~
gyardley
Hahaha - well, there you go. Thanks for the update.

------
ndespres
Wow, good for them. I've been with them since they were "I'm In Like With
You," a fun but pointless "social flirting" site (at least, that's my memory
of what it was) before they turned to social gaming. I didn't think they were
going to make it for a while.

Congrats to Charles and the team at OMGPOP!

------
badclient
Credit to VCs. I've been guilty in past of noting how raising VC money may
take away reasonable exits possible with no funding or just angel. In this
case, it is very clear without VC money this company would have been dead
pooled many many years ago.

------
padobson
I'm dying to know the cash/stock split on this one. It will send signals about
what a company like OMGPOP thinks of the social gaming space going forward.

Considering they just spent 6 years working in the sector, what they think of
Zynga's future is telling.

~~~
jpdoctor
> _I'm dying to know the cash/stock split on this one. It will send signals
> about what a company like OMGPOP thinks of the social gaming space going
> forward._

It also signals whether znga thinks its stock is overvalued or undervalued.

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chimeracoder
> Now Zynga has scheduled a call for a “news announcement” for 3pm eastern.
> I’m going to go out on a short limb and assume it’s to formally acknowledge
> that they have bought the company.

I'm glad the news seems to have been confirmed (?), but I must say that the
headline is rather disingenuous, given that there was no actual confirmation.
Even the lede makes it seem that there's no doubt; just confirmation of a
previous rumor. I don't ask for anything major - just a single word (or two).

(I originally posted this comment for the other submission a split second
after it was deleted, but it still applies - glad HN at least chose the more
responsible title).

------
andrewhillman
Another single founder success for YC. Obviously the entire team deserves
credit. Kudos to all.

~~~
andrewhillman
OMGPOP was smart to do this deal. They really had no choice. It seems really
difficult to come up with new games. If they didn't do the deal, Zynga would
have cloned the app and introduced it to their huge network of "_____ with
friends" players for free and OMGPOP would have lost market share and revenue.

------
tomkit
It was bound to happen -- Now they have to pay a premium for having failed to
launch a game in this genre. The model was proven by Newtoy with Words with
Friends (which they acquired) and Zynga has since launched a series of others
based on the same model (Hanging with Friends etc.). All they need to do is
look at the biggest existing markets for board games, console games, etc. and
apply it to the WWF model. Pictionary should have been a no-brainer!

------
dkrich
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
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
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.

~~~
smackfu
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
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
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
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
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.

------
lazerwalker
Given that Draw Something fits within the same asynchronous turn-based model
of the With Friends games (owned, of course, by Zynga), I'm curious to see
where Zynga moves with branding. There's something to be said for unifying all
future OMGPOP/With Friends games under the With Friends blanket for cross-
promotional purposes, but the "X Something" brand does have some measure of
brand appeal.

~~~
k-mcgrady
I would guess they will probably go with 'Draw Something With Friends'.

~~~
digitallimit
Better yet, Draw With Friends.

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j_baker
_Here's more detail on the price: $180 million plus another $30 million or so
in employee retention payments, Im told._

Is this typical? It would seem that the employees are getting the shorter end
of the stick on this deal.

~~~
paul
Not commenting on this particular situation, but to answer your question in
general:

If a company has an IPO, there are no "employee retention payments", so it's
better than that :)

Employee retention payments are actually a way to give employees a somewhat
better deal than investors, though typically they will be subject to vesting.

~~~
jpdoctor
> _If a company has an IPO, there are no "employee retention payments", so
> it's better than that :)_

The reverse split of common before preferred share conversions for IPO are
often a big screw to the employees. Many are also unaware of it, as they don't
dig through the S-1. (Atheros was the largest one I saw in this camp.)

~~~
paul
Reverse split doesn't screw employees, it just changes the math (10000 shares
at $1/share is no better than 1000 shares at $10/share).

~~~
jpdoctor
> _Reverse split doesn't screw employees_

It absolutely screws the employees when the common is reverse split, but the
preferred-to-common conversion factor remains the same.

~~~
paul
That's not how it works.

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netvarun
It doesn't make sense. The article mentions that OMGPOP makes 250 grand a day
(that too after after all commissions). that equates to 91.25 million a year.
IMHO, $200 million seems like a really small price.

~~~
gkoberger
Eventually they're going to run out of people to pay or play. Games don't tend
to have a long lifespan, so it probably made sense for them to cash out while
they're hot.

There's no way they can sustain this rate for 2+ years, which is what they'd
need to do in order to make $200 million.

~~~
sbov
Maybe that's part of why Zynga makes sense. They seem pretty good at
transitioning players to new games.

~~~
gyardley
Yep, sustained success on mobile is all about cross-promotion between a
portfolio of games.

------
nixle
This is great news. OMGPOP would have headed in that direction anyway and now
their talented, hardworking employees will see their careers boosted a bit
earlier (maybe even a nice little payout?)

All the value OMGPOP might have ever had ( which besides Draw-something, they
really didn't have * ) will evaporate into the creativity-destructing teeth of
soul-grinder Zynga, leaving a big piece of the market available for Indie
game-devs <3 that are awesome and actually give a d * mn.

* ) OMGPOP has actually been struggling for any kind of success in the casual/social game scene.

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alaskamiller
Everything old is new again. Or maybe I'm just old.

It's interesting how 2 years later we're vilifying Zynga
(<http://news.ycombinator.com/item?id=1041604>)

It's interesting how iminlikewithyou after 5 years finally sold out.

It's interesting how gaming of all forms became the big hits big business
Hollywood vainly wish it could still be.

Think about what would happen in another 5. Then do it.

------
joejohnson
Maybe it will take less than half an hour for a move to be sent to my friend's
phone. Hopefully it won't take too long for Zynga to move this game over to
the zCloud and fix all the push notification bugs too.

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antidaily
Great for OMGPOP, even better for Zynga. Price seems low to me.

------
pointpointclick
Anyone remember when OMGPOP was iminlikewithyou.com before they made the pivot
to social games? 2007ish, if I recall correctly...

~~~
rdl
Back then it was a weird dating site where most of the users were actually VCs
checking it out :)

------
gutini
Does anyone else question Zynga's growth model?
[http://www.fool.com/investing/general/2012/03/21/welcome-
to-...](http://www.fool.com/investing/general/2012/03/21/welcome-to-zyngas-
downward-spiral.aspx)

------
tkahn6
Is this a talent acquisition or an attempt to capture future revenues of Draw
Something?

~~~
tptacek
A $200MM talent acquisition? This meme needs some suppression.

~~~
tkahn6
Pretty disappointed that I was downvoted, given that it was a genuine
question. No need to be cryptic or condescending.

I'm asking because this is shop that makes a lot of iOS apps with a hope that
one hits. They don't have a singular product that they sell. So what is Zynga
buying?

~~~
webwright
What shop are you talking about? It's the #1 paid app, the #1 free app, and is
king of the top grossing list, too.

~~~
tptacek
Has there ever even been a "talent acquisition" in the (say) mid-8 digits?
Since, say, 2006? Definition of a talent acquisition: you buy a company, and
none of its offerings are available 18 months later under any brand.

(The true definition would be "and all the members of the team are reassigned
to a different project", but that's hard to know from the outside).

~~~
rdl
I don't think THIS was a talent acquisition so much as a super successful
game, so successful Zynga couldn't rip it off and kill it, but there are
definitely large talent acquisitions in recent history:

* Powerset. ~$100mm, July 2008, to Microsoft.

* Friendfeed, ~$50mm, August 2009, to Facebook.

* Slide, $228mmm August 2010, to Google.

(Takeaway: sell your company in the summer.)

~~~
paul
I dispute that $50m number :)

~~~
rdl
I defer to your superior knowledge of the situation. (I'm not sure if the
$50mm was low or high; as reported in the press, it included 2/3 in stock,
which is probably worth 10x what it was back then at least, so congrats!)

------
beatle
amazing. everyone i know loves draw something. congratulations.

~~~
citricsquid
I think it's got a winning formula, whether or not it was intentional or an
accident I don't know, but it does so many things right. It caters to casual
players (I can pick it up, guess, draw and put it down) or hardcore players
(draw + guess all day and all night), it forces people to provide value back
to the player they're against (after guessing you _have_ to draw to play
another game) and it has a good micro transaction system.

I've never played mobile games properly before but I find myself drawn into
playing Draw Something along with all my friends, who like yours love it.

~~~
dinkumthinkum
I actually don't really get the game that much. I've played, it's kind of fun,
but half the time people can't figure out how to draw the subject and just
write it out ... literally, this happens about 1/4 of the time. But kudos to
them for their success. I do question the $200 million and I can only imagine,
as another user said, Zynga would try to transition users to their other games
in the long term.

------
omi
Who the hell plays this garbage?

~~~
matdwyer
It's actually surprisingly fun. My girlfriend spends like 10 minutes drawing
these elaborate pictures for strangers.

The only thing that infuriates me is when people know what it is but can't
spell the word and then give up.

~~~
natesm
I get annoyed when the "hard" word ends up being some rapper/celebrity name
instead of something that everyone knows.

~~~
matdwyer
I've seen some hilarious Lil' Wayne & Tebow drawings though! Much more fun to
me, but you're right, this is a world wide game.

------
wilfra
"it has recently been netting around $250,000 a day from the game — that’s
after Apple takes its 30 percent cut."

$7.5 million a month at the very beginning of their hockey stick growth, and
they are willing to sell for $200 million? Deal of the century for Zynga...

They should have leveraged this into a massive funding round and started
making acquisitions, growing etc. Nobody is ever going to compete with Zynga
if people cash out to them the first chance they get every time.

~~~
pclark
A cowardly decision? Do you have any idea how stressful it is running a team
of 30 employees and tens of millions of dollars in financing and not having a
clear path to turn it into a successful company? OMGPOP made _great_ video
games for 5 years and none of them stuck. They deserve recognition for
sticking to their vision and eventually finding one that is a hit, I can
totally imagine why the team wants to sell and not have to worry about the
next hit.

It took OMGPOP over 5 years of concentrated efforts to succeed.
<http://en.wikipedia.org/wiki/List_of_games_on_Omgpop>

Stop being so unbelievably rude.

~~~
wilfra
"They deserve recognition for sticking to their vision and eventually finding
one that is a hit"

They absolutely do. But they are now the latest example of what not to do the
second you finally gain traction. As I said in another comment, Facebook got
this right. So many others do not, and it is really a pity in the social
gaming space as there is a huge need for somebody to compete with Zynga.

------
methoddk
OMGPOP are sellouts. Buyouts like this kill me. I hate seeing good companies
get gobbled up by others...

