Author 丨 Wang Fan
Edited by 丨Yang Pudding
Produced by | Prism Tencent News Xiaoman Studio
On January 10, 2022, U.S. game developer Take Two announced that it would acquire social game developer Zynga in the form of "cash + stock" . The overall valuation of the transaction is $12.7 billion (about 80.9 billion yuan), which is a 64% premium to Zynga's stock price on Friday.
Acquired Zynga is known for its social gaming. The latter was deeply bound to Facebook, launching "Happy Farm Farm FarmVille" in 2009, creating a "blockbuster" that was active for six days on the line, and also launched "You Draw Me Guess" and so on. In recent years, Zynga has seized the ultra-casual track through ferocious acquisitions, and in the past year, quarterly revenue has maintained a high growth rate of 50%.
Buyer Take Two, based in New York, is best known for its computer and console game franchises. It has well-known IPs such as "Grand Theft Auto (GTA)", "Civilization", "Red Dead Redemption" and so on. Take Two said in the announcement that after the completion of the acquisition, the proportion of net bookings from mobile devices will increase from 22% to 50%.
Take-Two also expects to save about $100 million a year in the first two years after the merger is completed, and create another $500 million in net bookings by using existing host IP for mobile development and optimizing Zynga's Chartboost advertising platform. The combined 12-month net booking volume reached $6.1 billion and operating cash flow of $769 million.
The prospects for the mobile gaming market have led analysts to believe that mergers and acquisitions in this area will continue to be active. According to data company Newzoo, the global mobile gaming market revenue is expected to reach $116.4 billion by 2024.
After the announcement of the acquisition, Zynga shares rose 40% on the day, and buyer Take-Two fell 13.13%.
Who is Zynga? He once relied on Facebook traffic and then seized the ultra-casual game track
American social game developer Zynga was founded in April 2007 and is headquartered in San Francisco, California.
The developer's first "blockbuster" was the launch of the masterpiece "FarmVille" on Facebook in June 2009, which once reached 10 million daily active in six weeks and was the first game on Facebook to exceed 10 million daily active. Since then, Zynga has continued the successful experience of "speed is king", relying on a large number of people from the traditional game industry, and deeply bound with Facebook to seize the opportunity of social games.
However, whether Zynga's business model can be sustained has always been questioned by the outside world, and even some analysts pointed out that Zynga parasitizes Facebook's platform traffic and will "become a success and a failure". At that time, in order to tie the cooperation, Zynga had signed an exclusive agreement with Facebook and divided 30% of virtual product sales with Facebook. Facebook's pre-IPO prospectus revealed that Zynga at the time contributed 12% of Facebook's revenue.
In 2010, mark Pincus, former CEO of Zynga, began preparing to host the game himself in order to prevent a possible breakdown in negotiations with Facebook, but was shelved after signing a long-term new contract with Facebook. It wasn't until 2012, after Zynga went public to raise $1 billion, that Zynga unveiled its own platform, not only promoting its own games, but also hosting other games, planning to prove to investors that it didn't need Facebook and could get revenue and users.
But in the great changes in the industry, Zynga's development path is not smooth. With the rise of mobile games and the fading of the PC social gaming dividend, Zynga turned to a large number of acquisitions to grab talent, users and new tracks. According to public information, Zynga acquired the casual board game of Turkish developer and distribution platform Peak for $100 million in 2017, and later acquired all of the latter's shares for $1.8 billion in 2020. Zynga has said that after the acquisition of Peak, Zynga's daily active activity will increase by 60%. In August of the same year, Zynga also acquired an 80% stake in Rollic, an ultra-casual mobile game developer in Istanbul, for about $180 million. The latter acquired another casual game studio, Unison, also based in Turkey. High heels, a casual game created by Uncosoft, topped the multinational free-to-play list during the pandemic.
Pictured: Uncosoft's High Heels topped the multi-country free-to-play list during the pandemic
The innovation of the external team has brought good performance to Zynga's earnings report. According to the third quarter of 2021 financial report, Zynga revenue reached $705 million, an increase of 40% compared to the same period last year. Total bookings also increased by 6% to $668 million compared to $628 million in the third quarter of 2020. Zynga attributed record revenue and bookings to Rollic's ultra-casual portfolio.
Take-Two borrowed the power of mobile games
Buyer Take-Two, based in New York, is known for its computer and console game franchises, and owns studios such as 2K Games and Rockstar Games, including the Grand Theft Auto series and the Resident Evil series. Among them, Grand Theft Auto V, released in 2013, is one of the best-selling video games of all time. It is said that 155 million copies have been sold worldwide.
In recent years, Take-Two has expanded its business into mobile games through a number of acquisitions, such as Playdots, SocialPoint and Nordeus.
In addition to valuing the production and distribution experience in the field of mobile games, Take-Two CEO Zelnik said that another attraction of Zynga is that it has its own advertising platform. Game makers often rely on third-party platforms rather than internal advertising platforms.
Take Two said in the acquisition announcement that Zynga has the potential to make mobile games based on the Take-Two console and computer franchise.
"A key opportunity is the possibility of bringing our core intellectual property into the mobile business, which will be the first time." Zelnik said on a conference call with the acquisition news. In recent years, people's willingness to spend on mobile games has been strong.
Considering that Zynga's quarterly revenue was in the $600-700 million range in the most recent year, today's acquisition prices have come as a surprise to some observers.
Eric Gordon, a professor at the University of Michigan's Ross School of Business, commented on the media, "This is a huge valuation for a company that does not continue to generate profits or new blockbusters." ”
"But the [M&A] trend doesn't stop there. Many console developers will find it not easy to make mobile games. D.A. Davidson analyst Francograndha thinks.
He also said that cryptocurrencies and metacosms are potential growth opportunities, but mobile gaming has proven to be a path to go.
Take Two assessed that according to IDG consulting data, mobile games will reach $136 billion in net bookings in 2021, becoming a fast-growing segment and is expected to continue to maintain a compound annual growth rate of 8% over the next three years.
Upon completion of the merger, Take Two will expand its board of directors to 10 people, bringing in two new directors from Zynga.
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