According to the article, “Zynga Flashes $1.8 Billion Searching for the New FarmVille: Tech”, on Bloomberg.com, Zynga, the largest publisher of mobile games is on the prowl for a new “hi-growth” hit. The enormously successful now publically-traded company is in a great position to acquire new development talent. The company has more than enough resources and no debt to speak of to go shopping. Following the successful $180 million acquisition of OMGPop, creators of the mobile game “Draw Something”, Zynga is poised to continue buying out start-ups that suit their unique, if unorthodox, business model.
The article describes the Zynga model:
“To help persuade entrepreneurs to stay, Zynga offers stock units that vest over two or more years. Unlike many Silicon Valley acquirers, the company typically doesn’t structure deals around performance incentives, or so-called earn-outs, which reward founders with extra cash or stock after their product gains a certain number of users, hits a revenue goal or meets some other business objective.”
While Zynga seems to have the resources and know-how to continue to expand their mobile game portfolio the article mentions some concerns and disagreements with the way Zynga does business. Analyst Arvind Bhatia questions the sustainability of continuing spending the large sums Zynga has been offering and the company has a done relatively poor job in keeping the talent that it recruits. Their strategy demonstrates a lot of confidence so we may just have to sit back and watch to see if their plan is justified.
Derek Clarke, April 26, 2012