Looks Like Zynga Just Bought OMGPOP For $200 Million

http://allthingsd.com/20120321/looks-like-zynga-just-bought-omgpop-for-200-million/

by akharris • 14 years ago

163 154 14 years ago

beatle3• 14 years ago

amazing. everyone i know loves draw something. congratulations.

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.

dfxm12• 14 years ago

What I like about is that everyone wins. Both & the person you are playing with get a reward (coins) for a successful guess. There's no cheating to worry about, no sore losers/winners, etc.

Also, having a little bit of coins may or may not entice you to get more (which means bugging more friends to play, or busting out the wallet).

dinkumthinkum2• 14 years ago

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.

tkahn64• 14 years ago

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

Lewisham• 14 years ago

It's probably a bit of everything; talent, future revenue, and market consolidation, just like the With Friends purchase was.

tptacek3• 14 years ago

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

tkahn64• 14 years ago

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?

apawloski• 14 years ago

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• 14 years ago

"Play Draw Something now and earn Farmville points!"

patio11• 14 years ago

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.]

jianshen• 14 years ago

As one of my close friends said recently, "yet another Facebook token that Zynga will soon own."

chimeracoder• 14 years ago

> 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).

netvarun• 14 years ago

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• 14 years ago

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• 14 years ago

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

brandall10• 14 years ago

That's at this moment in time for one product, which is currently at the top of the iOS charts.

untog2• 14 years ago

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.

bitsoda• 14 years ago

The hard route? OMGPOP was incorporated in 2006, Zynga in 2007. They've been trying their hand at online games for a while now. This isn't an overnight success.

untog2• 14 years ago

No, it isn't. But up until recently OMGPOP was strangely hesitant to make mobile games (as relayed to me by a friend who used to work there). Look at their entries in the app store- they have three games.

They went in a new direction and it paid off. I would have been interested to see them try to go further with it.

Reebz• 14 years ago

The OMGPOP team is probably reading this from their Ferrari's as they are parked outside the Yacht dealership.

samstave2• 14 years ago

Really sad actually.

The only reason why Zynga bought them is because Draw Something is so high profile, that there was no way Zynga could steal it.

As I said over on Quora, this really sucks as Zynga is a despicable company.

Surely, the folks at OMGPOP had been worried that Zynga would try to steal this game, as they have done every one else -- and I would be interested to know what they thought of Pincus' character prior to the purchase.

At least they get to stay in NYC and be no place close to Pincus.

joejohnson4• 14 years ago

Why do you think Zynga is a despicable company?

furyofantares• 14 years ago

I hate Zynga games because of how buggy and slow they are.

But it's not like Zynga doesn't add value. The examples I've seen of Zynga copying the base of other games also have them making significant adaptations to better fit the market. Zynga really understands the market a lot better than many of the little guys, and they add lots of value to lots of users that way. I'm curious if there are counterexamples.

mkramlich• 14 years ago

the vast majority of all computer and board games that exist are not made by Zynga, including 99%+ of the masterpieces. so I'm not too worried about one particular computer game company being bought by Zynga. The most key people, the game designers (to the extent they have them) will be free to create new games again, whether at Zynga or elsewhere after leaving.

donky_cong• 14 years ago

Seriously ? Been losing money for 5 years. Got one hit that makes money (not $200M money) and they sell.

Excellent choice by OMGPOP

beatle3• 14 years ago

yeah. and they can always use part of that money to start another company.

dc-tech-fan5• 14 years ago

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• 14 years ago

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.)

davidwparker• 14 years ago

Fun times. I actually played "telepictionary" aka "telestrations" for the first time probably back in 2007. It's a blast. Good to see someone made it digital.

divadong• 14 years ago

Just spent an hour playing this awesome game! Really funny :) Great work!

qeorge• 14 years ago

I haven't laughed out loud from a website in a long time. This is really well done. Nice work.

ricree• 14 years ago

A lot of fun, but the sheer number of penis drawings and descriptions really limits who I can introduce this game to.

tomjacobs• 14 years ago

Are you going to make an iPad/iPhone version?

phillmv• 14 years ago

Make it into a mobile app that lets me sync with friends on facebook or twitter or w/e.

omi• 14 years ago

Who the hell plays this garbage?

jamesjyu• 14 years ago

Pretty much everyone I know is addicted.

matdwyer2• 14 years ago

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• 14 years ago

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

lusr• 14 years ago

I've never played this (first time I've heard of it), but it sounds like a game I used to play about 5 years ago online with people on IRC/Kongregate chat. I used to love it and spend hours playing it. Boy do I feel dumb now not remembering it when the mobile app craze started!

zinssmeister• 14 years ago

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 ;)

leoedin• 14 years ago

I can't comment on their mobile offerings, but OMGPOP has been running a fairly unique web-based online gaming platform for years. They certainly had a fairly large userbase when I was using the site a couple of years ago, but I guess the facebook and mobile apps were the ones that really brought users.

The web platform has made a number of moves to monetise in recent years, putting more and more features behind payment-based tokens. It'd be interesting to know what proportion of their income comes from the web gaming platform.

pduan2• 14 years ago

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• 14 years ago

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?

ndespres• 14 years ago

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!

antidaily• 14 years ago

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

j_baker• 14 years ago

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.

jpdoctor5• 14 years ago

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

Which deals do you think they get the long end of the stick?

paul5• 14 years ago

Talent acquisitions. Investors are often left with close to nothing.

paul5• 14 years ago

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.

jpdoctor5• 14 years ago

> 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.)

tomkit• 14 years ago

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!

joejohnson4• 14 years ago

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.

gutini• 14 years ago

Does anyone else question Zynga's growth model? http://www.fool.com/investing/general/2012/03/21/welcome-to-...

gyardley3• 14 years ago

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• 14 years ago

Charles left a year ago.

gyardley3• 14 years ago

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

jedc2• 14 years ago

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...

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.)

wilfra5• 14 years ago

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.

ootachi• 14 years ago

Founders often don't have a choice as to whether to accept buyout offers. In the case of OMGPOP, which had received a ton of VC funding and struggled for years until finally finding some success, I can definitely see why VCs would want to force a sale. (In fact, I wouldn't be surprised if VCs generally think that "make games for iOS" is not a business model that is capable of the kind of returns they need anymore, and they want to avoid taking further risk on that model—hence they forced the sale.)

abuzzooz• 14 years ago

There are always two sides for each story. You hear about a lot of successful companies that rejected a buyout, only to die in obscurity. I guess it all depends on the shareholders and what they want to do. Sometimes it's good to take home a good chunk of profit and look elsewhere.

andywood• 14 years ago

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.

joejohnson4• 14 years ago

Facebook rejecting buyout offers from larger companies not currently in the (at the time rather small) social space is not the same as OMGPOP rejecting a lucrative offer from a major player in a saturated market.

kooshball• 14 years ago

> Great for the VC's and angels - bad for the founders and early employees.

Actually PG has publicly stated that it's almost never good for YC for a startup to exit early. I can't seem to find the comment though.

pinkton2• 14 years ago

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

I'm fairly sure that YC doesn't recycle the money off from wins, but instead returns it to their investors. YC is a for-profit fund that uses other people's money to give about $20k cash and $20k of training in exchange for 6% of their company.

YuriNiyazov• 14 years ago

do you have evidence? traditional vc funds don't recycle their money, but yc is not a traditional vc fund

jedc2• 14 years ago

When I wrote that I didn't mean it in a strict accounting sense, but in a holistic sense. ie, I don't see PG and Jessica buying a yacht with their YC earnings, but I can see them plowing the earnings back into the program. :)

padobson• 14 years ago

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.

jpdoctor5• 14 years ago

> 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.

wilfra5• 14 years ago

"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.

ido• 14 years ago

How do you figure it's only the beginning of a hocky stick growth? Draw Something might just start lose steam in a couple months, the game market is very hit-oriented and a lot of these games don't stay on the top of the chart for very long.

The game industry graveyard is littered with 1 hit wonders that never managed to repeat their success after a single massive home run.

pclark• 14 years ago

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.

wilfra5• 14 years ago

"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.

digitallimit2• 14 years ago

What the hell is "Games List?"

mdonahoe• 14 years ago

"Nobody is ever going to compete with Zynga if people cash out to them the first chance they get every time."

NimbleBit (TinyTower guys) rejected a Zynga acquisition offer. I hope that most game companies hate Zynga too much to allow themselves to be acquired by them.

I guessing that OMGPOP's investors pushed heavily toward this solution after years of little traction.

Jach2• 14 years ago

Some people have the belief "I'm going to work real hard for X years and try to make enough so that I don't have to work at all if I don't want to for the rest of my life." I don't know if this is what the CEO thinks, but if it is, I don't think it's cowardly.

potatolicious• 14 years ago

> "Deal of the century for Zynga and a horrible, cowardly business decision for them to sell."

You realize that OMGPOP is founded and staffed by real human beings, who are probably reading these threads today, right?

I can respect the opinion that selling to Zynga was the wrong call - but your tone and wording is entirely inappropriate.

If the founder and employees of the company were sitting across the table from you, would you still call them cowards?

wilfra5• 14 years ago

Fair enough. I could have made the same point with better wording. I removed that sentence.

fwiw I was talking about the investors/CEO etc, the people who made the decision on the sale. Not the employees.

dinkumthinkum2• 14 years ago

I just can't agree with you. Not selling could have been a big gamble in about 8 months if the fad cools down. I think it's a gamble for Zynga as well but they have the pockets to make such a gamble. The OMGPOP team has been around for awhile and have not had great success so I get it.

methoddk• 14 years ago

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

andrewhillman2• 14 years ago

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

andrewhillman2• 14 years ago

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.

hipsterelitist• 14 years ago

It actually wasn't single founder when YC funded them, Dan Albritton was the other founder. Really nice to work with them back in the day.

lazerwalker• 14 years ago

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• 14 years ago

I would guess they will probably go with 'Draw Something With Friends'.

digitallimit2• 14 years ago

Better yet, Draw With Friends.

pointpointclick• 14 years ago

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

rdl4• 14 years ago

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

badclient• 14 years ago

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.

dkrich7• 14 years ago

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• 14 years ago

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.

dkrich7• 14 years ago

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.

alaskamiller• 14 years ago

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.

nixle• 14 years ago

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.

ivankirigin• 14 years ago

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• 14 years ago

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

ThePinion• 14 years ago

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• 14 years ago

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.

Looks Like Zynga Just Bought OMGPOP For $200 Million

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