In March 2012, Zynga, the casual gaming titan, acquired OMGPOP, a small firm which had developed the breakout hit Draw Something. It paid $180m. At the time, around one billion games were being played each and every week on the app, which had gone from being iOS only to having successful Android and Facebook ports, all with a very small team behind it. At the time, there was some grumbling that Zynga’s offer was backed up with the implicit threat that it would simply clone the game if it didn’t get its way, but for the most part, OMGPOP seemed happy.
Then it went downhill.
In October, Zynga wrote off $95m related to “the intangible assets previously acquired in connection with the company’s purchase of OMGPOP” when filing its financial results for Q3 2012. And now, the company announces (under the fantastically euphamistic headline “Zynga Announces Substantial Cost Reductions“) that it is laying off 520 employees, including the entirety of its LA, Dallas and New York offices. The New York offices being the rebranded OMGPOP offices.
In other words, the value of OMGPOP has declined from $180m to roughly $0m in just over a year. Zynga still has the company’s IP, of course, and released Draw Something 2 to moderate reception in April (peaking at #3 in the iPhone games charts, it would be a solid performance for anything but the sequel to the biggest iPhone game of last year), so the withered husk of OMGPOP is still worth something to the company. But the purchase is definitely one of the first proofs of the astronomically inflated valuations of the second web bubble.
It’s hard to divorce the travails of OMGPOP from the wider problems of Zynga, though. Certainly the former was ludicrously overvalued, acquired at the peak of its popularity even as many were pointing out it was far more fad than evergreen. But Zynga has experienced its own difficulties. Earnings from its flagship Farmville game have plummeted, even while other games have failed to pick up the slack; daily active users have slid from 72m to 52m in a year; and before its latest quarterly results, it shuttered four more underperforming games, The Ville, Dream Zoo, Empires & Allies, and Dream Zoo (the latter made for the Chinese market). Whether or not Draw Something was an unrepeatable success before the acquisition, Zynga doesn’t look to be the best company to have shepherded it anywhere at all.
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