Zynga is in talks to acquire OMGPOP, the maker of massive hit Draw Something, according to a source with direct knowledge of the discussions. It’s my understanding that the talks have not yet entered the more advanced, exclusivity stage because there are still other Japanese buyers like GREE that are interested in the company.
When asked for comment, Zynga said it does not comment on rumors or speculation. Given that OMGPOP has raised around $17 million to date, I’d expect the price for this deal to be in the $150 to $250 million range. (Update: Some readers are asking about the price. So I did confirm that range with two sources who have knowledge of the talks. Plus, Om Malik is also hearing about a bid in the $200 million range. Basically, if OMGPOP gets too aggressive with its demands, then it no longer makes sense for Zynga to buy rather than build. Then on the lower end, the deal would probably need to be $150 million at minimum so that the deal clears the board of directors.) In emails over the weekend, OMGPOP chief executive Dan Porter also didn’t answer questions about interest from Japanese buyers like GREE or DeNA.
If it did happen, it would be Zynga’s biggest publicly disclosed acquisition to date. Zynga’s track record is mostly in acquiring small teams for a talent-price range of $5 to $20 million. But it did make a fantastic deal in late 2010 to buy Words With Friends-maker Newtoy for $53.3 million in cash and stock — a price that looks positively low in retrospect. After buying Newtoy, Zynga was able to double Words With Friends’ daily active users in 120 days. By the time it had filed for a public offering, Zynga had grown its mobile footprint tenfold, largely on the back of Newtoy’s titles.
For Zynga, this is a question of buy or build. On the one hand, Zynga could launch a competing title like “Draw With Friends” or as one intrepid commenter suggested last week, “Doodles With Acquaintances.” But that means it would come several months late to the market and then split the market with OMGPOP. This has happened with several other genres of games that Zynga has entered like animal care-taking and tower titles.
Alternatively, an acquisition at the right price could be a big win for Zynga. “Draw Something” is an ideal fit for Zynga’s “With Friends” line-up. Over the past year, the former Newtoy team has launched “Scramble With Friends” and “Hanging With Friends” among other titles. If Zynga scooped up “Draw Something,” it could take the game’s existing base, grow it further and then use it to cross-promote future mobile gaming titles. “Draw Something” has racked up more than 30 million downloads in five weeks.
Plus, Draw Something has been such an unexpected hit that it’s taking some of the wind out of Zynga’s momentum on mobile. OMGPOP’s title just became the largest game on Facebook by daily users last week. So an OMGPOP acquisition could send the right message to investors that Zynga is keeping its foot on the gas pedal as it expands beyond the Facebook platform.
This story is developing….