Looks Like Zynga Just Bought OMGPOP For $200 Million
allthingsd.com
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Oh well.
They went in a new direction and it paid off. I would have been interested to see them try to go further with it.
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.
http://www.businessinsider.com/how-zynga-is-just-like-micros...
Don't forget Tiny Tower http://www.forbes.com/sites/insertcoin/2012/01/25/everything...
If Mark Pincus was more open about it and said "We're better marketers, business builders, and job creators than the original game creators. Yeah we copy their games, we might not be original and creative but we're a lot more valuable for the market, and for the consumer." we'd see Zynga in a different light. It's the fact that he's completely delusional about it.
Here's a quote from Mark Pincus, "I am proud of the ethical and fair way that we've built this company.". That's what makes Zynga despicable. And Pincus a scary person. He's obviously an intelligent businessman but he's so caught up in his own bullshit that he actually believes it. That's what makes it frightening.
>>Here's a quote from Mark Pincus, "I am proud of the ethical and fair way that we've built this company.". That's what makes Zynga despicable.
That Mark Pincus claims his company operates in a fair and ethical way (which you disagree with) makes Zynga despicable?
I feel like the Zynga bashing is a product of the feedback loop that is tech news. Just a few years ago, Zynga was lauded as a great company, and Pincus as a great CEO: http://crunchies2010.techcrunch.com/ How quickly popular opinion can change. I wonder if a lot of the hate stems from Zynga's success in a space where many entrepreneurs had invested heavily and ultimately failed.
"Ideas are cheap, it's the implementation that really matters."
The games that Zynga copies were not "ideas" they were IP. And Zynga wasn't inspired by them. Zynga flat out, straight up, cloned them.
When you work your ass off, sacrifice time with your family, your savings, and invest it into building a profitable flash game online, iterating week after week until you get the formula just right. Only to have a bully come by and clone it. That my friend, is NOT borrowing. That's NOT implementing an idea differently. That is theft. Those are unfair business practices.
People like me are angry at Pincus because his method, if it becomes popular, could completely fuck up the startup ecosystem.
What if ALL of silicon valley starting acting like Pincus? Instead of acquiring sites and IP fairly, they simply cloned them. What if Google simply cloned YouTube div for div, color for color, feature for feature? What if Amazon cloned the technology used in Kiva's robotic logistics system instead of acquiring the company? What if Microsoft cloned skype and its algorithms instead of acquiring it? This isn't Github where you can fork someone else's work. These are companies that people put their lives and savings accounts into.
Here's how it works:
1: Crazy young entrepreneurs risk everything to find a new profitable business or build a new product. Because they're small they can easily pivot and reiterate day after day and evolve their product/solution/business faster than a big company.
2: They find something that works, VCs jump on board to grow the business/product/service and the crazy young entrepreneurs who worked their asses off expand their business/service/product.
3: Big players like Microsoft, Apple, Google, Facebook, Amazon can use their muscle and dollars to acquire the startup and assimilate it into itself and offer this unique new service/business/product to their established customers. Thus benefiting the entrepreneurs who try new things, the investors who help grow new things, the big players with lots of established customers, and the end users. So many people benefit from this ecosystem.
What Zynga does is dangerous. It basically gives the little guy the finger, steals their hard earned IP and doesn't give anything back. This is what makes it despicable. Most entrepreneurs keep their voice down about it because they don't want to look like angry disgruntled losers who are envious of a successful entrepreneur. But if you don't call it out and say anything about it and on top of that give Pincus a CEO of the year award... That hurts all of us.
On top of all this, Zynga sees nothing wrong with what it does. Again, if they were open about the whole thing they'd be seen in a slightly better light. Still unethical copycats that hurt an ecosystem but at least honest about it. If they did the right thing and properly acquired the games they clone, we'd all be cheering Pincus on.
Big companies clone each others IP all the time. What do you think Bing, Android and Google+ are? They are just clones of other peoples IP...
Zynga isn't buying this for the IP, nor is the IP itself what is truly valuable. They are buying it for the traction. When some small game company builds a tiny game that never takes off in any meaningful way and Zynga clones it and instantly creates something 10000x more popular than the original ever was, that is not the same thing. The smaller company had no userbase, community and traction to buy therefore they were not valuable to Zynga in the same way that Draw Something is.
What you reference are not clones. They are services in the same space with utterly different UI/UX/features and an /attempt/ at differing value props.
ZYNGA MAKES EXACT CLONES - there is a difference. If you are not familiar with the topic, don't comment as though you're having some new profound insight.
I don't understand what people are missing about Zynga. I feel like I am talking to people who have about zero historical context of shit that has been happening in Silicon Valley.
In China, the big players crush small startups by cloning them within a few days of them getting popular, and in some cases deploy dirty tactics against them (I'm thinking of an antivirus being interfered with on users' computers because it was removing part of a giant's software - was Tencent involved?). The point is that in China, everything gets cloned really quickly and the big players keep winning the market by pushing the new services out to their existing users, who don't seem to care that much about not letting one company dominate. It's a horrible model that I believe is entrenched by the big boys having influence with those in power.
How come this doesn't happen in the US, where copying does take place, but less directly and quickly? It's not like quickly copying a startup idea is illegal, and anyone can claim they've been working on something similar to a new idea for a while. Is it perhaps because there's a diversity of channels and forums by which new startups can market themselves, whereas in China everyone uses Baidu/QQ/Renren/Weibo and some of those sites possibly block out competitors' marketing?
I don't know, just thinking out loud and looking for more-informed opinions.
What's personally depressed me about all these mobile games and their companies is they're all just circle-jerking and ripping off the same games that came out 10-20 years ago as well as digitalizing games that have been around for hundreds of years, and many of them I think "I could clone at least 90% of that in a weekend"... I don't think there's anything morally wrong with them, but it's not my cup of tea for what I want to play or how I would want to make money and I do sense a lack of "taste". I think OMGPOP got their payday, leave them alone. But I also think if you're in the business of what can be easily duplicated in terms of effort, as opposed to flat out copying files, prepare for the big companies to win.
In light of pg's recent article amounting to "information wants to be free" and there's nothing we can do about it...
How, exactly, is what Zynga is doing different from pirating films, music, or software? In both cases, it seems to me that the original creator hasn't lost anything. They still have their game. They still get to say "they" made it. Etc.
Are we really only against pirating when it helps big companies and not when it hurts them?
If you don't think Zynga is a despicable company than I can't imagine you believe this is such a thing.
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.
I used to really like Words with Friends. Then zynga did an app update where the icon was more about the zynga logo than the Words with Friends logo. (reverted after user backlash) Then it was more and more 'buy our other games!' notifications. Then the facebook integration slowed the app down so much it took 3-4x as long to actually play the game.
Yesterday I was saying to myself. Draw Something is so much better than Words with Friends, because it doesnt throw ANY of the zynga shit at me.
Now I wake up and see this on HN... so upsetting.
I hope somebody does the reverse thing of Zynga and builds a LIGHTER, Apple-like version of it, I'd jump ship in an instant. Especially after going through the painful WWF fiasco. It might even be possible to get an App Store spotlight by being more "loyal" to Apple's way of doing things, and obviously not being portable.
Excellent choice by OMGPOP
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.)
We are actually working on improving Doodle or Die for mobile safari right now.
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.)
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.
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.
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.
Also, I expect that the limited partners of YC have given them unusually flexible and favorable terms.
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.
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.
$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?
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.
What.
[edit to add: Not currently playing any Zynga games. League of Legends pushes my buttons much better.]
Congrats to Charles and the team at OMGPOP!
Considering they just spent 6 years working in the sector, what they think of Zynga's future is telling.
It also signals whether znga thinks its stock is overvalued or undervalued.
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).
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.
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.
Given the number of developers working on producing the next big hit in games, there will be a Words With Friends or Draw Something released on an ongoing basis. Why would Zynga get in the business of buying up these companies after the hits have been produced? Seems like a losing business model.
- Cross promotion
- platform leverage
- historical performance of similar games
- and all of this operating in a market segment (mobile gaming) that is exploding not contracting.
I don't think Zynga gains any long-term competitive advantage from this. Most people don't play games because they know the company that produces them, they play them because they are a fun novelty. Games are necessarily one-off successes at the mobile/social level, because there is not really a storyline or steep learning curve, so I believe that a company that produces one successful game is no more likely to produce another than a company with no previous successes, assuming equivalent technical know-how.
This reminds me a lot of when Mark Cuban sold Broadcast.com to Yahoo. Yahoo execs overreacted to the potential of the technology that Broadcast had developed, and were drastically overpaying out of fear of missing out. Not a great position to make acquisitions from.
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?
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.
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.)
It absolutely screws the employees when the common is reverse split, but the preferred-to-common conversion factor remains the same.
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.
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.
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.
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?
(The true definition would be "and all the members of the team are reassigned to a different project", but that's hard to know from the outside).
200MM for a talent acquisition seems high which is why I also wondered whether it was to capture future revenues from Draw Something. It was an innocent question.
* Powerset. ~$100mm, July 2008, to Microsoft.
* Friendfeed, ~$50mm, August 2009, to Facebook.
* Slide, $228mmm August 2010, to Google.
(Takeaway: sell your company in the summer.)
There's probably a good business model in being an "academy startup" which both shoots for the moon AND is a great place to work, builds skills, and can do a talent sale (or tech sale, maybe) if the product is unsuccessful, building that into the company from the start. That's probably what I'd do, especially if it were based outside the bay area and maybe strongly allied with a great school but lacking other good local employers (Waterloo, CMU, etc.)
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.
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).
The only thing that infuriates me is when people know what it is but can't spell the word and then give up.
$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.
The game industry graveyard is littered with 1 hit wonders that never managed to repeat their success after a single massive home run.
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.
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.
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.
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?
fwiw I was talking about the investors/CEO etc, the people who made the decision on the sale. Not the employees.