Comment by pclark | Hacker News Reader

Comment by pclark | Hacker News Reader

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Firstly they didn't pay $180mm for a drawing game, they paid $180mm for a company of 40 skilled employees, a back catalogue of web games (Draw Something was first a web game, that was ported to mobile. Imagine what that team can apply to their other assets.) and a wildly popular mobile game that is making six figures in revenue each day.

If you assume that 40 employees - a close knit team - works out at $1mm in value per head over 4 years, that is $40mm. If you consider that Draw Something is making, say, $200,000 a day in revenue - that is $1.4mm revenue a week. $5.6mm revenue a month. $67mm revenue a year. That is for the first release, what if this is the next Angry Birds? imagine the value of that audience to up-sell new titles, new micro-transactions, and so on.

Suddenly it looks cheap if you consider the massive popularity of Draw Something, this is a game that everyone loves! For Zynga, a publicly traded company, this matters. It's important to look like you're responsive to potential killers (mobile is something Zynga does not focus on much yet, but need to.)

And we haven't even mentioned the fact that OMGPOP are OMGHOT right now! Imagine the premium you'd have to pay for this company, they must be flooded with VC term sheets ("yo raise $40mm from us and give yourselves $20mm.") OMGPOP can turn this into the Zynga of Mobile. We've already valued the company at nearly $100mm from the team and singular game, a 2x multiplier doesn't seem ridiculous when you think about it.

OMGPOP will be to Zynga what the YouTube acquisition was to Google: huge.

the nytimes article pointed out that they created 35 games, most of which I assume aren't close to being as popular and successful as draw something. Also, there were already a couple of pictionary games on the app store, charadium and depict that are quite similar. So this just feel like a fluke. The developers themselves were surprised at the success.

If this is a fluke, why would anyone expect the developers to be able to replicate the success on other games in the future? I think I read somewhere the current run-rate revenue of draw is around 100k a day. But you would expect that to tail off when it reaches saturation. Probably most of that comes from the initial purchase, rather than in game purchases. So you're looking at more than 6x of current revenue which will decrease over time, just to break even on the purchase, and not counting expenses.

Don't get me wrong, I'm sure the developers are talented, and they deserve getting paid. The only people losing are the shareholders of Zynga, and less the management, since they've been dumping the stock. I think Zynga is probably under a lot of pressure to diversify it's revenue away from Facebook, as well as grow the revenue to justify it's valuation.

Comparing acq of OMGPOP to Youtube is just silly.

This chart illustrates the exact opposite of Zynga shareholders losing something: https://twitter.com/#!/nabeel/status/182821510493384704 and also Zynga is under a lot of pressure to diversify into other markets, just like every other business in the world. Mobile is an obvious huge market Zynga can dominate now.

I've done a lot of game design/development both as a hobby and semi-professionally. I have a rule of thumb for when some person/company says they've created 35 games: almost all of those will have been clones of other games they've played before. Just with superficial differences and tweaks. Almost always what happens is a person/team just re-implements it in a fresh codebase they control. If this is true in OMGPOP's case, it would mean they'd be a perfect fit for Zynga, given their modus operandi discussed so many times on HN recently.

I have another rule for computer/web games in particular. If someone says they've created 35 games it almost always means their small simple Flash games. And again, almost always clones of some other game that already existed. It's very very rare that someone truly designs an original game, from scratch, whether a computer game or board game, etc.

Taking quick look at OMGPOP's site... let's see, clones/reimpls of Checkers, Connect Four, Missile Command... I'll stop now.

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