Conflagration: Zynga’s OMGPOP acquisition torched nearly $500,000 a day
thenextweb.com
thenextweb.com
The stock price was already valuing them a lot lower than their pre-OMGPOP buy so this seems more like a recognition of that in order to make their balance sheets look a bit more credible. I had stock positions invested for a while in Activision (90's) and Vivendi (early 2000's) and generally they seemed pretty random. A hit and the price would rocket up, a flop and it plummets down. That suggested to me that a 'fashion' stock (where the product was as much fad/fashion driven as it is quality/non-quality driven) is really only good for trading, not for longer term growth. Got out of both positions at a small profit but a lousy return.
Contrast that with a company like Milton Bradley though, which milked the Monopoly game concept for millions if not a few billion dollars. It seems like games are more like 'books' or 'music' or 'movies' than something more durable like a 'word processor.'
The treatment Zynga getting re-assures me that we aren't in a bubble, in spite of what some would say (although not so much now, which is nice).
Kind of a baseless argument, really. Still, has much changed? Isn't VC money still sloshing around the valley? Aren't startups starting up in ridiculous numbers? Isn't everyone and their dog an angel investor? That was my impression of where things were heading before stories about it dropped off in regularity. Even up here at the University of Calgary this year I've seen ads asking for talent to join startups, which is a first as far as I've noticed.
Or rather, their dreams are no longer grand and hard things, but weak things like becoming rich so that one can simply party it up.
edit: and obviously there are a still some who dream big, I'm talking about my impression of the average attitude out there. I hope I'm wrong.
I don't follow your logic here.
You're implying that the work done at Zynga is non-important, or is some how bad.
But plenty of smart people work at "important" world changing places and never hit huge success.
Plenty of smart people work at "non-important" places and end up hitting it big (like most year-old startup being acqhired these days).
My point is that regardless of the monetary prospects, how you choose to spend your time matters, because the only certain thing is what you are working on now, not the payout in the future.
Deciding what "matters" is a trickier than we think.
Everyone I know who was playing Draw Something stopped playing in the 2 weeks following the acquisition.
None of them cared that Zynga took over, but they cared that they were being spammed, that the same words were coming up constantly (best way to kill the game experience), and that the service degraded visibly (lost games, inconsistencies in games, server not available).
As the games involved 2 people, as soon as some of my friends found it to be a poor enough experience and stopped using it... the whole thing unravelled really fast and the whole group of friends just stopped using it.
I couldn't make sense of it: What did Zynga do to OMGPOP? Or did OMGPOP do this to themselves in trying to justify their worth to Zynga? Did they cut servers to reduce costs, whilst 'monetising' every possible angle in the app to bring in revenue?
Whatever they did, it worked. Just not in the way they wanted.
Edit to clarify: I paraphrased, obviously.
I feel depressed at how cynical I am sometimes, but there's no feeling like being wrong about something like when you expect someone to try screwing/blaming you to save money.
alexwillhelm: "The fuck are you banging on about?
I linked because that bit is one of WolframAlpha's more useful features. It's a great way to get time scale when you need it. Have fun counting by hand, you Luddite. You are right that "a lot" of journalists would not have done that. Thank god I am not one of those. Also, next time you waste my 30 seconds, have a point. Yes you fuckwit, it is in fact "MAJOR." A"
Insane.
(Sorry I'm not from around here and don't understand the "write down" language. I presume it's different than "underwrite").
Edit: from trotsky's comment I'm assuming it means they now value it for $x less than what they valued it before (what they paid for).
So how does this influence/affect the guys that came with the acquisition?
When one companies purchases another, part of the deal is often variable based on future earnings, and if the acquired company doesn't hit the projected numbers, they get less money.
The author speculates Zynga paid $180M, instead of the maximum deal value of $210M.
This is really speculation though, im my opinion.
Of course, that story is from TechCrunch ("You got your speculation in my journalism! YOU got your journalism in my speculation! Wait, you're BOTH right!"), so it may not be the definitive statement it appears to be.
A writedown (see http://en.wikipedia.org/wiki/Write-off#Writedown) means that they are revising the previously announced value of an asset they own downwards. It means the actual value of the asset has turned out to be less than they thought. It's important to investors because the value of company stock is based in part on the value of the company's assets, so if one of those assets turns out to be a lemon, the value of the company overall is less than it was, which can drive the stock down.
how does this influence/affect the guys that came with the acquisition?
The article says that the last $30 million of the acquisition price was structured as an "earn-out," meaning that to get it the OMGPOP unit would have to have met certain mutually agreed-upon performance benchmarks. If the value of OMGPOP today is that much less than it was six months ago, it's unlikely they've hit those marks, so that payment probably won't happen.
For rank-and-file employees who didn't have an ownership stake in OMGPOP, there's less impact except insofar as it shows OMGPOP not performing, which increases the chance of Zynga dumping the unit, shaking up staff, bringing in new managers, etc.
This may be referring to cdixon's "Increasing velocity" post: http://cdixon.org/2012/04/11/increasing-velocity/
It's a hugely important idea that doesn't get enough attention.
To the extent that there was a significant stock component to the acquisition, this is somewhat less bad than it looks, since Zynga's stock is down so much (though, of course, Zynga won't want to make that argument).
I could imagine Zynga turned some dials when they acquired the company that destroyed the user base.
I could imagine the game just got boring, to everyone (it did for me).
I could imagine there were some fairly impressive, but perhaps inflated, PowerPoint presentations given to Zynga, and things didn't go exactly as planned.
And I could imagine a culture clash that destroyed progress on the game, and in such a fast moving progress, standing still is as good as dying.
But mostly, I could imagine all of the above. Easy come, easy go.
I have never had an FB account, never will and will never play a Zynga game.
I deleted my Quora account when they mucked with the privacy settings.
I take my account providing pretty seriously and will not sign up for companies services if I do not like their business practices.
I have dropped many a cell carrier for these reasons as well.
In this case Zynga states:
"...$85 million and $95 million (excluding any income tax impact) related to the intangible assets previously acquired in connection with the company's purchase of OMGPOP."
So Zynga is saying that they overpaid, or that the asset is not performing as they wished, i.e. so they are writting-off the intangible value (the difference in price between OMGPop's real assets when acquired and its acquired price). In this case they are writing-down $85m-$95m of a reported $200m dollar acquisition - a 43% to 47% reduction in value.
Everytime I see a webapp like this, I always wonder to myself "where's the click".
I dont see a future for SaaS that is not targeted at people directly forking money over for it.
Why? People choose their alliances. OMGPOP and Zynga are both trying to cash in on fads without bringing much real value to the marketplace. Why should rank-and-file employees get more sympathy than the big fish running the show? They chose to do the jobs they did.
If you tell a kid "tie your shoes, honey," and he just takes off running, he could well face plant. If he does, you can still feel sympathy for him, and you can still be comforting. But you should also say, "Well, this is why keeping your shoes tied is a good idea."
Nobody's born knowing that delivering user value is the key to business sustainability, and there's a lot in American culture that teaches other lessons. If I judge by the people getting on the Zynga short bus, a lot of their employees are pretty young. Hopefully this is where they learn something about picking employers.
Nobody knows everything. We all have lessons to learn. We all die with many lessons unlearned. Refusing to have sympathy for suffering just because the cause of the suffering is obvious to you is bad for everybody. Yourself included.
what the fuck Alex Wilhelm?
Kixeye, whilst having its own PR issues, has proven that FB gaming can be quite profitable and lucrative.
Luckily they don't have quite the bad reputation Zynga has for its practices - even though the CEO is a douchebag.
All of this Zynga drama is, to me, is even more an indication on how criminally wrong the FB ipo was; Zynga did the smart thing in IPOing first had the information about FBs worth would have been true - but they suffer tremendously based on how bad the ipo was...
The OMGPOP buy was a toss of 200MM on the speculation that FB was going to out goog the goog....
I am still surprised there really havent been any claims of criminality/litigation.
http://venturebeat.com/2012/10/04/kixeye-fires-four-after-in...
Well good for them, that was the right thing to do. I hope the folks here that were attacking the victim get the news that the victim was not really fabricating the whole thing as they were implying.