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To expand its boundaries, Zynga allies with Japan's Softbank

Zynga, the maker of FarmVille and other popular social games, is preparing for an alliance with Japan’s Softbank investment firm as a way to break into the fast -growing Japanese market, VentureBeat has learned.

Japan is seeing significant growth in social gaming, even the U.S. shows signs of a slowdown.

Mark Pincus, the CEO of Zynga, had backing from a Softbank affiliate for one of his previous companies, SupportSoft.

The biggest maker of social games on Facebook, Zynga has been growing quickly. Its games are played by 252 million people every month, according to AppData. The company has seen a lot of that growth happen in the U.S., where Americans embrace Facebook in record numbers and spend playing games there, much of the time on Zynga’s games.

But now Facebook’s growth is slowing down, and the social game market has likewise paused. SecondShares, a market for trading shares in privately held companies, recently estimated that Zynga is worth $5 billion. But it noted in the risk factors section of its report that four of six major Zynga games have been declining in traffic recently. Zynga’s newly launched game Treasure Isle, which has more than 21 million users now, is the only one registering a surge in traffic.

To continue its expansion, Zynga is diversifying to other platforms, such as the FarmVille.com site, which has roughly 15 million users. And as the Softbank deal suggests, Zynga is looking at international expansions to keep its growth rate up.

Zynga has already built up a big war chest to keep expanding, raising $180 million from Russia’s DST in December. It has acquired small game developers without announcing the purchases, presumably to avoid tipping its hand to rivals. The company also knows that some of the biggest success stories in social games are in Asia, where players have taken to the model of playing games for free and paying real money for virtual goods. If Zynga wants to be a long-term player in social games, it has to expand to the Asian markets.

It isn’t clear exactly what Zynga and Softbank are going to announce. But more than one source has confirmed that an alliance is in the works.

A spokeswoman for the company said, “We are focused on building the best social game experience for our customers and have no news to announce at this time.”

[Photo: Joi Ito]


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