Google has reportedly secretly invested $100- $200 million in social gaming firm Zynga, according to a report by Techcrunch.
We have confirmed tonight that the details of the deal are correct, through a source familiar with the matter.
The investment is on top of other deals that have brought Zynga almost $500 million in capital in the past year. The deal reportedly closed a month ago and is part of a strategic partnership still being negotiated. Google itself made the investment, not Google Ventures, and Zynga could be part of Google Games, a new platform launching later this year.
Google Games will be part of a larger social network that Google is launching to compete with Facebook, and it will bring in users through all of Google’s different connections to users, such as Gmail. Hence, Google Games could become a very serious contender in the social game space in a short period of time, our source tells us.
Zynga will add its games to Google Games, giving the platform an entry point into social games and the start of the kind of social graph — linking friends to friends — that Facebook has created. Sources told Techcrunch that Zynga’s revenues for the first half of 2010 will be $350 million, half of which is operating profit. (This is despite a steady decline in Zynga’s actual user numbers; that’s because Zynga is improving how it makes money from the users who choose to pay for virtual items in its games. While a small percentage of users pay in Zynga games, Zynga benefits greatly when it increases its conversion of free users to pay users).
Zynga continues to work on high-level strategic deals. It has a new partnership with Softbank, which reportedly invested $150 million into Zynga as part of an alliance to take Zynga’s games to Asia; it announced a partnership with Yahoo and it recently ended a feud with Facebook by striking a five-year agreement to use Facebook Credits, a new virtual currency system.
Google and Zynga have not responded to Techcrunch’s request for comments. Zynga declined comment to me. Google recently hired a games evangelist, Mark Deloura, but it’s unclear just how serious its Google Games effort will be. The company has listed a job opening for a product lead for Google Games. The description says the “product management leader, games” will be “responsible for developing Google’s games commerce product strategy and partnering to build and manage the business with a cross-functional team.”
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