Zynga said moments ago that it has acquired Texas-based mobile game company Newtoy, the maker of games such as Words with Friends on the iPhone.
The price was not disclosed. The move shows that Zynga, which is big on Facebook, is serious about becoming a big presence in mobile games too. Five months ago, Zynga launched FarmVille on the iPhone, and the game has since been downloaded more than 7 million times. Overall, Zynga mobile games have been downloaded 10 million times. That’s small for Zynga, and the company wants its mobile side to grow faster.
The San Francisco company has become the largest social game company, with more than 215 million monthly active users playing its games, mostly on Facebook. Earlier this week, it announced a groundbreaking deal with American Express, which will let its cardholders buy Zynga virtual goods with their frequent-purchase rewards.
David Ko, senior vice president for mobile games at Zynga, said in a conference call that the company’s goal is to take its games to every platform so users can play anytime, anywhere. So far, the company has acquired seven companies in seven months, but none were as focused on mobile as Newtoy.
McKinney, Texas-based Newtoy will become the Zynga With Friends studio, headed by co-founders of Newtoy, brothers Paul and David Bettner. Paul Bettner will become general manager of the studio while David Bettner will become director. Words with Friends, a Scrabble-like game for the mobile market, has been downloaded more than 12 million times to date. Other big titles are Chess with Friends and We Rule. Newtoy has 23 employees and was founded in 2008. The Bettner brothers had previously made big-budget PC and console games, including Age of Empires and Halo Wars.
Ko said Zynga would try to increase downloads for Newtoy titles through cross promotion with other Zynga games.
The acquisition has also set up an interesting competition. In October, Japan’s DeNA acquired iPhone game maker Ngmoco for $403 million. That price was something like 13 times revenues — a very high price. But DeNA is on a billion-dollar run rate with its business on mobile phones in Japan, and it is intent on expanding to Western markets for social mobile games.
Zynga has made global expansion a big priority as it searches for ways to become less dependent on Facebook. The company has to diversify its risks and expand to new markets. A couple of weeks ago, the company announced that it would launch its newest game, CityVille, in five different languages. CityVille went live last night.
Zynga is a privately held company with more than 1,300 employees. It has seen extremely fast growth in nearly four years. The company has raised hundreds of millions of dollars from major investors such as DST, SoftBank, and Kleiner Perkins Caufield & Byers. Secondary trading on SharesPost (where employees sell their stock to cash out early) pegs Zynga’s value at $5.6 billion. Revenue for 2010 is expected to surpass $500 million, according to Inside Network. Roughly 10 million Americans play FarmVille every day.
But the dependency on Facebook is a big risk for Zynga. In any given week, Zynga can lose 10 million users or gain that many. The company really took off in June, 2009, when it launched FarmVille, a casual farm simulation that users play for minutes a day. The players have been fickle; FarmVille’s audience has shrunk from 83 million monthly unique visitors earlier this year to 53.7 million. Along the way, Zynga has been marketing its other games to FarmVille players. So even if those players stop playing FarmVille, they may move on to other Zynga games. The game is available for free, but users pay real money for virtual goods such as tractor fuel.
The company has expanded to Japan, but it will be interesting to watch if it can come out on top there. There are a lot of big Japanese mobile social game companies, such as DeNA, which have entrenched positions. U.S. rivals such as CrowdStar are also moving into the Japanese market. To ensure success, Zynga raised money from SoftBank and created a joint venture, Zynga Japan, to accelerate its entry into the market.
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