Conflagration: Zynga’s OMGPOP acquisition torched nearly $500,000 a day
Presumably this isn't entirely unexpected, and the 'torching' comment is over the top. Microsoft wrote off $6.2B of their AQuantive purchase in July, assuming 2000 days (5 years plus a few months) that is $3.1M per day, roughly 6x the 'torch' rate in this article.
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).
It's harsh, but whenever I see Zynga's stock dip even lower its reassuring due to the signal it sends to smart people: what you work on matters.
I wonder how much of that write down is due to Zynga's management of OMGPOP. Their games went from fairly fun to complete spamballs (popups and constant, invasive advertising) in a matter of weeks after the acquisition. That caused almost everyone I knew who played it to stop. Draw Something has unplayable responsiveness on older Android phones after the "updates".
I haven’t played their annoying game in quite a few months (despite being addicted, despite myself, initially). I got a Draw Something email yesterday (contents: “Please? We know you love us! Here’s your username! You forgot, right? Haha! LOVE US!”) and cheerfully unsubscribed.
Edit to clarify: I paraphrased, obviously.
Did anybody else see this oddball response by the author to a compliment he got in the comments?
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.
Pardon my ignorance, but what does this mean? That Zynga will pay OMGPOP less than what we had heard? How can they do that?
(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?
I forget which venture capitalist first said it, but a very wise thought is this: if it has become easier for any single app to garner millions of users rapidly...
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.
ZNGA hasn't even been public for a year, yet their equity is now at an 80% discount from it's initial price. Not looking good at all.
Was OMGPOP acquired with cash, stock or a mixture of the two?
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).
If Zynga had been smart with OMGPOP they'd have probably made a fortune from it, but instead they did what they did to Words With Friends and killed it. Amazingly when you start dropping the quality of the game, making it increasingly spammy and introduce seriously reliability issues people aren't going to return, and there's your profit centre gone.
i wish i could wish Zynga the best, but everything I read makes the CEO, Mark Pincus, and the company philosphy seem truly awful.
very hard to believe you can go from buy to writing down half the value in two quarters. either there was fraud involved or zinga is just looking for a convenient scapegoat + one time charge for their general malaise (which is what I'd guess)
Can someone explain in simple English what a "writedown" means?
I'm not surprised.
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.
I feel sympathy for any employees who exercised their options at IPO - that stock in after hours is at a rock bottom 2.28. Hope strike price was low.
Too bad we can't talk Larry Ellison into buying Zynga so 2 steaming piles get flushed at one time.
undefined
Heh, call it Karma.
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.
