Kind of sad. I mean, congratulations to OMGPOP, but I'd really like to see a decent competitor to Zynga out there. Their games are slow, buggy and overly instrusive, but no other company has the kind of traction they do. OMGPOP could have taken the hard route and built themselves up from the success of Draw Something.
The only reason why Zynga bought them is because Draw Something is so high profile, that there was no way Zynga could steal it.
As I said over on Quora, this really sucks as Zynga is a despicable company.
Surely, the folks at OMGPOP had been worried that Zynga would try to steal this game, as they have done every one else -- and I would be interested to know what they thought of Pincus' character prior to the purchase.
At least they get to stay in NYC and be no place close to Pincus.
The hard route? OMGPOP was incorporated in 2006, Zynga in 2007. They've been trying their hand at online games for a while now. This isn't an overnight success.
Try Doodle or Die – it’s independently run by four random guys (disclaimer: i’m one of them). It’s more like Telephone than Pictionary. Much more freedom and the results are hilarious.
the vast majority of all computer and board games that exist are not made by Zynga, including 99%+ of the masterpieces. so I'm not too worried about one particular computer game company being bought by Zynga. The most key people, the game designers (to the extent they have them) will be free to create new games again, whether at Zynga or elsewhere after leaving.
So many great companies and so many early exits. Great for the VC's and angels - bad for the founders and early employees. And the users. Imagine if Heroku, reddit and others had stayed independent.
Facebook got this part right. Reject buyout offers and use them to raise capital at ever increasing obscene valuations - and build your product exactly as you want.
> This likely means YC gets about $3-5million out of the deal, funding even more startups in the future. :)
I'm fairly sure that YC doesn't recycle the money off from wins, but instead returns it to their investors. YC is a for-profit fund that uses other people's money to give about $20k cash and $20k of training in exchange for 6% of their company.
Draw Something is everywhere and it's an awesome game. Good move for OMGPOP to cash out. It's a lot of money to throw at a studio that has basically only produced one hit game. Or maybe I am too old to recognize any of their other games ;)
But when you break it down, it looks like a pretty good deal.
Revenue multiple: Based on the reported figure of $250,000/day = $91.25M/year. At a purchase of $210M, this represents a multiple of 2.2x, far below the price/sales multiple of Zynga and Glu Mobile, two publicly traded companies on the US exchange. Sure, OMGPOP probably won't be hitting $250,000/day for the entire year but even at a 50% discount, you're in the same range as Glu.
DAU cost: Assume CPI of $1.50, install/DAU conversion rate of 10%. This equates to a DAU cost of ~$15. It's safe to say that OMGPOP has >10M DAU, which means ZNGA bought the company at <$20/DAU. Additionally, the above CPI and install/DAU conversion rate are quite low. I've been hearing that OMGPOP is seeing 1-day retention rates of 50-75% which is amazingly high. This means that with continued growth and similar retention rates, ZNGA got a pretty good deal in terms of DAU acquisition cost.
The main advantage for Zynga is that they can leverage OMGPOP's DAU and cross-promote their existing titles. And with their experience in monetizing titles, it's safe to assume that ARPU will increase.
I can't comment on their mobile offerings, but OMGPOP has been running a fairly unique web-based online gaming platform for years. They certainly had a fairly large userbase when I was using the site a couple of years ago, but I guess the facebook and mobile apps were the ones that really brought users.
The web platform has made a number of moves to monetise in recent years, putting more and more features behind payment-based tokens. It'd be interesting to know what proportion of their income comes from the web gaming platform.
Well this sucks. I just got into Draw Something yesterday and have been a fan of OMGPOP since Iminlikewithyou (hipster), but a company like Zynga does not deserve this game, or my attention to it. Zynga is well known for being theives and gathering as much possible data as they can about their users to sell off to ad companies and such. Looks like I'll be uninstalling this Draw Something once the switch takes place.
Iminlikewithyou was way ahead of its time and I'll always remember it as the site that made me realize rich real-time user interaction was possible on the Web.
Congrats to Charles and team! I've loved their games for ages, and hopefully their focus on quality will spread at Zynga.
I have some friends at another game company that was bought, and after a recent chat recently, I'm FAR more excited by what they are building now than what they had before. So to all those that are worried about this, I think the studio nature of gaming companies means that their acquisitions don't necessarily kill innovation.
Wow. Charles deserves a whole lot of credit for sticking it out over the last six years - my impression until recently was that they were having a hard time staying open. Congrats to all involved!
Wow, good for them. I've been with them since they were "I'm In Like With You," a fun but pointless "social flirting" site (at least, that's my memory of what it was) before they turned to social gaming. I didn't think they were going to make it for a while.
Credit to VCs. I've been guilty in past of noting how raising VC money may take away reasonable exits possible with no funding or just angel. In this case, it is very clear without VC money this company would have been dead pooled many many years ago.
I'm dying to know the cash/stock split on this one. It will send signals about what a company like OMGPOP thinks of the social gaming space going forward.
Considering they just spent 6 years working in the sector, what they think of Zynga's future is telling.
> I'm dying to know the cash/stock split on this one. It will send signals about what a company like OMGPOP thinks of the social gaming space going forward.
It also signals whether znga thinks its stock is overvalued or undervalued.
> Now Zynga has scheduled a call for a “news announcement” for 3pm eastern. I’m going to go out on a short limb and assume it’s to formally acknowledge that they have bought the company.
I'm glad the news seems to have been confirmed (?), but I must say that the headline is rather disingenuous, given that there was no actual confirmation. Even the lede makes it seem that there's no doubt; just confirmation of a previous rumor. I don't ask for anything major - just a single word (or two).
(I originally posted this comment for the other submission a split second after it was deleted, but it still applies - glad HN at least chose the more responsible title).
OMGPOP was smart to do this deal. They really had no choice. It seems really difficult to come up with new games. If they didn't do the deal, Zynga would have cloned the app and introduced it to their huge network of "_____ with friends" players for free and OMGPOP would have lost market share and revenue.
It was bound to happen -- Now they have to pay a premium for having failed to launch a game in this genre. The model was proven by Newtoy with Words with Friends (which they acquired) and Zynga has since launched a series of others based on the same model (Hanging with Friends etc.). All they need to do is look at the biggest existing markets for board games, console games, etc. and apply it to the WWF model. Pictionary should have been a no-brainer!
I don't understand Zynga's strategy. Are they trying to establish themselves as the De Beers of mobile gaming? This seems like an unsustainable strategy. If they just buy out every gaming company as it begins to exhibit growth at insane valuations, they are going to run out of money.
There are virtually no barriers to entry in the market, and there is no point at which there will be no emerging competitors. This is not a stock I would want to be a part of.
Given that Draw Something fits within the same asynchronous turn-based model of the With Friends games (owned, of course, by Zynga), I'm curious to see where Zynga moves with branding. There's something to be said for unifying all future OMGPOP/With Friends games under the With Friends blanket for cross-promotional purposes, but the "X Something" brand does have some measure of brand appeal.
Not commenting on this particular situation, but to answer your question in general:
If a company has an IPO, there are no "employee retention payments", so it's better than that :)
Employee retention payments are actually a way to give employees a somewhat better deal than investors, though typically they will be subject to vesting.
It doesn't make sense. The article mentions that OMGPOP makes 250 grand a day (that too after after all commissions). that equates to 91.25 million a year. IMHO, $200 million seems like a really small price.
Eventually they're going to run out of people to pay or play. Games don't tend to have a long lifespan, so it probably made sense for them to cash out while they're hot.
There's no way they can sustain this rate for 2+ years, which is what they'd need to do in order to make $200 million.
This is great news. OMGPOP would have headed in that direction anyway and now their talented, hardworking employees will see their careers boosted a bit earlier (maybe even a nice little payout?)
All the value OMGPOP might have ever had ( which besides Draw-something, they really didn't have * ) will evaporate into the creativity-destructing teeth of soul-grinder Zynga, leaving a big piece of the market available for Indie game-devs <3 that are awesome and actually give a d * mn.
* ) OMGPOP has actually been struggling for any kind of success in the casual/social game scene.
Maybe it will take less than half an hour for a move to be sent to my friend's phone. Hopefully it won't take too long for Zynga to move this game over to the zCloud and fix all the push notification bugs too.
[+] [-] untog|14 years ago|reply
Oh well.
[+] [-] samstave|14 years ago|reply
The only reason why Zynga bought them is because Draw Something is so high profile, that there was no way Zynga could steal it.
As I said over on Quora, this really sucks as Zynga is a despicable company.
Surely, the folks at OMGPOP had been worried that Zynga would try to steal this game, as they have done every one else -- and I would be interested to know what they thought of Pincus' character prior to the purchase.
At least they get to stay in NYC and be no place close to Pincus.
[+] [-] bitsoda|14 years ago|reply
[+] [-] dc-tech-fan|14 years ago|reply
http://doodleordie.com
[+] [-] donky_cong|14 years ago|reply
Excellent choice by OMGPOP
[+] [-] Reebz|14 years ago|reply
[+] [-] mkramlich|14 years ago|reply
[+] [-] jedc|14 years ago|reply
https://docs.google.com/spreadsheet/ccc?key=0AkkhSN3vaY4jdF9...
This likely means YC gets about $3-5million out of the deal, funding even more startups in the future. :)
(edit: Originally wrote Flightcaster for some reason; meant Heroku. Was thinking of Flightcaster earlier today and got confused.)
[+] [-] wilfra|14 years ago|reply
Facebook got this part right. Reject buyout offers and use them to raise capital at ever increasing obscene valuations - and build your product exactly as you want.
[+] [-] pinkton|14 years ago|reply
I'm fairly sure that YC doesn't recycle the money off from wins, but instead returns it to their investors. YC is a for-profit fund that uses other people's money to give about $20k cash and $20k of training in exchange for 6% of their company.
[+] [-] zinssmeister|14 years ago|reply
[+] [-] pduan|14 years ago|reply
But when you break it down, it looks like a pretty good deal.
Revenue multiple: Based on the reported figure of $250,000/day = $91.25M/year. At a purchase of $210M, this represents a multiple of 2.2x, far below the price/sales multiple of Zynga and Glu Mobile, two publicly traded companies on the US exchange. Sure, OMGPOP probably won't be hitting $250,000/day for the entire year but even at a 50% discount, you're in the same range as Glu.
DAU cost: Assume CPI of $1.50, install/DAU conversion rate of 10%. This equates to a DAU cost of ~$15. It's safe to say that OMGPOP has >10M DAU, which means ZNGA bought the company at <$20/DAU. Additionally, the above CPI and install/DAU conversion rate are quite low. I've been hearing that OMGPOP is seeing 1-day retention rates of 50-75% which is amazingly high. This means that with continued growth and similar retention rates, ZNGA got a pretty good deal in terms of DAU acquisition cost.
The main advantage for Zynga is that they can leverage OMGPOP's DAU and cross-promote their existing titles. And with their experience in monetizing titles, it's safe to assume that ARPU will increase.
[+] [-] leoedin|14 years ago|reply
The web platform has made a number of moves to monetise in recent years, putting more and more features behind payment-based tokens. It'd be interesting to know what proportion of their income comes from the web gaming platform.
[+] [-] ThePinion|14 years ago|reply
[+] [-] k33n|14 years ago|reply
[+] [-] ivankirigin|14 years ago|reply
I have some friends at another game company that was bought, and after a recent chat recently, I'm FAR more excited by what they are building now than what they had before. So to all those that are worried about this, I think the studio nature of gaming companies means that their acquisitions don't necessarily kill innovation.
[+] [-] phil|14 years ago|reply
[+] [-] apawloski|14 years ago|reply
[+] [-] TazeTSchnitzel|14 years ago|reply
[+] [-] jianshen|14 years ago|reply
[+] [-] gyardley|14 years ago|reply
[+] [-] desult|14 years ago|reply
[+] [-] ndespres|14 years ago|reply
Congrats to Charles and the team at OMGPOP!
[+] [-] badclient|14 years ago|reply
[+] [-] padobson|14 years ago|reply
Considering they just spent 6 years working in the sector, what they think of Zynga's future is telling.
[+] [-] jpdoctor|14 years ago|reply
It also signals whether znga thinks its stock is overvalued or undervalued.
[+] [-] chimeracoder|14 years ago|reply
I'm glad the news seems to have been confirmed (?), but I must say that the headline is rather disingenuous, given that there was no actual confirmation. Even the lede makes it seem that there's no doubt; just confirmation of a previous rumor. I don't ask for anything major - just a single word (or two).
(I originally posted this comment for the other submission a split second after it was deleted, but it still applies - glad HN at least chose the more responsible title).
[+] [-] andrewhillman|14 years ago|reply
[+] [-] andrewhillman|14 years ago|reply
[+] [-] hipsterelitist|14 years ago|reply
[+] [-] tomkit|14 years ago|reply
[+] [-] dkrich|14 years ago|reply
There are virtually no barriers to entry in the market, and there is no point at which there will be no emerging competitors. This is not a stock I would want to be a part of.
[+] [-] rwhitman|14 years ago|reply
[+] [-] lazerwalker|14 years ago|reply
[+] [-] j_baker|14 years ago|reply
Is this typical? It would seem that the employees are getting the shorter end of the stick on this deal.
[+] [-] paul|14 years ago|reply
If a company has an IPO, there are no "employee retention payments", so it's better than that :)
Employee retention payments are actually a way to give employees a somewhat better deal than investors, though typically they will be subject to vesting.
[+] [-] jpdoctor|14 years ago|reply
Which deals do you think they get the long end of the stick?
[+] [-] netvarun|14 years ago|reply
[+] [-] gkoberger|14 years ago|reply
There's no way they can sustain this rate for 2+ years, which is what they'd need to do in order to make $200 million.
[+] [-] brandall10|14 years ago|reply
[+] [-] nixle|14 years ago|reply
All the value OMGPOP might have ever had ( which besides Draw-something, they really didn't have * ) will evaporate into the creativity-destructing teeth of soul-grinder Zynga, leaving a big piece of the market available for Indie game-devs <3 that are awesome and actually give a d * mn.
* ) OMGPOP has actually been struggling for any kind of success in the casual/social game scene.
[+] [-] alaskamiller|14 years ago|reply
It's interesting how 2 years later we're vilifying Zynga (http://news.ycombinator.com/item?id=1041604)
It's interesting how iminlikewithyou after 5 years finally sold out.
It's interesting how gaming of all forms became the big hits big business Hollywood vainly wish it could still be.
Think about what would happen in another 5. Then do it.
[+] [-] joejohnson|14 years ago|reply