Zynga's Acquisition Strategy: Reshaping Its Portfolio for Future Growth

Key insights

6 takeaways

01
Zynga's acquisitions of Gram Games ($250 million) and Peak Games' casual card portfolio ($100 million) are critical growth drivers, contributing 23% of the company's total mobile bookings in 2Q18.
02
Gram Games' title 'Merge Dragons!' has become Zynga's third highest-grossing app, despite launching only in June 2017, and exhibits strong international appeal with 50% of its revenue generated outside the U.S.
03
The acquisition of Gram Games was valued at approximately 2.6x annual sales, justified by a 150% quarter-over-quarter revenue growth rate for the studio's titles in 1Q18.
04
The Peak Games casual card portfolio was acquired for approximately 1.9x annual sales, helping to revitalize a segment where Zynga's legacy title growth had slowed to low single digits.
05
Beyond direct revenue, the acquisitions significantly bolstered Zynga's user acquisition funnel, with four Gram Games titles and one Peak Games title ranking among Zynga's top 10 most downloaded apps in 1Q18.
06
Zynga plans to leverage its expertise in live operations to further scale 'Merge Dragons!', which continues to show sequential monthly revenue growth one year after its release.

Summary

Zynga’s recent acquisition strategy, highlighted by the purchases of Peak Games’ casual card portfolio and Gram Games, serves as a critical mechanism for revitalizing the company’s revenue growth. By integrating these high-performing assets, Zynga has successfully offset the slowing growth of its legacy titles. As of mid-2018, these acquired titles accounted for 23 percent of the company’s total mobile bookings, demonstrating the immediate financial impact of inorganic expansion.

The acquisition of Gram Games for $250 million, representing a 2.6x multiplier on monthly sales, is particularly significant due to the rapid growth of the title Merge Dragons!. Launched in June 2017, the game quickly became Zynga’s third-highest grossing app, with half of its revenue generated outside the United States. Similarly, the $100 million acquisition of Peak Games’ portfolio in late 2017 provided a stable revenue stream that grew at a high single-digit rate quarter-over-quarter in early 2018.

Beyond direct revenue, these acquisitions have bolstered Zynga’s user acquisition funnel. Several titles from the acquired portfolios now rank among the company’s most downloaded apps, providing Zynga with new opportunities to leverage its expertise in live operations and advertising monetization. Data derived from Sensor Tower’s Store Intelligence platform indicates that these strategic moves have successfully transitioned Zynga toward a more diversified and high-growth portfolio. The ongoing success of these titles suggests they have the potential to become evergreen assets, further stabilizing the company’s long-term market position within the mobile gaming industry.