Zynga Sets an Ugly Precedent

Well, that was easy.

Any company that wants to collect an estimated $200 million from Zynga (Nasdaq: ZNGA  ) simply needs to beat the social gaming giant at its own game.

This afternoon's announcement -- the acquisition of casual game developer OMGPOP for undisclosed financials terms -- lays to rest the fear that an upstart is going to upstage Zynga this month.

What about next week? What about next month?

OMGPOP came out of nowhere to makes its Pictionary knockoff Draw Something the top draw on Apple's (Nasdaq: AAPL  ) App Store and a rising force on Facebook.

This is what happens
I was hoping that OMGPOP would refuse Zynga's charms. Whether it could use Draw Something as the springboard for its own Zynga-esque empire or seek out higher bids among traditional video game companies, nothing good would happen from a Zynga buyout.

Once again, Zynga is delaying the inevitable. It won't be able to snap up every flavor-of-the-month app that bubbles up to the top -- and bubble up they will.

Apple and Facebook provide developers with level playing fields. An established company like Zynga may have networking advantages. Electronic Arts (Nasdaq: EA  ) may have a branding advantage when it transforms its iconic games into social apps. However, this still opens the door for a visionary developer -- even if it's just a single crafty coder -- to make a viral splash.

Draw Something is huge right now. The stats promoted in this afternoon's press release are impressive.

  • The game has been downloaded 35 million times.
  • A billion drawings have been created in the last week alone.
  • An average of 3,000 drawings are completed per second.
  • Draw Something is the top Apple App Store download in 84 different countries.

David Ko -- Zynga's chief mobile officer -- shared an anecdote during the call. He was at an airport bar and noticed a couple playing on their smartphones. One was playing Zynga's own Words With Friends. The other was playing OMGPOP's -- and now Zynga's -- Draw Something. Ko mentioned that he wished he could take a picture because it was the snapshot of a true cultural phenomenon.

He may be right, though some may argue that it's a sad statement of what relationships have boiled down to these days. Remember when couples used to actually talk to each other?

However, the cynic in me wonders how this same snapshot would have looked a year ago. Draw Something didn't exist a year ago, and Words With Friends was still a fledgling title. Zynga didn't create either hot property. It acquired the developers.

A year from now that scene will take place with two entirely different games. Maybe Zynga will own one of the games. Maybe it won't.

Sooner or later we will come to the point where Zynga can't buy everything it can't conquer.

Going mobile
Even though the next trillion-dollar revolution will be in mobile, it may not involve Zynga. A free special report will get you up to speed.

The Motley Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of Apple. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.


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