EA Goes Fishing in Facebook's Pond

The latest "get rich quick" plan apparently involves cultivating an audience of app users on Facebook.

Playfish became the latest developer wooed by the acquisitive siren song of a larger industry colleague. Electronic Arts (Nasdaq: ERTS  ) is buying the social-gaming specialist in a $275 million deal, which could be worth as much as $400 million in equity retention arrangements and performance-based earn-outs.

Playfish entertains 60 million monthly active players across its multiplayer diversions, driving more than a billion gameplay sessions along the way. Its sticky apps run on Apple (Nasdaq: AAPL  ) iPhones and News Corp.'s (NYSE: NWS  ) MySpace social network, but its real drivers are Facebook hits Pet Society, Restaurant City, and Country Story.

This isn't the first time that a public company has snapped up a rising star on Facebook's platform. Expedia (Nasdaq: EXPE  ) and The Knot (Nasdaq: KNOT  ) gobbled up the makers of travel and wedding planning apps, respectively.

The monetization of social apps remains a work in progress, but the traffic trend is undeniable. Facebook is becoming a bigger part of the lives of its 300 million -- and counting -- users. In EA's field, video game hardware and software sales have fallen in six of the past seven months. Diehard gamers are still a loyal lot, but the video game industry needs to reach the broader mainstream audience. Right now, those people are on Facebook, playing Playfish's Restaurant City and Zynga's FarmVille.

EA is doing the right thing by acquiring Playfish, but this is still a nascent industry with a thin moat. The low barriers to entry will make social networking games even more competitive in the coming years, making it that much harder for even the heavy hitters to crank out viral hits at will.

EA needs to be here, but the cover charge sure isn't cheap.

Are Facebook apps a passing phase? Can social gaming be effectively monetized? Share your thoughts in the comment box below.

The Knot is a Motley Fool Rule Breakers recommendation. Apple and Electronic Arts are Motley Fool Stock Advisor selections. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz remembers when social networks were an offline endeavor. He does not own shares in any of the companies in this story. He is also a member of the Rule Breakers analytical team, seeking out the next great growth stock early in its defiance. The Fool's disclosure policy does not care that you just leveled up in Mafia Wars.


Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1038380, ~/Articles/ArticleHandler.aspx, 11/28/2014 5:05:26 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement