In a deal to shore up its online offerings, leading video game maker Electronic Arts will be acquiring Pogo.com. It's a great move to widen its online reach after the company has invested so much in EA.com.

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By Rick Aristotle Munarriz (TMF Edible)
March 1, 2001

Learning to ride a pogo stick takes patience, balance, and the ability to withstand the ups and downs. The same rules apply to online game maven Pogo.com, which will now be bought out by leisure software leader Electronic Arts (Nasdaq: ERTS).

Pogo was engaged once before. Excite@Home (Nasdaq: ATHM) agreed to buy the company last summer. It already had a 10% stake in the privately held company and was using the Pogo games to keep its site sticky. Unfortunately, the weak ad market exposed the provider of more than 40 free online games as a one-trick pony. Despite generating 800 million ad views a month, it's revenue stream was narrowing. There were content deals in place with online magnets like iWon.com and iVillage (Nasdaq: IVIL), but they weren't enough, and Excite@Home ditched Pogo at the altar in January.

That opened up the lane for the company that makes NBA Live 2001 to grab Pogo on the rebound. But the NASCAR 2000 publisher is driven by a much different motivation than Excite@Home was. Electronic Arts (EA) badly needs Pogo to become a more complete full-family online force.

In speaking with David Marino-Nachison earlier this year, EA CFO Stan McKee noted that "half the population is female and we'd love to get a big share of that market." Granted, he was talking about the crossover success of The Sims at the time. Still, for a company that consistently hits it out of the park with its traditionally estrogen-low EA Sports titles like Triple Play, the female gaming market had been sorely underserved by the company.

Pogo will help. Its collection of free Internet-based parlor, card, and arcade games has attracted a strong female audience. Case in point: Three of the top five money winners of the site's popular Poppit! game go by the handles ladyrave, cutegrrl, and yourmomn.

But it's not just a matter of rallying the family around the computer monitor to play a round of cyber Cribbage. Like a cigarette company handing out free trial packs, EA hopes to hook users into the online gaming experience with Pogo's free offerings. In its master plan, many will ultimately pay for EA's premium offerings.

Those are mighty aspirations. The reason for Pogo's popularity is not just that it's free, but that many of the games have cash payouts to boot. Someone who is perched at Pogo's Freebie Casino is not very likely to subscribe to a monthly pay plan to get in on some virtual FIFA soccer action.

You can't fault EA for trying, though. Picking up the established leader in simple Internet games while it continues to invest in providing the best options in the high-end gaming market, the Triple Play specialist is looking to cover its bases. EA could score big with this one.

Rick Aristotle Munarriz loves video games. There was a time when his initials ruled the arcade's high score list. But he has concerns about EA's valuation, and therefore does not own shares in the company. Rick's stock holdings can be viewed online, as can the Fool's disclosure policy.

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