The End of an Era: Will Zynga Be Delisted?
As of May 2022, social gaming pioneer Zynga (ZNGA) is officially delisted from the NASDAQ exchange following its $12.7 billion acquisition by Grand Theft Auto developer Take-Two Interactive Software (TTWO). For long-time Zynga investors and fans of tap-to-play mobile game hits like Words with Friends, this closure of a chapter has understandably prompted reflection as well as speculation: what does this merger mean for the fate of Zynga‘s titles moving forward?
I‘ve analyzed the details as an avid gamer and industry commentator – here‘s the inside scoop on what led up to Zynga being taken private under new ownership and what we could see next from this major player now part of Take-Two‘s expanding empire.
The Story Behind a Mobile Gaming Pioneer
Let‘s rewind to get context on Zynga‘s history as a trailblazer bringing social gaming elements to casual mobile apps early on.
Founded in 2007 and riding high during the Facebook gaming craze with breakout hits FarmVille and CityVille, Zynga successfully evolved its data-driven approach to game creation for the smartphone environment. By utilizing cross-promotions and an addictive, microtransaction-powered model across its portfolio, Zynga churned out a string of compelling mobile properties over the past decade:
- Words with Friends
- Zynga Poker
- Empires & Puzzles
- Merge Dragons!
- Game of Thrones Slots Casino
Reaching record revenue of $1.14 billion in 2020 alongside Tiger King-fueled user spikes amid the pandemic, why did the company ultimately put itself up for sale?
Despite amassing hundreds of millions of mobile MAUs and a fundraising haul over $3 billion, Zynga faced pressures from slowing user growth, retention issues plaguing aging titles, and struggling conversion of players into consistent payers. Executives hoped an acquisition could provide greater resources to nurture newer releases like hyper-casual title FarmVille 3.
Enter Take-Two, whose properties (see: NBA 2K franchise) were actually losing ground in mobile – making Zynga and its trove of accessible, free-to-play IP (with proven in-app purchase potential) an appealing target. But with the keys to Zynga‘s kingdom now handed over, what awaits its community of loyal players?
Zynga by the Numbers: Analyzing an Industry Leader
While public filings have Zynga‘s revenue and average bookings per user declining year-over-year, dive deeper and indicators still point to an enviable mobile games business relative to market at large:
- 209 million monthly active users across portfolio (Q1 2022)
- Over $720 million in revenue, 50% from international players (Q1 2022)
- 5 games with over $100 million annualized revenue (Empires & Puzzles, Merge Dragons, Game of Thrones Slots Casino, Golf Rival, Words With Friends)
- Average mobile bookings of $0.43 per mobile user
Compare to Electronic Arts‘ $0.76 and Activision‘s $0.47 average bookings rates which are more dependent on console/PC and lack Zynga‘s mobile ARPU expertise – clearly they retain an engaged audience ripe for better incentivization under Take-Two.
Projections for its newest titles Harry Potter: Puzzles & Spells and Star Wars Hunters are also promising given the IP, if properly marketed to fans. Analysts at D.A. Davidson in fact estimate nearly 50% revenue growth for Zynga in coming years as Take-Two applies its expertise managing hit franchises. The resources to nurture this potential certainly exist based on operating cash flow margins:
| Company | Last Twelve Month Operating Cash Flow Margin |
|---|---|
| Take-Two Interactive | 21.9% |
| Zynga | 35.7% |
Operating Cash Flow Margin Comparison (via Morningstar) Indicative of Zynga‘s Strong F2P Monetization
Now the pressure is on Take-Two to retain Zynga‘s design teams during this transitional period to continue excelling in the live operations that build game longevity. Their incentives programs and corporate culture must prioritize creator autonomy for the fruits of this acquisition to fully flourish.
What Players Can Expect Next: For Better or Worse
Integrating different corporate structures poses its share of challenges. But with console/PC veteran Take-Two admitting mobile as its weak spot, plus Zynga trying to sustain momentum, there are reasons for optimism about the companies combining forces.
In the best-case scenario, Zynga substantially benefits from Take-Two‘s IP access, analytics tech/user acquisition capabilities and spending power while retaining enough independence that its ad/in-app purchase expertise positively rubs off across Take-Two‘s offerings.
However, it‘s unclear whether Take-Two plans to take a more active role in directing Zynga‘s development pipelines longer-term. Too heavy-handed an approach risks diluting the scrappy innovation that made Zynga a mobile pioneer. Maintaining employee morale through this transitional uncertainty also proves critical to avoiding talent bleed.
As an industry watcher, I expect gameplay itself to remain consistent for current Zynga players in the near future while the bigger questions surround these franchises‘ content roadmaps and lifespan support. We could see more brand tie-in events, improved seasonal updates, and heightened polish that comes with increased resources for titles like Words with Friends 2.
The real test will be leveraging Zynga‘s playbook for not just better monetizing Take-Two mainstays (ex: NBA 2K mobile adopting an Empires & Puzzles model) but also crafting new mobile IP that rises to the standard of their console catalog. If Street Fighter and other Take-Two classics arrive on mobile with Zynga‘s F2P expertise then this acquisition pays major dividends.
Only time will tell how all the pieces come together but from Habzy to Farmer Jon, Zynga‘s lovable mascots aren‘t riding off into the sunset just yet even if this officially spells the end of stock tickers moving markets. Where the company goes next remains thrilling to ponder for social/casual gaming enthusiasts worldwide.
