Zynga reveals plans for NaturalMotion buy: Can games maker win back growth?

25/03/2014

Zynga, the company behind Farmville, bought UK games maker Natural Motion last month for £317m. Now, the companies boss has explained how the embattled maker of Farmville looks to turn around its fortunes with a mobile drive.

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The cash and stock deal, marked the largest acquisition in Zynga’s seven-year history.
Don Mattrick, chief executive officer of Zynga, said the deal is the key to his three-part strategy for success: sustaining mature hit games, creating new hit game content and doing both more efficiently.

“By acquiring NaturalMotion,” Mattrick said in a statement, “we can significantly expand our creative pipeline, accelerate our mobile growth and bring next-generation technology and tools to Zynga that we expect will fast track our ability to deliver more hit games.”

Most known for its iOS hit games Clumsy Ninja and CSR Racing, NaturalMotion is a London-based gaming and technology developer founded in 2001.

“We believe their cutting edge technology — called Euphoria — will light up the future of our industry on mobile,” Mattrick said in a statement. “Their proven simulation technologies have powered some of the biggest entertainment properties across gaming — showing up in titles such as ‘Grand Theft Auto 5′ as well as the iconic movies like ‘Lord of the Rings.’”
Mobile drive

The deal will allow Zynga, which has been slow to mobile, to gain exclusive property rights to use this technology for its own mobile content, while simultaneously gaining licensing revenues from present and future contracts with creative partners wanting to use Euphoria for their own animation.

Zynga plans to make major content shifts to mobile in 2014 by launching 75 percent of all new games to mobile first. Zynga management also expects 2014 to be the first time the Zynga mobile bookings surpass web bookings to account for more than 50 percent of the company’s base bookings.

Dramatic drop in users

Analysis of the company’s financial reports since the start of 2011 show a clear peak in the summer of 2012, when Zynga’s games were attracting 306m monthly active users (MAUs) and 72m daily active users (DAUs), with 4.1m people a month buying virtual items within those games (monthly unique payers – MUPs). While Zynga has floundering, rivals like King have taken off with hits like Candy Crush Saga.

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Now, Zynga is launching three new mobile versions of its top franchises today: Words With Friends,FarmVille 2, and Zynga Poker. If the company scores with these titles, it will jump-start its revenues and give it room to come up with more original hits. But it won’t be easy because of serious competition from a handful of companies that have shown they have more mojo than Zynga in mobile.

He noted that Zynga has generating a billion dollars in operating income during its life and reached a billion consumers in its first five years. It produced $393 million in earnings during its peak year, and Mattrick wants to return to those days.

With the $527 million acquisition of NaturalMotion last month, Mattrick acknowledged that the company could use some outside help to reinvigorate its performance.

“We expect that 2014 will be a year of growth for the company,” Mattrick said. “I’m pretty excited about that.”

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