Zynga may be learning a $200 million lesson after the purchase of OMGPOP, the makers of the popular Draw Something app. Forbes is reporting that Draw Something has lost 5 million daily active users- only a month after Zynga’s purchase.
I was surprised at first when Draw Something was sold t0 Zynga, after Angry Birds makers Rovio managed to build a lucrative brand over the game, I thought the OMGPOP makers will follow suit and try and built a real company. But now, it looks like they just made themselves a very sweet deal by selling the game to Zynga.
If the app continues to follow this trend and lose their daily active users, Zynga is looking at a huge loss. Draw Something is the type of game that needs more than one player which helped it’s rapid growth, the problem with this is that the fall is just as rapid, if your friend stops drawing, you can’t draw either, so every time one person wants to quit the game, it is most likely going to have a knock on effect.
Zynga’s purchase of Draw Something, highlights an important criteria when acquiring companies. The criteria Zynga missed is the growth and value synergy, a combination of both needs to be considered, Zynga bought Draw Something on the growth but didn’t pay attention to value.
Hyped up products rise fast and die hard, some things just don’t have longevity for various reasons, and maybe Draw Something doesn’t. For one, it is not as brandable as Angry Birds for example, which has gone one to make plush toys, books and a successful series of apps. Draw Something isn’t the kind of game that has longevity, you draw with your friends, share the ones your most proud of– then you are drawing with 5 friends all of a sudden and it becomes more of an obligation that fun, then you retire from the game so your friend then retires and that’s the end of it.
Zynga failed to look at the long game, and now they could be paying 200 million for that mistake. Right now Draw Something is sitting duly, at number 6 on the top paid charts. It may not be dead yet but 5 million active users gone after a month isn’t a good sign.
In other news with apps, Rovio have 3 apps in the top 25 paid list, SayHi translate is up to number 2 and WhatsApp, the SMS killer is number 1.
[...] witnessed Draw Something’s rapid rise and decline, the founders of Song Pop have the advantage of seeing the path Draw Something when down and [...]
[...] finances an afterthought rather than a priority equal to product development. Earlier this year Draw Something has explosive growth but no long-term value and Zynga took the bait. It seems that venture [...]