On December 20, Zynga ($ZNGA) acquired an 80% stake in Small Giant Games ($PRIVATE:SMALLGIANTGAMES), the creators popular game Empires and Puzzles, for $560 million. The deal will ultimately lead to a full acquisition for $700 million.
Most importantly, it will add a popular gaming franchise to Zynga's portfolio of games, or games that can be downloaded for free, but include plenty of opportunities for microtransactions. In July, Small Giant Games touted 3 million monthly active users and 15 million downloads, all by a team that was once only 12 employees when they were developing the game back in 2016.
Once an underdog of the mobile game market, Small Giant Games will now be an important asset to a company that is currently struggling to keep its playerbase.
Right now, Zynga's current lineup ranging from Farmville, the notorious social network game described in the game industry as a "Cow Clicker," to Words With Friends, a Scrabble-like game that somewhat achieves world peace by uniting rappers with the elderly, has grown stale on its userbase. Last quarter, Zynga failed to meet analyst estimates by $16.23 million only making $233.2 million in three months. Over the past few months, however, Facebook ($FB) app data shows that Zynga is even in more need of a fresh title.
For several of Zynga's top games, their Facebook Monthly Active Users Rank — a comparative measure that uses the number of people who log into a third-party app via Facebook login token — has declined steadily over the past four months.
Take, for instance, Zynga's Farmville games. Both the original Farmville and Farmville 2 have seen their active users rank crater. Farmville, which is close to celebrating its 10th anniversary, dropped over 300 places from July to today, while Farmville 2, released in 2014, fell below 200 consistently for the first time since we started tracking the game.
Over at the company's word related games, Words With Friends is fairing a bit better, but still experienced a crash recently and is currently ranked 113 out of all apps.
Meanwhile, Boggle With Friends has taken a pure nosedive; it went from flying alongside Zynga's top games in the top-500 two years ago from bottoming out of the top-2,000 apps.
Zynga's top match-3 game — Farmville: Harvest Swap — also has experienced the same dramatic dive in 2018, dropping over 1,000 placements in the middle of the year.
Then, of course, there is the company's literal casino game Hit It Rich! Casino Slots, where players can use real money to buy fake money (coins) and win fake prizes... The game is currently at its worst ranking since we started tracking Zynga's games in 2016.
The only game that is showing great signs of life for Zynga is Texas HoldEm Poker, which is currently a top-20 app out of all third-party applications that use a Facebook login token.
Zynga still has a strong hold on the mobile game market, but adding Empires and Puzzles into its mix will help it add more users under its massive umbrella. However, as its grip seems to be weakening across the games it once built its empire on, the new puzzle for Zynga investors will be figuring out if the Small Giant Games acquisition, which will take several years to complete, will be worth the $700 million price tag.
