Zynga spends $1.8bn to buy its way back into relevance

Zynga has announced the purchase of Turkish mobile games developer Peak for $1.8 billion, skyrocketing share price at a firm credited with being one of the first to break the mobile gaming sector.

Once upon a time, Zynga was a bright shining star, another exciting prospect to emerge from Silicon Valley. After raising almost $900 million from various funding rounds, the company registered itself on the NASDAQ during December 2011. Leaping more than 40% in the first few weeks to $12.93, Zynga looked like hot property, until it plummeted to $2.72 in the summer of 2013. The next six years were that of irrelevance and mediocrity.

With a poorly managed venture into real-money gaming and an inability to create blockbuster games, the business simply trundled along, though the purchase of Peak clearly excites the market, shooting up share price 25%.

“Peak is one of the world’s best puzzle game makers and we could not be more excited to add such creative and passionate talent to our company,” said Frank Gibeau, CEO of Zynga.

“With the addition of Toon Blast and Toy Blast, we are expanding our live services portfolio to eight forever franchises, meaningfully increasing our global audience base and adding to our exciting new game pipeline. As a combined team, we are well positioned to grow faster together.”

The difficulty with the mobile gaming industry is speed and sustainability. Firstly, because launching a game does not take much money, viral games can come from anywhere not just those companies with cash. Secondly, there is absolutely no guarantee a successful game will stay successful for very long.

In purchasing Peak, Zynga will bring Toon Blast and Toy Blast titles into its stable, two games will regularly feature at the top of download charts. How long this will continue is unknown, but in an ecosystem which is increasingly being defined by talent not cash, the 100 Peak employees will be a very valuable addition.

What is worth noting is that acquiring another business should not be viewed as a cure to the Zynga ills. This is the thirteenth acquisition, albeit the largest, since the business went public in 2011. Investors will hope it is thirteenth time lucky.