This Is Zynga's Biggest Nightmare
The hottest game on Apple's (NAS: AAPL) App Store over the past few days has been a multiplayer Pictionary knockoff called Draw Something.
The $0.99 download has the top spot among Apple's paid apps. The ad-supported freebie is also atop the App Store's list of free titles.
Social gaming giant Zynga (NAS: ZNGA) has carved out a cozy living transforming classic word games into sticky mobile diversions. Words With Friends is clearly a Scrabble clone. Scramble is really Boggle. However, Zynga isn't the company behind Draw Something.
OMGPOP is the small developer behind the drawing game sensation that's sweeping the mobile nation. OMGPOP is primarily an operator of a website devoted to flash-based social games. Despite being singled out by TIME Magazine as one of the 50 best websites of 2009, OMGPOP has lived mostly in obscurity outside of its core of fans.
Draw Something has put the company on the map. OMGPOP tells financial blog Business Insider that the game has been downloaded 20 million times since its launch five weeks ago.
Obviously a download means nothing, especially when so many free transactions are quickly discarded. However, OMGPOP tells Business Insider that 12 million of those downloads have resulted in active users. As millions of gamers egg on their Facebook friends to join -- and use Twitter to share some of the more interesting drawings -- the game is catching viral fire. There are now 3,000 Draw Something pictures being scribbled every second!
Is this starting to remind anyone of Zynga's early successes?
Zynga scored huge Facebook hits with FarmVille and Mafia Wars. As the popularity of those games began to wane, Zynga was quick to roll out CityVille and Mafia Wars 2. The Words with Friends craze has helped the social gaming giant turn its attention to bingo and poker.
Zynga is a fast-growing company. It went public three months ago and commands a $10 billion market cap today. No one is suggesting that OMGPOP is worth anything close to $10 billion, but it just goes to show how any of the countless third-party App Store, Android, and Facebook developers can strike it rich.
These are the early years of social gaming, and there are clearly more than enough engaged gamers to go around. However, what happens to the Scramble With Friends player who begins spending more time playing virtual Pictionary than virtual Boggle during commercial breaks or while waiting for a train?
The popularity of one viral game is probably coming at the expense of another.
Zynga investors may choose to dismiss the OMGPOP threat, but more will come. The Internet is a great leveler, but it also rightfully leads investors to question the staying power of any moat.
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