Can Zynga Buy Its Way to the Top?
Social gamer and serial acquirer Zynga (NAS: ZNGA) may be at it again.
Pictionary mobile knockoff Draw Something has quickly ascended Apple's (NAS: AAPL) iOS App Store charts and now sits comfortably in the top-dog spot under Top Paid at the popular $0.99 price point. That's Zynga's biggest nightmare come true and a clear threat to the growing social-gaming kingpin.
It gets worse.
Draw Something has even toppled Zynga on Facebook's gaming platform, its home turf. According to AppData, the game now garners 13 million daily active users, or DAUs, while Zynga's closest runner up is Scrabble knockoff Words With Friends, with 8.4 million DAUs -- although it still has plenty of top spots when you include CityVille's 7.9 million DAUs and Hidden Chronicles' 7.1 DAUs, among others.
You might recall that Zynga picked up Words With Friends through the acquisition of smaller Newtoy more than a year ago for just over $50 million. Well, Zynga has taken notice of Draw Something developer OMGPOP and is reportedly now in negotiations to acquire the smaller game maker.
TechCrunch is reporting that talks are still in preliminary stages, but there are also some potentially interested Japanese buyers, so OMGPOP could garner multiple bids. The potential price is allegedly in the ballpark of $150 million to $250 million, which would be significantly above the $5 million to $20 million it typically spends on acquisitions.
Given the social nature of Draw Something, it would feel right at home in Zynga's stable, right next to its other ... With Friends titles. But OMGPOP needs to play this one carefully, since if it tries to milk too much out of Zynga or rejects its advances, or if the deal just falls through, Zynga will just go ahead and copy it anyway.
OMGPOP has hit it big with Draw Something, as its other mobile games such as Puppy World and Boom Friends haven't gained meaningful traction in the charts, despite being released months ago. Climbing Apple's App Store charts is quite a feat, and now it just needs to make sure it plays its hand right, which might mean selling itself to Zynga.
Zynga is still a Faker Breaker. Faker Breakers don't have good odds of scoring multibagger returns -- Rule Breakers do. If you really want to discover the next rule-breaking multibagger, don't miss our new special free report that names a company that's been recommended multiple times. While Zynga has five out of six signs of a Faker Breaker, this company has all six signs of a Rule Breaker, and I own it in my personal portfolio. Get the free report now.
At the time this article was published Fool contributorEvan Niuowns shares of Apple, but he holds no other position in any company mentioned. Check out hisholdings and a short bio. The Motley Fool owns shares of Apple.Motley Fool newsletter serviceshave recommended buying shares of Apple and creating a bull call spread position in Apple. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.