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   Technology StocksZynga, Inc.

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To: Glenn Petersen who wrote (338)9/16/2017 6:06:03 AM
From: Glenn Petersen
   of 358
Rovio found success in a smartphone game that pitted a brightly colored feathered flock against an army of green pigs, spawning a series of sequels, a line of toys and clothing, and a feature film. Now, the Finnish company is planning an initial public offering that could value the company at roughly $2 billion, in a test of whether investors will find favor in a single franchise and whether the business can evolve.

Apparently not:

Angry Birds IPO expected to value parent Rovio at $1 billion

by Katie Roof
September 15, 2017

Remember Angry Birds? Well, apparently enough people are still playing it to justify an IPO.

Rovio Entertainment, the Finnish parent of the popular smartphone game, is getting ready to go public on the Helsinki Nasdaq in two weeks. And it’s set the price range for an IPO that would value the company at about $1 billion, a lot less than the more than $2 billion they were said to be hoping for.

But it will still be a “unicorn” if it goes public at the €10.25 to €11.50 per share that the company is targeting. The IPO will raise about €30 million.

Angry Birds apps have been downloaded 3.7 billion times since it was launched in 2009. It was able to leverage the success of the game and turn this into “The Angry Birds Movie” last year.

The company has raised at least $42 million in equity funding from Accel, Atomico, Felicis Ventures and others.

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To: Glenn Petersen who wrote (339)9/30/2017 8:41:01 PM
From: Glenn Petersen
   of 358
After a 4% pop, Rovio closes at a lackluster €11.50, level with its IPO price

by Ingrid Lunden ( @ingridlunden)
September 29, 2017

Rovio, maker of the Angry Birds gaming franchise, saw a small pop of 4.3 percent in its first day of trading as a public company, but like the very birds that get catapulted in Rovio’s original blockbuster game, the rise was not to last.

After pricing its IPO at €11.50 per share — the top of its range — to raise €30 million, today the stock opened on the Nasdaq Nordic exchange at €12.00, up 4.3 percent. But then, after morning trading took it as high as €12.34 a share, Rovio ( trading as ROVIO) has fallen down to hovering around the same price it was yesterday evening, €11.50/share. And it’s actually dipped below that, going as low as €11.35 at one point. Its current market cap is $1 billion (€896 million).

Rovio had said yesterday that its initial offering price of €11.50 was oversubscribed and valued it at $1 billion, although previously the company had hoped for a $2 billion valuation. It appears that the U.S. waking up has done little to boost trading so far. Rovio’s 37,073,010 IPO shares were offered to private individuals and entities in Finland, Sweden and Denmark and in private placements to institutional investors in Finland and internationally.

Rovio counts the U.S. market as one of its very biggest — the company said that “most” of its revenue comes from North America and Europe — and it also has a high profile there. But unlike Spotify, another company based out of the north of Europe that counts the U.S. as a key area for current business and future growth, Rovio chose to list closer to home.

Rovio once had designs to become the next Disney. But the fortunes of gaming companies rise and fall with the popularity of their titles, and that has impacted that lofty goal. (Indeed, you could argue that this has been a sticking point for some other gaming companies that have gone public in recent years, such as King — which eventually sold to Activision Blizzard — and Zynga. Their economics do not necessarily follow those expected of public companies.)

Rovio has had a number of strong follow ups to the original Angry Birds — it had three mobile in Apple’s top 100 highest grossing apps over the summer, for Angry Birds Blast, Angry Birds Evolution and Angry Birds 2 — but no new brand so far has quite broken through as a blockbuster in quite the way as the original Angry Birds did.

According to Verto Analytics, the Angry Birds franchise (comprising all the titles) has seen its monthly US visitors over the age of 18 tripled over the last year. There are now 5.9 million visitors compared 2 million in July 2016. But while Angry Birds (2.1 million visitors) and Angry Birds 2 (1.4 million visitors) have grown respectively by 351 percent and 128 percent, Angry Birds is down from a peak of 3 million earlier this year.

“Even the most successful Angry Birds titles still lag well behind flagship offerings from their biggest rivals: King’s Candy Crush Saga has 10.2 million monthly uniques and Supercell’s Clash of Clans has 5.6 million,” noted Connie Hwong, of Verto, who also questions the model of building a number of games around a single brand.

“King and Supercell have exercised greater restraint in rolling out expansions or sequels to their existing mobile games franchises,” Hwong wrote. “Candy Crush has a handful of sequels while Clash of Clans has just one spinoff, Clash Royale. Is a smaller, more carefully edited catalogue of game titles a better bet for mobile game companies?”

Rovio has been right-sizing in a different way: after investing in a number of areas in its “Disney” heyday, the company has since pulled back on many of its most ambitious ventures outside of games (such as amusement parks) in favor of a licensing model, where a third party takes on the investment and risk of new projects.

Other moves in the future for the company will include more geographic expansion. With China currently the world’s biggest market for gaming, Rovio is focusing its strategy there.

“We are working on a number of high profile potential partnerships in China,” Rovio’s EVP of games, Wilhelm Taht, said in an interview with TechCrunch last month. In China, foreign companies need to align with a local company in order to build a business in the country. “We have gone through several potential partnerships and with 600 million downloads in the region already, we will try to strengthen the China business.”

The company reported revenues of €266 million ($314 million) for the year that ended June 30, 2017, with an operating profit of €29,483 ($35 million).

We are updating this story with more detail and price changes throughout the day.

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From: Glenn Petersen10/25/2017 9:32:20 PM
1 Recommendation   of 358
Not specific to Zynga, but an interesting article on the "art" of casual game development:

Silicon Studio’s Yokozuna software is part of a bigger trend of artificial intelligence researchers looking to video games for complex challenges beyond chess and Go. Many of the recent advances in natural-language processing, and image and speech recognition, have come from deep learning, an AI sub-discipline that requires human-labeled data to work. Video-game environments are a good source of data because every interaction is recorded.

Game Makers Are Profiling Players to Keep Them Hooked

By Pavel Alpeyev and Yuji Nakamura

-- Psychological profile used to influence behavior, spending

-- Deep-learning software used to predict player actions

In the game industry of today, titles like Clash Royale and Pokemon Go are free for most people because there’s a small number of players who pay for extras like special weapons and more lives. Game developers have to strike a delicate balance in this free-to-play model between drawing the masses and encouraging big spenders -- and they need both for a successful title.

The dashboard of Silicon Studio’s Yokozuna software.
Source: Silicon Studio

Silicon Studio Corp. is trying to help by providing game makers with deep-learning algorithms to create what amounts to a psychological profile of each player. The Tokyo-based company’s software predicts how long people will play, what levels they might achieve, how much money they might spend and on what. Even more important, the technology lets game creators mold player behavior to keep them hooked.

“Game data is perfect for studying human behavior,” said Africa Perianez, chief data scientist at Silicon Studio and a former nuclear physicist at the European nuclear research organization CERN. “It’s going to change the industry, change the direction of personalized games.”

The machine-learning software, called Yokozuna Data after the highest rank in sumo wrestling, is drawing customers. Three publicly-traded Japanese publishers and a South Korean developer have signed up to use the product, Perianez said, declining to give their names because of confidentiality agreements. The company is also in talks with large European publishers of massive multiplayer online role-playing games, Perianez said. Silicon Studio shares rose as much as 3.8 percent in Tokyo trading.

Japanese and South Korean game publishers pioneered the art of making money from free-to-play titles. For years, they employed so-called live ops teams that use events, competitions and limited-time offers to get people to pay up. As those techniques mature, companies are turning to artificial intelligence and data-mining to influence players -- strategies similar to those Google and Facebook Inc. use for targeted advertising.

Silicon Studio was founded in 1999 as a unit of Silicon Graphics, the U.S. maker of high performance computers used for special effects in “Jurassic Park.” The company was spun off the following year to focus on software tools for other game makers, like Yokozuna, and develops its own games.

"It’s an extremely geeky company,” said Serkan Toto, founder of consultant Kantan Games Inc. “For years they’ve done heavy lifting like creating rendering and physics engines, before getting into publishing games.”

The company listed on the Tokyo Stock Exchange in February 2015 and saw its market cap climb to 44 billion yen ($390 million) within a month. Silicon Studio wasn’t able to deliver lasting hit titles and shares have declined more than 80 percent since. Its market value is now about 8.5 billion yen.

Yokozuna, which was in development for two years, can tailor promotions to specific groups or individuals. For example, users at risk of quitting a game like GungHo Online Entertainment Inc.’s Puzzle & Dragons may find it easier to win rare monsters or faster to advance through game levels. For Niantic Inc.’s Pokemon Go, Yokozuna could help schedule extra events for a holiday weekend -- and customize walking distances based fitness.

A key challenge in free-to-play gaming is maintaining a healthy ecosystem of players who spent a lot (called whales) and those who never pay (krill). Industry insiders, who favor marine-biology terms, call casual spenders dolphins. Whales usually comprise 1 percent of all players, but generate half of total revenue. Though krill may seem irrelevant for game developers since they don’t pay, they are essential because paying users need competition from others to hand over their money. The whales need something to eat.

Silicon Studio has been using deep learning algorithms to tailor promotions to specific groups or individual players.
Source: Silicon Studio

As more smartphone games became available for free, the industry adopted micro-transactions to generate revenue, selling digital trinkets and tokens. Even the simplest games operate virtual economies, with startups such as Scientific Revenue and Gondola offering analytics and dynamic pricing tools.

Enticing players to pay with custom incentives is tricky though. In July, fans of Zynga Inc.’s CSR Racing 2 game revolted when they discovered some gamers paid $35 for content that others got for $5. The company apologized and offered compensation.

“One thing that is important to gaming culture is the sense of an even playing field,” said Jane McGonigal, the author of the New York Times bestseller “Reality is Broken” and a game developer.

Silicon Studio’s Yokozuna software is part of a bigger trend of artificial intelligence researchers looking to video games for complex challenges beyond chess and Go. Many of the recent advances in natural-language processing, and image and speech recognition, have come from deep learning, an AI sub-discipline that requires human-labeled data to work. Video-game environments are a good source of data because every interaction is recorded.

“There is no other field that has better data,” said Perianez, who previously worked on predictions of mobile subscriptions and Coca-Cola sales. “You can measure habits continuously for years.”

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From: Glenn Petersen11/11/2017 10:14:36 PM
   of 358
Zynga pays $100 million for Peak Games’ casual card game studio

Dean Takahashi @deantak
November 7, 2017 1:05 PM

Above: Okey Plus
Image Credit: Peak Games

Zynga has acquired the mobile card game studio of Turkey’s Peak Games for $100 million in cash. The move is one of the biggest acquisitions Zynga has made under Frank Gibeau, who became CEO in March 2016. It’s also a big validation for Peak Games’ strategy of focusing on casual card games that are popular worldwide, like spades and gin rummy.

Zynga will get Peak’s card games such as Spades Plus, Gin Rummy Plus, and Okey. The latter is based on a popular Middle Eastern board game. Peak Games will retain its Toy Blast and Toon Blast games, and remain an independent company in Istanbul.

The deal is a big one for Zynga, which previously paid $527 million when it acquired NaturalMotion, a studio that made games such as CSR Racing and Dawn of Titans.

In an interview, Gibeau said acquisition is one of a few ways that Zynga is trying to increase its overall revenues. It is focused on growing its current base through services (live operations like events or tournaments), adding sequels to existing games, launching new intellectual properties, and acquiring licensed brands for new games.

Above: Frank Gibeau, CEO of Zynga.
Image Credit: Zynga

“With Peak, we felt there was an opportunity to work with them to bring their games to our portfolio of card games,” Gibeau said. “They have the largest mobile rummy game in the world, and the largest spades game in the world.”

Peak has been making games for seven years, with a focus on mobile casual card games as well as the Blast series of mobile games. Peak Games founder and CEO Sidar Sahin will stay with Peak and operate it as a separate company.

“The opportunity was to acquire this piece of the company,” Gibeau said.

While Zynga’s own card games have common users with Peak’s games, Gibeau said that for the most part that Zynga will be acquiring new audiences with the Peak games. Zynga currently has 1,524 employees, and it will add Peak employees as well.

Peak Games titles grossed more than an estimated $165 million from the App Store and Google Play worldwide during the first three quarters of 2017, according to measurement firm Sensor Tower. Compared to the same period in 2016, this revenue grew approximately 145 percent.

Its highest-grossing title, Toy Blast, earned more than an estimated $124 million, or about 75 percent of the total.

After Toy Blast, its next largest earners are card games Okey Plus, Spades Plus, and Gin Rummy Plus, which grossed an estimated $18 million, $9 million, and $8 million, respectively during the first three quarters of this year.

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From: hollyhunter11/20/2017 8:20:16 AM
   of 358
looking better after some consolidation. On watch for clear above 4.09.

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From: Glenn Petersen5/2/2018 11:11:29 PM
   of 358
Zynga founder Mark Pincus is giving up voting control of his gaming company: ‘It’s time’

In an unusual move, Pincus doesn’t want the final say anymore and wanted more freedom.

By Kara Swisher @karaswisher
May 2, 2018, 4:05pm EDT

In an unusual move for a Silicon Valley company, Zynga chairman Mark Pincus has given up voting control of the social gaming company he founded more than a decade ago.

The establishment of voting rights parity — basically, one share, one vote — rids the company of its longtime multi-class share structure that concentrated all power in the hands of one person. What that means is that Pincus’s 70 percent voting power over Zynga will convert into a 10 percent economic stake. Under the Zynga plan, his high-octane voting shares will convert into Class A common stock in the San Francisco-based company.

Pincus is also shifting his title to non-executive chairman but will remain on its board.

That much-celebrated “power of the founder” has been common in tech, with companies like Facebook and Google continuing to concentrate voting control in the hands of a startup’s creators with the aim of resisting undue shareholder pressure and staying true to their vision.

Pincus said that was no longer needed at Zynga, since the company has stabilized after several years of turmoil. Thus, he said, he felt “it’s time” to move to a new corporate structure and also remove himself from active management in the company. He had done that once before, stepping back in 2013, only to return in a more prominent role in 2015.

“Given our positive momentum, now is the right time to simplify our stock structure and transition to one share, one vote. I believe it’s in the best interests of our shareholders to establish voting rights parity for all,” Pincus said in a statement.

In a longer interview this morning, he noted that he also wanted space to undertake a number of other things in investing and elsewhere.

“When I came back, I put my other aspirations on hold,” said Pincus, noting he has become interested in areas like blockchain and building a new internet (yes, he gets the reference to the HBO show, “Silicon Valley). “But now it’s time to create more space between me and the company to do that as a separate person and entity ... I have a lot of pent-up ideas and energy that for well over a year I have wanted to pursue.”

More importantly, said Pincus, the founder-as-ruler concept may have outlived its usefulness, at least at Zynga. “We asked ourselves, is there a benefit to this, and I think it is a healthy debate for any company to be having,” he said. “Recently, my control did give air cover for the team, but that is not needed any longer as we have become more stable.”

Zynga CEO Frank Gibeau agreed. “When Mark approached the board with this idea, we thought it was a good time, because we were growing with a lot of momentum and this change makes us more accountable to shareholders,” he said. “When we are not worried about defense but growing the company, a one-share-one-vote structure where everyone’s economic interests aligned is positive to shareholders. The perception of a controlling shareholder causes that to skew and this gives us a clean road ahead.”

Zynga was founded in April of 2007, taking off like a rocket ship via its game integration with Facebook. With Pincus as its energetic and high-profile leader, it went public in late 2011. According to Zynga, it had three classes of stock ownership, with its Class C common shares — all held by Pincus — getting 70 votes per share. Class B shares, which Pincus held a majority of, got seven votes per share and Class A shares had one vote each.

Under the new structure, all Zynga shareholders will have equal voting rights.

Zynga’s shares have certainly recovered over the last several years, after getting hit by changes at Facebook and in the mobile market. Its stock price dipped below $2 a share in early 2016, but it has now risen to $3.61.

While still in turnaround, the company reported stronger first-quarter results today and has announced more stock repurchase programs. Recently, under Gibeau, its flagship games and live services, like “Words With Friends 2” and “Zynga Poker,” have seen solid growth.

While not directly commenting on current Silicon Valley giants like Google and Facebook, which continue to give founders huge latitude, he did note that there will be some pushback on the idea that “founders don’t feel accountable to shareholders.”

Added Pincus: “Is the value we were worried about at founding served by multi-class structures? It’s no longer obvious what benefit it has given. So many companies like this are now in amazing positions that seem very well aligned with visions of founders.”

If you want to read more from Pincus, here is his blog post.

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From: Glenn Petersen5/30/2018 8:54:21 PM
   of 358
Zynga buys 1010 maker Gram Games for $250 million

Dean Takahashi [url=]@deantak [/url]
May 30, 2018 6:02 AM

Above: Gram Games founders Mehmet Ecevit (left) and Kaan Karamanci.
Image Credit: Gram Games

Zynga has acquired 1010 mobile game maker Gram Games for $250 million in cash plus other considerations.

Frank Gibeau, CEO of San Francisco-based Zynga, said in an interview with GamesBeat that the company will also pay an earnout, or bonus, over three years if Gram Games hits unspecified financial targets.

Gram Games has studios in Istanbul, Turkey, where it was founded in 2012, and in London. Gram Games currently has nine live games, including 1010 and Merge Dragons, which is a top-50-grossing game in the U.S.

Above: Gram Games’ Merge Dragons.
Image Credit: Gram Games

Zynga will add Gram’s 77 employees to its roster, and Gibeau said the deal could add to the company’s “forever franchises,” or long-life live services games such as Zynga’s Words With Friends franchise.

“Their franchises are in good shape, and we are very excited to bring them into the company,” Gibeau said. “They have a unique way of building games through rapid prototyping with small teams.”

“Gram Games helped define the hyper-Casual genre with games like 1010 and Six, and we continued to grow our footprint with Merge Dragons,” said Kaan Karamanci, cofounder of Gram Games, in a statement. “We look forward to marrying our unique approach to game making with Zynga’s live services expertise to grow our games and continue to delight millions of players around the world.”

Above: Gram Games’ studio in Istanbul
Image Credit: Gram Games

Gibeau added, “They focus on culture and creativity. We will keep them as is, and they will operate as an independent studio inside our company.”

Gram Games has 3 million daily active users, and its free-to-play games have been downloaded more than 170 million times. Gibeau said Gram has good games in its pipeline as well.

Gibeau said the acquisition will be accretive at the outset, and the company will remain committed on delivering its guidance for the fiscal year. Gibeau said the price Zynga paid was two to three times the revenue that Gram generates.

“We are proud to join Zynga and combine Gram Games’ unique culture, talented team and hit games with Zynga’s world-class organization,” said Mehmet Ecevit, Gram Games CEO, in a statement. “We believe deeply in Zynga’s mission to connect the world through games and are excited to work with Frank and the rest of the Zynga team on our next phase of growth.”

Above: Gram Games’ studio in London
Image Credit: Gram Games

“We were drawn to the talent of the team,” Gibeau said.

The deal is similar to Zynga’s purchase of assets from Peak Games, another Istanbul-based game studio. Zynga paid $100 million last year for Peak’s casual games studio.

“This deal fits with Peak Games in a lot of ways, as both have talented teams with strong creativity and big opportunities, both globally and in emerging markets,” Gibeau said.

Zynga said it expects to hits its previous guidance for earnings for the second quarter. Gibeau said that for GAAP (generally accepted accounting principles) purposes, Zynga does not expect any significant revenue impact from Gram Games, as the expected bookings generated in Q2 of $10 million will be accounted for as an increase in deferred revenue and recognized as revenue in future quarters.

Zynga expects a reduction to its adjusted earnings before income taxes, depreciation, and amortization (EBITDA) of $8 million, as a result of the $10 million increase in deferred revenue partially offset by $2 million of expected operating contribution

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From: Glenn Petersen12/20/2018 8:23:36 PM
   of 358
ZNGA was up about 6.4% in AH trading.

Zynga will buy 80% of Empires & Puzzles maker Small Giant Games for $560 million

Dean Takahashi
December 20, 2018 1:05 PM

Above: Empires & Puzzles has more than 10 million downloads.
Image Credit: Small Giant Games

Zynga has agreed to acquire the Helsinki-based mobile game maker Small Giant Games, the creator of the hit title Empires & Puzzles. Zynga will pay $560 million in cash and stock for 80 percent of the company, and the rest will come later.

It’s the biggest deal since Zynga acquired CSR Racing maker NaturalMotion for $527 million in 2014. And it reflects the strategy of CEO Frank Gibeau to grow during an age of mobile gaming consolidation through both the creation of new games and acquisitions.

Back in May, Zynga acquired 1010 mobile game maker Gram Games for $250 million in cash plus other considerations. That was preceded by Zynga’s 2017 purchase of assets, including a casual game studio Peak Games, another Istanbul-based game studio, for $100 million.

The deal will close on January 1, pending various approvals. To put the purchase price in perspective, the amount is larger than the $494 million valuation of Cloud Imperium, which is making the Star Citizen and Squadron 42 games, which hold the record for the highest crowd-funded games in history. While Cloud Imperium has 520 employees making its triple-A games, Small Giant Games has just 47. That means Zynga is paying at least $11.9 million per Small Giant Games employee.

“I’ll take our 47 Finns,” Gibeau said in an interview with GamesBeat. “The Finns have small teams that are very skillful. What they have accomplished with Empires & Puzzles is phenomenal.”

Above: Timo Soininen (left) of Small Giant Games and Dean Takahashi of GamesBeat at Casual Connect Europe.
Image Credit: VentureBeat

Zynga is buying the company because it has a hit game which has been downloaded more than 24 million times in the past 18 months and has broken into the top 10 grossing games on iOS and Android. That’s a remarkable result for the first game from Small Giant Games, which Timo Soininen cofounded in 2013. He previously the CEO of Habbo Hotel, an early hit online game.

Small Giant Games is expected to contribute to Zynga’s growth in 2019. Empires & Puzzles game successfully blends approachable match-3 battles with deeper gameplay elements including Hero Collection, Base Building and Social Alliances.

“Our studio was founded on the idea that small, skillful teams can accomplish giant things, and I am confident that partnering with Zynga is the right next step in our evolution,” said Soininen in a statement. “We will now operate as a separate studio within Zynga, maintaining our identity, culture and creative independence. By leveraging the expertise and support from the wider Zynga team, we will amplify the reach of Empires & Puzzles and the new games in our development pipeline.”

Above: Empires & Puzzles has match-3 gameplay.
Image Credit: Small Giant Games

In terms of details, Zynga will acquire 80 percent of Small Giant for $560 million, made up of approximately $330 million in cash and $230 million of unregistered Zynga common stock (issued at the average closing price per share over the thirty-day trading period ended December 19, 2018). The final upfront transaction consideration will also include customary closing adjustments and will be partially funded by a newly established $200 million revolving credit facility.

Zynga will purchase the remaining 20 percent of Small Giant over the next three years at valuations based on specified profitability goals. Gibeau said that represents an “earnout,” or a way to retain the employees of Small Giant Games with the potential of a bigger payday down the road.

Small Giant Games had bookings last year of $190 million, which would put it just behind Zynga’s own Words With Friends in terms of revenue generation.

“It’s already at scale, profitable, growing, with fantastic engagement metrics,” Gibeau said. “People play it and they keep on playing. The team has great talent.”

Empires & Puzzles also gets Zynga to new users, as more of Empires & Puzzle audience is on Android and 60 percent of its revenues are outside the U.S., Gibeau said.

“From our perspective, it really checked the boxes,” he said.

Over time, Zynga will contribute its own live operations expertise and help take the game into Asia.

Separately, Zynga is raising its fourth quarter 2018 guidance based on the strong performance of holiday bold beats across its live service portfolio — in particular, Words With Friends, Merge Dragons! and CSR2. In addition, Wonka’s World of Candy is off to a promising start since its launch in early November.

This performance does not include any contributions from Small Giant yet. Small Giant Games raised $41 million in February, making it one of the rare mobile game studios to be able to raise a large round of money in a mature mobile gaming market. The Small Giants Games investors include EQT Ventures, Creandum, Spintop Ventures, and Profounders. Gibeau said they requested to be paid in Zynga stock out of confidence in Zynga’s future.

“We have hit our margins, gross revenue goals, and are fundamentals are good,” Gibeau said. “The turnaround is over and it’s all about growth. We are layering in new themes and products as opposed to just trying to fix things. It is emotionally and culturally exciting for the company.”

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From: Glenn Petersen2/10/2019 10:04:05 PM
   of 358
Zynga’s turnaround: How once-beleaguered game company plans for 2019 growth

Dean Takahashi [url=]@deantak [/url]
February 9, 2019 7:15 AM

Above: Social-gaming publisher Zynga's headquarters.
Image Credit: Zynga

Zynga went public in 2011, and it grew quickly on the strength of social games like FarmVille. But it hit the skids in 2013, and it began going downhill. Frank Gibeau, a former Electronic Arts executive, joined as CEO in 2016, taking over from Mark Pincus, the original CEO, who replaced his own replacement, Don Mattrick, who was Gibeau’s former colleague from EA. (Did you follow all that?)

It was a long slog, but Zynga has gone through a turnaround. In fact, Gibeau said this week in an interview with GamesBeat that the company’s “turnaround is now complete.” The company broke even, even with 1,778 employees, and it is 39 percent bookings growth in 2019.

Part of the solution has been acquisitions. Starting in November 2017, Zynga began making new acquisitions, such as buying Peak Games board and card games for $100 million. In May, Zynga also bought Merge Dragons maker Gram Games for $250 million, and then in December, it got a 80 percent of Small Giant Games, maker of Empires & Puzzles, for $560 million.

But Zynga has doubled down on its “forever franchises” (those that can top $100 million in a year and sustain a business for five years or more) and driven growth on existing games like Words With Friends and CSR Racing 2. Zynga Poker is still kind of limping, but nine new games are in the works.

Gibeau will be a speaker in a fireside chat with Michael Metzger of Drake Star Partners at our GamesBeat Summit 2019, which takes place in Los Angeles on April 23-24. Here’s an edited transcript of our interview.

Above: Frank Gibeau, CEO of Zynga.
Image Credit: Zynga

GamesBeat: It sounds like you guys had a good quarter there.

Frank Gibeau: It was a good quarter and a good year. We beat on the top and the bottom. We even beat our raised guidance for the quarter. We’re set up for a really strong 2019. The business has a lot of momentum. The thing we’re most excited about is how Gram with Merge Dragons and Small Giant with Empire of Puzzles have fit nicely into the portfolio alongside Words With Friends, CSR 2, and Zynga Poker. We have a good lineup of games to create the base for us, and then we have more than nine games being built right now that will come out over the next couple of years, with a bunch coming in soft launch

It’s an exciting time. We’re out of the turnaround. We’re done. There’s more “Spill on aisle three!” cleanup stuff. We’re focused in on growing the business, making games. It’s a lot of fun. Mobile is the place to be right now.

GamesBeat: You always had the declining Facebook desktop business and rising mobile. Has that stabilized, or is that still happening, still slowing down overall growth?

Gibeau: There’s a couple ways to think about it. We’re 93-plus percent mobile now. When we started I think we were in the 60s. Over the last couple of years we’ve accelerated the transition to mobile. That’s part of how we did the cleanup on the turnaround, to start to exit and focus in on where we had the highest growth. That was in mobile.

The good news is that more than 90 percent of the business is in mobile. We still have a headwind from what we call legacy mobile and web. We have to overcome that when we talk about how we’re going to grow the company. It’s going down. It hasn’t reached bottom yet, but it’s as close to the bottom as it’s ever been. When you think about how we performed this year and how we’ll perform next year, we always start out with a $50 to $70 million headwind in revenue decline from those businesses. Then you tack on the growth in our forever franchises and the new games coming in. We’re almost to the end, but it’s still an artifact that we have to deal with.

I think what’s encouraging is if you remove that from our growth performance, we’re growing even faster. We had a great year over year in the quarter, where I think we grew 19 percent on the top end. If you took out the headwind from web we’d be growing in the 20s. It’s encouraging to see.

Above: Empires & Puzzles has more than 10 million downloads.
Image Credit: Small Giant Games

GamesBeat: Are you already more confident about Empires and Puzzles than acquisition time?

Gibeau: Last week it was in the top 10 on Android. Merge Dragons was in the top 20. We see a lot of momentum in those two franchises, especially on Android and international, which as you know has been a key strategy for us. We’re falling more in love with those guys every day.

If you look forward into next year, we’re projecting that we’ll grow the company 39 percent on the top line. We’re going to try and achieve $1.35 billion on the top. We finished this year just a bit below a billion. It’s a 39 percent growth rate in terms of bookings. It should make us one of the fastest growing game companies, if not the fastest growing public game company, next year. That should set us up for growth in 2020 and beyond.

A big part of that is Empires and Puzzles and Merge Dragons, but also you’ll see growth from Words With Friends and CSR 2. Poker is going to be in a good position too. We have a new lineup of games coming. We’ll have a bunch of them in soft launch in the near future, some of them in the next few weeks actually. They’ll include Star Wars and Harry Potter, Game of Thrones, CityVille, FarmVille. We’ll have additional games from Gram and Small Giant.

We’re going to leave 2018 with about a billion dollars of revenue from our top five franchises, our five forever franchises. Those are going to grow, and then you’ll layer in the new games. We’re very fired up about the fact that we’ll be growing in the next couple of years.

Above: Zynga’s CSR2 has added new vehicles from the Geneva Motor Show.
Image Credit: Zynga

GamesBeat: Electronic Arts gave a mixed outlook for mobile. They described it as a difficult business. Command and Conquer didn’t do as well as they’d hoped. You guys seem a lot more optimistic than EA and some others in the space.

Gibeau: As you know, I spent some time there. I ran the EA mobile business for a while, and we did fine. I think the issue for me is that–it’s not the fact that mobile is competitive. It’s the fact that it’s the largest platform, the fastest-growing platform. It reaches the most people and the most devices. It’s an awesome platform to be on. It’s competitive, but it’s pro ball. You have to execute. You have to be able to compete.

We don’t typically blame the competition around here. We try to focus in on what we can do better than anyone else in the world. What is it about our games that connects with players? How do we go out and find those players and get them to connect with our games and stay with them for a long time?

I understand their point of view, but it’s one of those things where — at Zynga we’re a mobile-first company. We’re focused on mobile. We’ve spent the last few years really getting fit to be able to compete and grow the business. If we were worried about the competition I wouldn’t publicly tell you that we’re going to grow the company 39 percent next year. Poker has been around 10 years. Words With Friends has been around eight years. CSR is a five-year-old franchise. Empires and Puzzles and Merge Dragons are going like hotcakes now. They’re growing fast.

Merge Dragons wasn’t that high in the charts when we started working with them. We think the combination of our studios, our publishing platform, and the fact that we’re out here being inquisitive–we’re out looking for franchises and talented game teams that want to join a company like ours. 2018 was a strong year. We leave it with a lot of momentum. It’s not that we aren’t paranoid about the competition. We just don’t blame it.

Above: Zynga’s leaders. Frank Gibeau, CEO, is on far left.
Image Credit: Zynga

GamesBeat: Is Poker still trying to recover right now?

Gibeau: It had a really good first half of 2018. Then, about midsummer, it got some hits from a Facebook platform shift, as well as some challenges inside the game economy. We’ve been working through that. As you know, with live services, it’s a marathon. You’ll have periods of time where it goes rapidly. You might level off a bit, have to make some changes, and then you get back to growth.

That’s the story right now on Poker. It finished 2018 in line with what it did in 2017, which was phenomenal year, so it’s not like it’s off its peak. It’s performing at its peak. It’s just not growing as much as we want it to. From the time I came into the company, we introduced some new things like tournaments, and the product grew about 96 percent in that period. When you grow that fast, sometimes you have to level off a bit and look at things again.

That’s where we’re at right now. We wish it was doing better, but we feel like we have a good handle on it. We need to make some adjustments to some of the tournament structures, the economy. It’ll return to growth in 2019. It remains a forever franchise for us. We hope to be in business with it for another 10 years. But it’s one of those things where, if you look at the Q4 timeframe, it was really a story of Merge Dragons, Words With Friends, and CSR. Poker did well, but it wasn’t growing year over year as much as we wanted.

GamesBeat: As far as forever franchises, can you talk about that again and why some of these might be considered your forever franchises, even if they’re pretty new?

Gibeau: We have a definition for it, which is a game that does over $100 million a year in bookings, and a game we believe can last for five years or more. We have a couple of other definitions in terms of engagement metrics. When you look at Merge Dragons and Empires and Puzzles, they’re well above the $100 million mark and growing. They have a global audience. They’re about a year and a half into their lives, both below two years I think. We believe these games have the potential and the depth to do that same business through the next couple of years.

Above: Zynga Poker Classic
Image Credit: Zynga

When we greenlight new games, like the nine games we’ve been talking about, we look at the potential in each game and ask ourselves, “Can this last for five years or more? Does it reach a global audience? Does it have a potential to do more than $100 million in a year?” Maybe not the first year, because in mobile you have to grow into it, but it’s definitely not a buzzword. We use it as a decision-making point to classify the games and the investments we make at Zynga.

GamesBeat: You’re at 1,700 people. Is that going to change much in the coming year?

Gibeau: A lot of that is international now. Our European organization is really cool. We have two teams in Istanbul, two teams in Helsinki, teams in London and Brighton. We’ve been growing internationally, because mobile has so much talent in terms of developers and franchises everywhere. We’ve been expanding through acquisitions. We’ve actually expanded our team in Bangalore. They handle a lot of new mobile games. We’ve been investing in new games there for India as well.

I think you’ll see us hang around that number. But if we do scale it up, it’ll be probably more related to acquisition activity than organic growth. We feel like we have a good handle on the size of our company and our operating margins. As we look at how we’re going to grow in 2019 and 2020, we don’t see a big headcount lift. We see a lot more efficiency than a scaling-up army of people.

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From: Glenn Petersen6/7/2019 10:48:38 AM
   of 358
Zynga Is Now Flush With Cash and Investors Are Watching for More Deals

By David Marino-Nachison
Updated June 3, 2019 9:59 a.m. ET Order ReprintsPrint Article

Photograph by David Paul Morris/Bloomberg

Mobile gaming company Zynga finally sold its headquarters building last week, raising millions in the process. So now what?

That—instead of “When will they sell it?”—is what investors are asking following Tuesday’s announcement that the San Francisco-based company, known for Farmville and Words With Friends, agreed to sell its building to a Boston investment firm.

The deal, expected to close before August, should net Zynga (ticker: ZNGA) some $600 million in cash this year, the company said. It bought the building for $234 million in 2012, and Barron’s readers were contemplating its potential value not long after the purchase.

Zynga owned nearly 690,000 square feet of space, leasing roughly half. In December, the company said “close to 100%” of the free space was leased out. Tuesday’s deal is a sale-leaseback, which means Zynga won’t be leaving its digs, though $15 million in new annual expenses are expected as a result.

Zynga had $252 million in cash, equivalents and long-term investments on its balance sheet as of the end of March, so the infusion of funds is a hefty one. But because management had previously indicated that a deal was likely, investors weren’t particularly surprised—though the shares did finish the week up nearly 4%.

Next up is the job of putting the money to work. “We look forward to investing the proceeds into future growth,” CEO Frank Gibeau said Tuesday in a statement that didn’t offer much additional detail. (Zynga didn’t reply to a request for comment.)

That could mean acquisitions. Two recent deals offer clues as to what might be in store.

In December, Zynga acquired 80% of the Finnish company Small Giant Games for $560 million, mostly in cash. It said the deal was expected to boost profits thanks largely to Empires & Puzzles, which it termed a “forever franchise.” (Zynga plans to buy the rest over the next three years.)

And in May 2018, it bought European developer Gram Games, known for Merge Dragons, for $250 million in cash plus future considerations based on Gram’s progress toward profitability goals.

Both games, the company believes, have the potential to hook players because they are easy to pick up, but have lots to offer over weeks, months or even longer, giving Zynga more opportunities to push various digital upsells. And both, Zynga believes, bring in users that won’t necessarily have to drop other Zynga games to start playing.

The deals, management has said, took about a year to come off. Zynga thinks its strength as an acquirer is that it can offer efficiencies on things like marketing, testing, and product management, while leaving a developer’s culture relatively untouched.

Zynga’s “reputation as a place where creatives want to go work has vastly improved over the past year,” Stephens analyst Jeff Cohen wrote Thursday.

Wall Street expects revenue to grow from $970 million last year to about $1.78 billion in 2021, with earnings per share rising from 11 cents to 30 cents. Zynga has said that while it wants to be able to make moves it thinks can help it grow, it is also comfortable with what it has.

“We don’t need to acquire anything else to grow,” Gibeau said at a JPMorgan Chase conference in mid-May, saying Zynga has a solid strategy for organic growth over the next couple of years. “But if we do find an opportunity to partner with a company, like we have with Gram or Small Giant, we’d like to be able to do so.”

Zynga’s shares are up 60% this year through Friday’s close at $6.29, not only outpacing the S&P 500 and competitor Glu Mobile (GLUU) but larger, console-heavy developers Activision Blizzard (ATVI), Electronic Arts (EA), and Take-Two Interactive (TTWO). Wall Street’s average price target is just under $7.

“We are not anticipating a major, transformative acquisition, but instead, opportunities similar to its recent spate of purchases,” PiperJaffray analyst Michael Olson wrote on Tuesday. “We view Small Giant/Gram sized acquisitions as the sweet spot for Zynga, which we believe seeks to acquire small studios looking to scale an established title.”

Email David Marino-Nachison at Follow him at @marinonachison and follow Barron’s Next at @barronsnext.

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