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Take that Facebook! Search giant finds a $100 million backdoor to the social networking business
Google has invested a whopping $100 million to $200 million in the social gaming giant Zynga, the makers of the popular Farmville and Mafia Wars online games. This story was first reported by TechCrunch, and confirmed by VentureBeat. Both publicaitons cited multiple unidentified sources.
Through the investment, Zynga becomes the "cornerstone of a new Google Games to launch later this year," according to the TC report. By integrating with Zynga, Google may be able to create a social graph as users begin to log in with their Google ID to play Zynga games.
This sounds totally reasonable and clever. For whatever the reason - games are what's driving the insane activity and traction on social networks. In a piece I wrote titled: Zynga and Facebook had to play nice, I wrote: "Zynga has incredible leverage over Facebook. Zynga has 246 million unique users per month, meaning more than half of Facbeook users are playing Zynga's games. Zynga has grown its user base eightfold while Facebook grew its user base by 2.5x to 484 million users over the same time. Zynga accounts for 31% of all active applications on Facebook, which is more than double Facebook's own apps. It's arguable that Facebook grew because of Zynga's popularity."
Google would love some of that sizzle.
So, is it really a booming "games" business Google is after?
Or rather, is it to beat Facebook as the dominant social network? Secretly, it's most likely the latter.
Why doesn't Zynga just become the cornerstone of Google-book? Google is reportedly trying to build up "Google Me" - its entry into social networking.
Now, I've watched Google have success in areas they've ventured into. I use Chrome often and I'm a die-hard fan of Google docs. But it may have to settle for a distance No. 2 in social networking, given Facebook's prowess. And, maybe that's all it cares to do.
For Zynga's part, it's clear why the San Francisco gaming giant wants to partner with Google. It's clearly trying to lessen its dependence on Facebook. In mid-May, Zynga and Facebook struck a five-year partnership that gives Zynga more preferential treatment than other app providers on Facebook. A week later, Zynga announced that Yahoo would distribute its social games across its homepages, Yahoo mail, and other places across Yahoo's vast network. This deal follows a similar one struck with MSN back in February.
As for the funding, Zynga has certainly built up a warchest. The company has raised nearly half-billion dollars in venture funding in the last 12 months. The most recent raise was $147 million from Softbank Capial in June, and $180 million from Digital Sky Technologies in December of last year. Since the Softbank investment was never confirmed by Zynga, it's possible the Google investment was part of the $150 million.
The same TechCrunch sources said that Zynga's revenue is $350 million for the first half of this year. Half of that is operating profilt. Zynga's sales are projected to be $1 billion next year.
Both Zynga and Google would not comment.
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Zynga is the largest social gaming company with 8.5 million daily users and 45 million monthly users. Zynga’s games are available on Facebook, MySpace, Bebo, Hi5, Friendster, Yahoo! and the iPhone, and include Texas Hold’Em Poker, Mafia Wars, YoVille, Vampires, Street Racing, Scramble and Word Twist. The company is funded by Kleiner Perkins Caufield & Byers, IVP, Union Square Ventures, Foundry Group, Avalon Ventures, Pilot Group, Reid Hoffman and Peter Thiel. Zynga is headquartered at the Chip Factory in San Francisco. For more information, please visit www.zynga.com.