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$180 million purchase for Draw Something studio turned out to be a giant bust
When Zynga bought OMGPOP for $180 million last March, I remember hearing rumblings very early on that the amount the company paid was far too high for what they would be getting in return. Basically, OMGPOP had one big hit in Draw Something, but has otherwise not proven that it could create a successful game. And for Zynga to spend so much money for, essentially, one game seemed like a fool's errand.
And that is exactly what it turned out to be. The Draw Something phenomenon faded quickly after the purchase, and the studio became an albatross around Zynga's neck; a reminder of a hasty purchase that hurt the company in the long run.
So now, to the shock of pretty much nobody, Zynga is set to shut the studio down completely, according to a report from VentureBeat.
The news has also been tweeted out by OMGPOP and its employees:
This news comes a day after Zynga announced that it would be laying off 520 employees, or approximately 18% of its global workforce. The company also noted that there would be "closure of various office locations," with reports surfacing that studios in in New York, Los Angeles and Dallas would be getting the axe.
It is unclear at this time if the closure of OMGPOP would result in layoffs that are included in the confirmed 520 employees, or if these would be additional layoffs. VatorNews has reached out to Zynga to confirm the closure, and to find out if OMGPOP employees were counted in yesterday's announcement. We will update when we learn more.
The Draw Something disaster
Draw Something had been an instant phenomenon, being downloaded 35 million times in its first six weeks alone after debuting that February. And the purchase initially looked like a winner when Draw Something became the top paid app in the iTunes store in April, but things quickly fell apart after that.
The game's numbers fell off severely and the game lost seven million users from May to June alone. Suddenly, the purchase of a small game company that had only seen a single success led to Zynga being severely criticized for being too hasty and overspending on an unproven property.
As Draw Something's numbers fell, so did Zynga's stock price:
(Image source: VentureBeat.com)
Zynga had been betting that it could revive the propety with Draw Something 2, which was revealed in a Tweet from ex-OMGPOP CEO Dan Porter, who left Zynga in April, in a response to Ryan Seacrest on Twitter. But the game, which started strong after launching in late April, spending a week at number one in Apple's App Store, quickly fizzled as well and was down to number 33 by mid-May.
Zynga getting leaner
Zynga's mission these days is to become a leaner, more mobile focused company. And that means that the company has to trim the fat.
Along with the closure of OMGPOP and the layoffs announced yesterday, Zynga has also been closing down a number of its studios.
In October, Pincus announced that he was laying off 5% of the company’s workforce by shutting down Zynga Boston. Then, in January it closed down Zynga Japan and, in February, the Zynga offices in Austin and McKinney, Texas, Baltimore and New York City, were shut down as well, cutting the company's workforce by another 1%.
The teams from the two Texas offices were to be relocated to offices in Dallas and North Austin, while the company's New York City office was to be consolidated to its New York City mobile studio. There was no indication of where, or if, the team at the Baltimore office will be relocated.
Zynga's stock is currently down .03% to $2.99 a share.
(Image source: https://designerbs.blogspot.com)
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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.