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Report: Google Invested Over $100M In Zynga, Preparing Google Games
by Eric Caoili [PC]
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July 11, 2010
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Google quietly invested between $100 million to $200 million in FarmVille developer Zynga as part of its preparation to launch a new Google Games platform later this year, according to online reports.
Google itself -- not its investment arm Google Ventures -- closed the investment portion of its deal with the social games developer around a month ago, according to a report from TechCrunch. The company has a broader strategic partnership planned with Zynga as well, which is still in process.
Part of that partnership will entail Zynga's games serving as the cornerstone for the search giant's Google Games platform, which is rumored to launch later this year. As the developer of Facebook's most popular apps, Zynga's titles could help make the service more attractive to social gamers hesitant to venture far from their favorite social network.
Google hasn't publicly revealed any information about Google Games, but it has put up at least one job listing that seeks to hire someone who will be tasked with "developing Google's games commerce product strategy and partnering to build and manage the business with a cross-functional team."
Zynga has made several moves in recent months to extend its popular games beyond Facebook, launching standalone sites for its titles, making FarmVille available to play through Microsoft's MSN Games portal, and partnering with Yahoo to bring its titles to the Internet services company's network (e.g. main homepage, Yahoo! Games).
Several months ago, the social games developer and Facebook argued over the latter's upcoming implementation of Credits, a universal virtual currency for all apps on the social network -- an alternative to game- or publisher-specific virtual currencies, and one that would send 30 percent of revenues from virtual goods purchases to Facebook.
Zynga and Facebook eventually settled the dispute -- without revealing specifics for how exactly they resolved their differences -- and announced a five-year agreement that will allow the companies to continue to work together, keeping the developer's popular titles like Texas HoldEm Poker and Cafe World on the social network.
Google's investment in Zynga follows less than a month after the studio raised $147 million from Japanese telecommunications and media corporation Softbank in a Series D round of funding. It previously received $180 million last December, $29 million in July 2008, and $10 million in January 2008.
TechCrunch also reports that Zynga's revenues will $350 million for the first half of 2010, and that half of that amount is operating profit. It also says that Zynga predicts its 2011 revenue will hit at least $1 billion.
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If you look at the competition map that Shane Snow created for Gizmodo (http://cache.gawkerassets.com/assets/images/4/2010/04/versus15.jpg), you can see that one area where Google isn't matching up against Microsoft for future market share is in gaming.
So Google Games makes sense as a strategic action to plug that hole. How that translates into specific product and service offerings (especially as they leverage Google's existing efforts -- or not) will be interesting to watch....