Empire & Puzzles Acquisition Likely To Increase Zynga’s Net Income By 100% Or More

Summary:

  • Zynga’s average monthly revenue based on its quarterly report is only $74.25 million.
  • The $560 million purchase of an 80% stake in Small Giant Games helps Zynga earn $16 million in additional monthly sales.
  • Small Giant Games is the developer of Empire & Puzzles: RPG Quest, which has net global monthly sales of $6 million from iOS and $14 million from Android devices.
  • The $700 valuation purchase price is a good deal for Zynga. It bought a game developer that makes around $240 million in net annual sales.
  • A 21.5% monthly revenue boost just from buying one hit mobile game should also lift the profitability of Zynga.

I am more inspired to keep increasing my exposure to Zynga (ZNGA). Its recent acquisition of Small Giant Games can boost its monthly revenue by $16 million (+21.5%). Based on the quarterly earnings reports of Zynga, it only has an average monthly revenue of $74.25 million. Zynga obviously needed another hit mobile game to get nearer to $100 million in monthly revenue. Instead of wasting time and money in developing a new game, Zynga used some of its cash to jbuy another company’s hit mobile gam.

Small Giant Games is the Finnish developer of the hit mobile game Empire & Puzzles: RPG Quest. Empire & Puzzles is a mixed match-3, heroes-based card collecting game, and turn-based PVP combat online multiplayer game with estimated monthly net revenue of $20 million.

(Source: Apple iTunes)

The player-vs-player combat system compels competitive players to spend real dollars to acquire better heroes in Empire & Puzzles. It obviously has a strong gacha system that is helping Small Giant Games earn $20 million every month.

(Click on image to enlarge)

(Source: SensorTower)

Empire & Puzzles only had an estimated 1 million in downloads on Android last November, but it still managed a net sales of $14 million. It also netted $6 million from iOS device-using players last month. Zynga is paying $560 million to acquire 80% stake in Small Giant Games. This gave Small Giant Games a valuation of $700 million. This is cheap considering its estimated average monthly net sales is now $240 million.

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