Zynga Officially Overpaid for Draw Something
It's kind of tragically hilarious that people wondered if Zynga underpaid for OMGPOP, the company that makes mobile game Draw Something, since Zynga's earnings report out today has OMGPOP at half its purchase value. Back when Draw Something was uber-popular, Zynga paid $183 million for the start-up. Today, the gaming company will write the value down to somewhere between $85 million and $95 million. OOF.
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But, the downfall of Draw Something has been apparent for quite some time. Last May The Atlantic Wire's Dashiell Bennett noted the collapse of the game's popularity. Then, despite some brand integration efforts, last quarter's earnings report reversed increased annual estimates due to expected benefits from the game's sales. This time around, Zynga is reporting a total net loss of between $90 million and $105 million, in large part because of the failure of the drawing game, as the earnings report explains:
Preliminary third quarter results primarily reflect weakness of certain games in our web "invest and express" category, and include an estimated impairment charge between $85 million and $95 million (excluding any income tax impact) related to the intangible assets previously acquired in connection with the company's purchase of OMGPOP.
"Intangible assets" meaning: Money that the game was supposed to make because of its popularity.
