Sensor Tower Analysis: Zynga's Acquisition Strategy Is Reshaping Its Portfolio for Future Growth

Sensor Tower Store Intelligence app market data shows Zynga's purchase of Gram Games and Peak Games is driving revenue growth.

Merge Dragons Artwork

Earlier this week, Zynga announced that it was acquiring Gram Games (1010!, Merge Dragons!, Six!) for $250 million. This is Zynga's second meaningful acquisition in the last eight months, as the publisher purchased Peak Games' casual card portfolio for $100 million in November 2017. These recent acquisitions have dramatically reshaped Zynga's portfolio.

Based on Sensor Tower Store Intelligence data, the Peak and Gram titles are contributing 23 percent to total Zynga 2Q18 mobile bookings (through May 28), with Merge Dragons! ranking as the third highest grossing Zynga title behind Zynga Poker and CSR Racing 2.

Purchase Price Analysis

In the several months leading up to Zynga's purchase of Peak Games' casual card portfolio, year-over-year revenue growth was 40 percent, but month-over-month growth had stagnated. Assuming monthly sales remained consistent, the $100 million purchase price was about 1.9x annual sales.

Chart showing the monthly revenue of Gram Games and Peak Games titles for 12 months prior to their acquisition by Zynga

Gram Games grossed approximately $8 million in the month prior to acquisition, implying a 2.6x multiplier, assuming consistent monthly sales. However, Gram had only been monetizing on the mobile marketplaces for less than a year, with month-over-month revenue growing an average of 23 percent over the last three months. Furthermore, advertising revenue from popular Gram titles such as 1010! and Six! are excluded from this analysis.

Dance of (Merge) Dragons

Per Sensor Tower Store Intelligence data, Gram's Merge Dragons! comprises approximately 97 percent of Gram's total mobile bookings revenue. The title ranked as the No. 57 ranked gaming app in terms of U.S. revenue across the App Store and Google Play in the month of April, and is also a hit internationally, with 50 percent of its total revenue coming from outside the U.S. Despite only being launched in June 2017, Merge Dragons! is now already the third highest grossing app in Zynga's portfolio.

Chart showing the monthly revenue of Zynga's top earning games back to January 2016

Don't Discount Downloads

In addition to the successful Merge Dragons!, four more of the recently acquired Gram Games apps would have ranked in Zynga's top 10 most downloaded apps in the first quarter of 2018. While several of these apps already monetize via ad placements, Zynga can look for new ways to cash in on their popularity. Further illustrating the impact of acquisitions, Zynga's second most downloaded app in 1Q18 was Solitaire, acquired from Harpan LLC in March 2017, and the sixth most downloaded app was 101 YüzBir Okey Plus, part of the Peak acquisition.

Chart showing Zynga's most downloaded games for Q1 2018 including Gram Games and Peak Games titles

Reshaping Zynga's Portfolio

Zynga's recent acquisitions should serve as a shot in the arm for the company, as growth in its legacy titles had slowed to low single digits in recent quarters. For 1Q18, Peak's casual card portfolio grew high single digits quarter-over-quarter, while Gram Games revenue was up about 150 percent QoQ.

Chart showing Zynga's revenue for the past four quarters with Gram Games and Peak Games revenue added

Perhaps even more encouraging for Zynga, Merge Dragons!' monthly revenue is still seeing sequential growth a year after its initial release, suggesting it could turn into an evergreen title along the lines of Zynga Poker and Wizard of Oz.

Chart showing the first 12 months revenue for major Zynga game launches including Merge Dragons

We see a chance for growth to further accelerate as Zynga puts its clout and expertise in live ops behind the title.

Sensor Tower's platform is an enterprise-level offering. Interested in learning more?

Anthony Bartolacci

Written by: Anthony Bartolacci, Market Analyst

Date: June 2018

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