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Zynga paid $53.3 million for Newtoy

IPO filing reveals doubt over success in the mobile space

Zynga paid $53.3 million for social game developer Newtoy, according to its IPO.

When the company was acquired in December last year the amount paid was kept a secret, but Zynga's initial public offering filing revealed the cost to be $44.3 million in cash and $8.9 million in stock.

Newtoy was founded in May 2009 by Ensemble Studios veterans Paul and David Bettner. It scored an early hit with the Words With Friends mobile app, which had been downloaded 12 million times at the time of the acquisition. The studio was subsequently renamed Zynga With Friends.

"We're reinventing the way people are social on their mobile devices," said vice president Paul Bettner at the time. "The Zynga With Friends Studio will build on the Newtoy legacy of creating approachable, highly social games that are accessible to anyone from anywhere."

Zynga has acquired 12 companies since the start of 2010 for a total of $123 million, but Newtoy is the most expensive deal by a significant margin.

"Words with Friends is one of the leading social game franchises on mobile platforms," the filing states. "We believe there is a large opportunity to extend our brand and games to mobile platforms such as Apple iOS and Google Android."

Despite its mobile portfolio now standing at 11 games and its audience increasing, "more than ten-fold from November 2010 to June 2011," the filing suggests that Zynga regards success in the mobile space as a considerable challenge.

"We expect to devote substantial resources to the development of our mobile games, and our limited experience makes it difficult to know whether we will succeed in developing such games that appeal to paying players or advertisers."

Some of the "uncertainties" Zynga faces include staying relevant outside of the context of Facebook, a lack of experience working with wireless carriers, and integrating features that mobile users will be willing to purchase.

"If we do not succeed in doing so, our growth prospects will suffer."

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Matthew Handrahan avatar
Matthew Handrahan: Matthew Handrahan joined GamesIndustry in 2011, bringing long-form feature-writing experience to the team as well as a deep understanding of the video game development business. He previously spent more than five years at award-winning magazine gamesTM.
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