Grand Theft Auto publisher Take-Two Interactive has acquired mobile game empire Zynga for $12.7bn. The move cements Take-Two as the largest player in the rapidly-growing mobile games space and gives it a huge foothold in the lucrative ad market.
Zynga publishes some of the most popular mobile games in the world including Words With Friends, Farmville and Zynga Poker. Its position among the top flight of game publishers is built upon an understanding of mobile monetization; the company was among the first to really take advantage of microtransactions and in-game purchases in mobile.
Crucially it was also among the first publishers to use in-app advertising within its games, effectively monetizing the users who otherwise would not spend. It continued to invest in that space, acquiring mobile ad company Chartboost last year for $250m. It was a move that was widely seen as presaging Zynga building out its own advertising network based on the first-party data it has on its users.
CEO of Zynga Frank Gibeau said of the merger with Take-Two: “Combining Zynga’s expertise in mobile and next-generation platforms with Take-Two’s best-in-class capabilities and intellectual property will enable us to further advance our mission to connect the world through games while achieving significant growth and synergies together”.
Strauss Zelnick, Chairman and CEO of Take-Two, said: “We are thrilled to announce our transformative transaction with Zynga, which significantly diversifies our business and establishes our leadership position in mobile, the fastest-growing segment of the interactive entertainment industry.
“This strategic combination brings together our best-in-class console and PC franchises, with a market-leading, diversified mobile publishing platform that has a rich history of innovation and creativity. Zynga also has a highly talented and deeply experienced team, and we look forward to welcoming them into the Take-Two family in the coming months.”
Take-Two publishes franchises that include Grand Theft Auto, the NBA 2K series, and upcoming series such as the Marvel Comics-inspired Midnight Suns, in addition to smaller properties. Zynga’s primary focus, however, has been on new IPs; the acquisition will allow for mobile iterations of those larger franchises and brand extension into mobile audiences.
The release explains: “Other strategic benefits include the use of Zynga’s Chartboost advertising platform, which will improve new user acquisition through better audience targeting and optimize mobile advertising inventory to achieve greater yields; geographic expansion into growth markets across Asia, including India, and the Middle East, among other regions; and an enhanced focus on technological innovation and new business models that will utilize the collective knowledge of forward-thinking talent.”
While Take-Two has traditionally focused on huge tentpole releases and annual iterations of franchises, its stable of developers including Rockstar have transitioned towards providing online services for games like Grand Theft Auto Online. That model of recurring payments from gamers suggests that it sees recurrent consumer spending (RCS) as a major focus for the future, and that Zynga’s tools and focus on RCS is an asset to diversifying its revenue strategy.
The release states that Take-Two has also identified over $500m of incremental annual net bookings opportunities to unlock over time and approximately $100m of annual cost synergies within the first two years after closing. For marketers, the merger allows for new ways to advertise alongside some of the biggest entertainment franchises in the world, in a medium that is increasingly a priority for consumers and brands.