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While We're Talking Freemium

Before we begin: Monetization manager Michail Katkoff at Rovio Entertainment (Angry Birds) wrote a blogpost back in June on how to make the switch from paid content to the freemium model. Interesting post to check out. Key points are:

1. Identifying DAU, conversion rate, and ARPPU (average rate per paying user)

2. Creating demand for premium/ in-game offerings

3. Tracking and implementing key metrics to determine success

Seems straight-forward enough, right? See Katkoff's post for details.

In recent news, Zynga is said to have paid over $20M for San Mateo-based games company A Bit Lucky. The acquisition is part of Zynga's continued effort (think Zynga poker) to diversify their income stream and appeal to the midcore game segment. This means (or, technically should mean):

- Higher quality graphics

- Geared toward a male audience

- Smaller audiences who spend more on average/ higher conversion rate. While the terms of the deal are currently undisclosed, monetization for midcore games is expected to be significantly higher than casual games.

This acquisition is not unique: in 2010 and 2011, Zynga spent a combined total of $147.2M on 22 companies. In their latest quarterly filing, the company reported a loss of $1.64B in cash and short- and long-term investments as of June 30. Despite this number and yearly increases in revenue ($332M, as of 2012 Q2), the company's revenue continues to fall below analyst estimates and the stock continues to coast along the x-axis. So what is the true worth of these companies to Zynga?

If the standard methods of increasing revenue are 1) diversifying products, and 2) monetizing existing consumers, it seems Zynga has been primarily focused on the first option.

#Zynga #acquisition #freemium #A Bit Lucky