Why is Zynga worth a whopping $12.7 billion? (Hint: It's not FarmVille) – Ars Technica

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Major console game publisher Take-Two has acquired social and mobile gaming giant Zynga for a whopping $12.7 billion in cash and stock, making the deal the largest acquisition of a single gaming company in history.

With those companies gathered under the Zynga umbrella, the company now attracts over 168 million monthly users and made $706 million in revenue in the latest reporting quarter.
Still, Zynga’s mostly casual fare might seem like an odd match for a big-budget console game maker like Take-Two. But the acquisition gives Take-Two a simple way to get its massive and well-known console franchises—including Grand Theft Auto, Red Dead Redemption, Civilization, Borderlands, BioShock, Kerbal Space Program, and the 2K Sports games—in front of a huge audience of mobile players.
“Take-Two has an extensive catalog of commercially and critically successful console and PC titles with engaged and loyal communities of players, and there is a meaningful opportunity to create mobile games and new cross-platform experiences for many of these properties,” the company wrote in a statement announcing the acquisition. “Zynga’s nearly 3,000 employees include highly talented mobile developers, paving the way for Take-Two to accelerate this strategic initiative and introduce its iconic intellectual properties across the fastest-growing platform in the industry.”
Take-Two CEO Strauss Zelnick expanded on this synergy on a Monday morning conference call discussing the acquisition. “Perhaps most importantly, we have the ability together, from both a development and a publishing point of view, to optimize the creation of new titles based on Take-Two’s core intellectual property,” he said. “We believe we have the best collection of console and PC intellectual property in the interactive entertainment business, and it’s basically nearly entirely un-exploited from mobile and free-to-play around the world. Zynga’s best-in-class studios can help us develop that property.”
That helps explain why Take-Two thinks Zynga is a good fit. But it doesn’t necessarily mean the company is worth today’s record valuation.
The price Take-Two is paying today represents a significant 64 percent premium over Zynga’s closing stock price on Friday, showing just how eager the publisher is to get a chunk of the mobile gaming market. Today’s $12.7 billion valuation outpaces the $10 billion paid for Clash of Clans maker Supercell in 2016 and the $7.5 billion Microsoft paid for Bethesda Softworks in 2020.
Is Zynga’s collection of popular mobile titles really worth more than Doom, Fallout, The Elder Scrolls, and all of Bethesda’s other games combined? It could be—if it helps Take-Two seize even a small portion of the mobile game market, which was estimated to be worth $100 billion in 2020.

Given the size of that market, spending billions of dollars to get an instant foothold in the mobile games market seems perfectly natural. For evidence of just how important that foothold can be, look no further than Activision Blizzard. The major console and PC game publisher spent a then-unheard-of $5.9 billion for Candy Crush maker King Games back in 2015. That purchase looks prescient in retrospect, as King now represents a third of the company’s total revenues of over $2 billion a quarter.
Activision tried to leverage that acquisition with a King-made mobile version of Call of Duty, which began development in 2017. But the project fell apart, and Activision went to Tencent-owned TiMi Studios to develop Call of Duty: Mobile. That port is set to bring in over $1 billion in 2021, highlighting the potential value of bringing top-shelf console franchises to the massive worldwide mobile market.
In other words, today’s acquisition is only hard to understand if you still think of mobile games as the limited little cousin of PC and console gaming. In recent years, that relationship has flipped. Even giants of gaming’s old world are desperate for an easy way to leverage their franchises in the mobile market.
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