Reports have it that Google has invested between $100 million and $200 million in social gaming platform Zynga. Beyond the actual size of the spend, the real question is whether this move will finally give the Mountain View-based giant the leverage it desperately needs to launch its own full-blown social platform, i.e. the rumored 'Google Me.'
Google Game Is The Name
TechCrunch first reported on the Google-Zynga "secretly" brokered deal, citing unnamed sources close to the situation. VentureBeat followed suit, confirming the "details of the deal" from its own anonymous source "familiar with the matter." What TechCrunch and VentureBeat both agreed upon is that Google made the investment directly (i.e. not through its Google Ventures arm) and the company is readying to launch a Google Game platform.
Google Me Noises
This is where it becomes really interesting. Back in early May, we had anticipated that the search behemoth would be boosting its social strategy as it was readying to hire a "Head of Social." At the time, we'd also anticipated external growth, i.e. acquisitions. In fact, one month before that, Google had already also hired Mark DeLoura as its game 'developer advocate' and at the same time recruited Erik Klau to head Google Profiles. When rumors started emerging (thanks to a tweet by Digg founder Kevin Rose) in late June that the search giant was seriously working on a Google Me social platform, the marriage of Buzz + Orkut + Google Profiles seemed not to have enough "oomph" to knock of social behemoth Facebook. And the confirmation by Facebook's former CTO, Adam d'Angelo, that the Google Me plan was for real did neither bring much more details nor lend more credit to it.
Google Me + Google Games = A Long-Term Social AND Gaming Strategy
However, the reported Google-Zynga link would totally change the perspective and help Google kill two birds with one stone (no, no reference to Twitter here): it could give Google the opportunity to bring to life both a gaming platform - Google Games - and a social platform - Google Me - through leveraging Zynga's attractiveness to hords of addicted fans and players as well as interlinking those players and their friends across the graph, which so far is only thoroughly exploited by Facebook. Add to that its Buzz platform, Orkut and Google Profiles... and we're actually starting to see some meat on the bones of the company's social ambition. Also, the hires of a head of social and games advocate totally make sense. Actually, as we speak, Google is looking for another key 'player' in its grand social and gaming plans: it's seeking its "Product Management Leader, Games" so feel free to apply if you think you've got what it takes. Note that you would be "will be responsible for developing Google's games commerce product strategy and partnering to build and manage the business with a cross-functional team."
Revenues And Partnerships
In terms of cashing in on the games, TechCrunch anticipated that PayPal, who currently registers Zynga as its single largest customer, would be replaced by Google Checkout "as primary payment option" on the new platform. The report further quotes sources as saying that Zynga will post first-half sales of $350 million, and "projecting at least $1.0 billion in revenue in 2011." Just to give you an idea, this compares to TechCrunch's projected $240 million and to PaidContent's expectations for "more than $355 million" for this year. PaidContent also anticipated the bulk of the revenues would come from Facebook as despite sustained split-up rumors, the two companies finally entered a five-year non-exclusive agreement. And it is, indeed, non-exclusive, as Zynga has since been inking deals with other sites that will undoubtedly contribute to boosting the company's revenues to unprecedented levels. The social games platform notably shook hands with Microsoft's MSN and Yahoo. Looking at the social gaming platform's track record on Facebook, one can expect those companies to also benefit from Zynga's popularity in more than one way as rich ads displays in virtual currencies get the best ROI (read: the most engaged viewers and longest dwell times), according to a TubeMogul study that placed Facebook as the first beneficiary of the Zynga effect in that respect - so far. Google will certainly be happy to milk it too.
Finally, Zynga's lastest deal was announced at the end of June: the iPhone and iPod touch now carry its Farmville game. A smart move as it is estimated that in the mobile virtual gaming spend will exceed $168M this year and is poised to explode. That's for the U.S. only, so imagine the global market...
Global, Games, Gzillions: Bullseye For Google
Zynga has that covered to and is a truly global player. In May, it acquired Chinese social gaming company XPD Media for an undisclosed sum. In June, it was reported to have secured a $147 mln investment from Softbank and Bloomberg cited sources close to the deal as saying that talks between the two companies focused on "distributing and jointly promoting games through Softbank's mobile-phone service in Japan and other countries."
It looks like Google has picked just the right partner for its ambitious social and gaming plans.