Zynga gets musical and acquires Conduit Labs

Whenever I think the wild and crazy heyday of social games is over, along comes Zynga. Zynga has announced that it is acquiring Conduit Labs, creators of the musical Facebook games Super Dance and Music Pets.

Though terms are undisclosed, we can assume that the price was fair but not high. As Inside Social Games points out, Conduit Labs’ game traffic has dropped prodigiously over the past year and though Music Pets was innovative, it was not the musical hit that Nightclub City has been. Still, the founders and investors get Zynga stock, Zynga plans to go public, so don’t cry for the misfortunes of Conduit Labs. They’re going to fine.

With all the noise surrounding Playdom’s acquisition binge over the past year and Disney’s subsequent buy-out of Playdom, it was easy to miss how busy the corporate development team at Zynga has been over the past year. Based on the current rate, Zynga is on path to acquire at least one games company a month:

• Serious Business (February 2010)
• XPD Media (May 2010)
• Challenge Games (June 2010)
• Unoh (July 2010)

Based on these acquisitions, we can discern patterns. Here’s a cheat sheet for what you need to offer if you want to be bought by Zynga:

• If you are a US company, you need to be on the way down. This sounds counter to anything you may have learned in business school (or maybe not, the way business has been conducted on Wall Street lately) but Zynga seems to be looking for companies with games that are cool but not doing financially well, so that they can acquire them at a low valuation. The theory is to buy a company with good talent, plug them into the Zynga marketing machine, and watch what happens. Serious Business, Challenge Games, and now Conduit Labs fall into the same category.

• If you are not a US company, you need to be awesome and in a rapidly expanding market. XPD Media (China) and Unoh (Japan) are in fast growing social gaming markets that Zynga wants to enter that are outside the sphere of Facebook’s influence (especially China, where Facebook is still illegal). I imagine Zynga paid a lot of money for those two companies relative to the US companies.

• You need to be in a geographic location that Zynga is not located in. I have this very strange feeling that the executives at Zynga have a map of the world and their goal is to put a little office dot on every geographic region. Zynga now has offices in Boston, Austin, Japan, and China. They have not bought a company in South America yet. A good strategic move for a company that wants to be bought by Zynga is to move to Argentina or Chile (where the government gives you a stipend to over a game studio, not kidding) and wait for your phone call from Zynga corporate development. I kid, of course, but I do think Zynga wants to use acquisitions to transform itself into a truly global company.

What’s next for Conduit Labs? Many of the games they are working on will be shut down (Zynga has no qualms shutting you down if your game is not doing well). And, I imagine their next game will be music-related. Music is perfect for micro-transactions advertising as Rock Band and Guitar Hero have proved on the console and Nightclub City proves on Facebook. If the “MusicVille” domain or trademark is not yet taken, I advice you to buy it now.

Vanessa Carter