Brief:

• Zynga agreed to buy Rollic, an Istanbul-based mobile game developer whose hypercasual games have been downloaded more than 250 million times, according to an announcement. 
• Eight of Rollic's games have ranked as No. 1 or No. 2 in the list of top free downloaded games in Apple's App Store in the U.S. Recent releases "Go Knots 3D" and "Tangle Master 3D" were the two most downloaded games in the U.S. App Store in Q2. The company's titles have more than 5 million mobile daily active users and 65 million mobile monthly active users.
• Zynga plans to buy 80% of Rollic for $168 million in cash, with the deal expected to close by Oct. 1. Zynga will buy the other 20% in equal installments at valuations based on profitability goals in the next three years, per the announcement.

Insight:

Acquiring Rollic could sizably increase Zynga's audience and advertising business, both of which have soared in recent months as more people play mobile games while stuck at home during the coronavirus pandemic.

Zynga's revenue jumped 47% to a record $452 million in Q2 from a year earlier, a figure that included the company's highest-ever online game revenue of $388 million, according to earnings results released around the announcement of the Rollic news Wednesday. 

Zynga raised its full-year revenue guidance by $110 million to $1.8 billion, with the expectation that mobile gaming's ascendancy won't cool soon. The San Francisco-based firm's quarterly loss also deepened to $150 million from $56 million a year earlier because of expenses associated with prior acquisitions that performed better than expected.

Rollic may be significant to mobile marketers that advertise in games, especially if they can buy ad inserts at lower CPMs or improve targeting among the growing audience of mobile gamers. The deal may help to unify the in-game advertising market, giving brands a way to reach target consumers among Zynga's growing roster of ad-supported games.

"With Rollic, we are meaningfully growing our audience, expanding and diversifying our global advertising business and adding to our game pipeline and developer network," Frank Gibeau, CEO of Zynga, said in a press statement. "Zynga and Rollic are well positioned to grow faster together." 

The Rollic acquisition follows Zynga's $1.8 billion purchase of Peak, another Istanbul-based developer of mobile puzzle games that was founded in 2010, two months ago. The record purchase for the company was a significant deal as the mobile game industry consolidates. The Rollic acquisition also follows Zynga's purchase of Small Giant Games for $560 million two years ago, Bloomberg News reported.

Adding Rollic's hit hypercasual games "Go Knots 3D" and "Tangle Master 3D" to its lineup can help Zynga retain a leading foothold in the gaming market during a pandemic boom. Mobile game advertising revenue jumped by as much as 59% in April from a year earlier as the coronavirus pandemic led millions of people to spend more time playing games on their smartphones, according to a report from Unity Technologies.

However, effective cost per thousand views or clicks (eCPM) for the average ad in a mobile game fell almost 20% in late March from a Jan. 1 baseline amid a dip in brand and non-gaming marketing campaigns. Meanwhile, Google next month will provide game developers with more software tools to help promote their games, per a blog post.

Zynga's recent acquisitions come amid other signs of consolidation in the mobile gaming industry. AppLovin in May acquired Machine Zone, the studio known for developing titles like "Final Fantasy XV: A New Empire" and "Mobile Strike," for an undisclosed sum. AppLovin's other recent investments include PeopleFun, Belka Games, Clipwire Games, Firecraft Studios and Geewa.