Search giant invests $100 mil in Zynga

Google, which has been a looming threat in the gaming world, appears to be edging closer to becoming a major player in online games.

The search giant has invested at least $100 million in social gaming company Zynga, the developer of some of the biggest games on Facebook, including “FarmVille” and “Mafia Wars,” to help launch Google Games, which is expected later this year.

Zynga officials declined to comment on the story, but sources familiar with the matter confirmed the investment to Daily Variety.

Zynga could become the crown jewel of Google Games, giving the service a strong foundation as it takes on Facebook and other social gaming sites — and ultimately some of the mainstays of the traditional gaming world.

The entrance of Google into gaming has been something industry insiders have speculated about for more than three years, since the company acquired in-game advertising firm Adscape for $23 million.

The following year, it launched “Google Lively,” an avatar-based chat program that was similar to “Second Life.” Google killed that project after less than six months, but it was enough to turn heads at gaming companies.

Recently, the company posted a job listing for a Games Project Manager, indicating that it could be ready to try again.

While the growth rate of social network gaming has slowed, it is still one of the video game industry’s fastest expanding categories. More than 32 million people tend their virtual crops in FarmVille each day, and the game has a user base of 80 million. (That’s roughly seven times the number of people who play the online smash “World of Warcraft”.)

While many people think Google is solely targeting Facebook with the Zynga investment, its impact could be much wider. Electronic Arts invested $300 million in social games developer PlayFish late last year. And Take Two Interactive Software plans to release “Sid Meier’s Civilization Network,” a new take on one of gaming’s most loved (and most addictive) franchises later this year. Both companies could be negatively impacted if social gamers migrate to Google.

What makes Google’s coming entry into the field even more noteworthy is the variety of places it can go using its existing technologies. Imagine, for instance, a flight simulator that uses Google Earth as a backdrop or tracking a spy in a major city via Google Maps’ street view. While both examples are hypothetical, the company has a pattern of leveraging existing assets into new ones.

As a private company, Zynga is reluctant to release financial information. It is known to be remarkably profitable, however. While its games are free to play, users are given the opportunity to purchase upgrades for nominal sums. With a player base as large as Zynga’s, even a conversion rate of under 1 percent is an enormous windfall.

TechCrunch, the Website that initially reported the investment, speculates that Zynga may replace PayPal with Google Checkout as the primary payment option.

Beyond that, it could launch its next big release as a centerpiece of Google Games. Zynga and Facebook were at odds earlier this year over Facebook’s decision to turn all in-app currency into its own credit system, giving it 30 percent of the money spent in Zynga (and other developer’s) games.

The two companies apparently worked it out, announcing a five-year deal to continue working together in May. But if bad blood lingers, the new partnership with Google could be a good opportunity for it to find a new home for its future games.

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