Electronic Arts (ERTS) has acquired Facebook games-maker Playfish for up to $400 Million. We’ve been reporting rumours about the deal for weeks.
Playfish revenues were reportedly set to reach $75 million this year.
The company is the second-most popular games-maker on Facebook after Zynga. Its games include Country Story, Pet Society, and Restaurant City.
Playfish makes its money building addictive games for Facebook users, who get so involved that they begin to happily pay small amounts of money to progress more rapidly in the games.
Playfish also makes money from traditional advertising and from sponsors who buy in-game upgrades for users’ who agree to try their products.
In the past, we’ve estimated that social games industry leader Zynga’s revenues, expected to reach $250 million in 2009, will break down along the following lines:
- <33% Traditional advertising
- >33% Virtual goods sold directly to users
- <33% Sponsorship offers
Playfish revenues probably fall along similar lines.
This last, “offers,” revenue stream has come under scrutiny of late. Critics say users too often end up paying for products they never wanted to buy, and that legitimate sponsors end up paying for bad leads.
The controversy got messy enough that leading social games maker Zynga pulled all “offers” from its games.
Today’s news is huge validation for Zynga, Playfish and the entire burgeoning industry. EA’s $400 milllion seem to say: Offers may be bad, but there’s a real business here.
From EA’s release:
EA has acquired Playfish for approximately US$275 million in cash and approximately $US25 million in equity retention arrangements. In addition, the sellers are entitled to additional variable cash consideration, up to a maximum of US$100 million, contingent upon the achievement of certain performance milestones through December 31, 2011.