Has Google just pumped US$100m into Zynga?

12 Jul 2010

A stealth investment by Google – estimated to be more than US$100m – into online games maker Zynga has the web aflutter with speculation that Google is putting the pieces it needs in place for its own social network.

Zynga is the company behind popular online games like Mafia Wars, Café World, FarmVille and a new title FrontierVille.

The secret investment came to light this weekend when TechCrunch quoted multiple sources familiar with the deal.

Zynga, which is understood to have raised US$500m in the last year in venture capital and which is establishing its European headquarters in Dublin, has had a patchy relationship with social-networking site Facebook where many Zynga fans go to play games like FarmVille.

However, even though both Zynga and Facebook recently signed a five-year strategic alliance in the lead-up to the deal, there were rumours of Zynga’s dissatisfaction with Facebook, especially surrounding its new currency, Facebook Credits.

The deal with Google is understood to be a highly strategic direct corporate deal that doesn’t involve Google Ventures.

A new service, Google Games, is expected to launch later this year and could give Google the ability to create its own social network. Recent rumours surrounding the launch of a Google social network have been gathering pace lately and with the secret investment in Zynga it appears Google is attempting to put the pieces in place.

According to TechCrunch, two year-old Zynga is already massively profitable with US$350m in revenues predicted this year. The company, it says, could be a US$1bn a year company by 2011.

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years