Google Secretly Makes $100 Million Investment in Zynga for Google Games

July 12, 2010, By Sanjeev Ramachandran

Google is reported to have taken its first major step into the web gaming territory by secretly investing over $100 million in the online gaming company Zynga, which has created popular social games such as Farmville for the social networking site Facebook. The Mountain View-based company’s investment was made in June and the two firms are now in the process of drawing plans for its strategic partnership to create Google Games.

Though Google and Zynga have not confirmed the investment, Google has placed a job advertisement seeking a Project Management Leader for its yet-to-be-created Games department. The investment has also come from Google and not from Google Ventures, the company’s venture capital arm. Zynga will be included by Google as its main partner in its Google Games initiative and will integrate the new web gaming platform with the social network site that it plans to launch later this year.

Google’s investment in Zynga will help the company to gain more revenue and also study the behavior of users as more people will log on to its websites more often to play social games. The company will also be able to gain more advertising revenue through Zynga in the same way that  Zynga had increased the ad revenue for Facebook and was also a large source of paid business for the social networking website.

Zynga charges a fee for virtual energy and points in its games, which is the source of revenue for the company. As the charges are paid through Paypal, Zynga has become the second-largest customer for Paypal. However, Google could assist Zynga with the fee payment through Google’s own payment service called Google Checkout, increasing the company’s revenue in the process and providing a challenge to Paypal.

Zynga had managed to get almost $500 million as venture capital investments last year from companies such as SoftBank Capital and Digital Sky Technologies. It has also secured deals with Facebook and Yahoo! Games to create games for their sites and has projected its revenue in $1 billion by the year 2011.

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