Playtika’s $2 billion bet
Rolling the dice on inorganic growth
The SuperJoost Playlist is a weekly take on gaming, tech, and entertainment by business professor and author, Joost van Dreunen.
Walking through the Oculus in downtown Manhattan yesterday, I spotted a guy with thick-rimmed glasses, sitting alone, busily typing at a table with nothing but a keyboard and mouse.
No laptop, no tablet—just his fancy glasses. My immediate thought: “Who is this glasshole?” Seriously, go work from home like the rest of us. I struggle to see how doing deskwork in one of the busiest hubs for tourists and commuters in New York City is meaningfully more productive.
But then it hit me: the next wave of tech isn’t just about function—it’s about fashion. Apple laid the groundwork years ago when it started turning its stores into chic ‘forum shops.’ Tech is now a status symbol, a signifier to potential mates. And Meta is catching up to this reality.
Watching Zuckerberg at this week’s Meta Connect event, the shift is obvious. Gone is the oddball founder: first in flip-flops and hoodies, then stiff in a suit during Senate hearings. Now he’s relaxed, rocking an oversized sweater and an F.P. Journe Chronomètre Souverain. If the founder is a barometer for the firm, Meta is growing into its own. The distinct sense of FOMO that has haunted the company since the introduction of smartphones has been replaced with newfound confidence.
After a decade of building a reality that has remained mostly virtual, we’re now presented with a much more tangible, distinct product category. No longer emulating its main rivals, Meta seems to have split from the pack and carving its own path. Compared to the VisionPro, Meta’s “Orion”, a set of wireless glasses that projects holograms onto your surroundings, seems like a much more manageable interpretation of what the next product category could look like.
For virtual to become real, it must also be cool. To that end, I’d expect Meta to make an acquisition from the fashion industry in the coming year, and start hiring senior decision-makers with experience from luxury retail and product design. Mark has already bought a few of their sweaters.
On to this week’s update.
EVENTS
Come say hi at any of these events next week!
On Monday, September 30th I’ll be doing a show & tell during dinner as part of the Gamesbeat Global Tour 2024 in Seattle.
On Tuesday, October 1st, I’m scheduled for an afternoon panel at Epic Games’ Unreal Fest.
Following, on Wednesday, Oct 2nd, I’m opening the BITKRAFT Summit 2024 in San Francisco (I have a few extra tickets so email me if you’re interested!), after which I’m taking a delightful red-eye flight back to New York to
Host CD Projekt’s chief marketing officer, Jeremiah Cohn at NYU for a guest lecture on the firm's flywheel strategy.
BIG READ: Playtika’s $2 billion bet
The recently announced acquisition of SuperPlay by Playtika for $700 million upfront, with potential earnouts of up to $1.25 billion, exemplifies the strategic use of M&A in the competitive mobile gaming industry. It also raises the question of whether a previously successful strategy will work in current market conditions.
Playtika, founded in 2010 and headquartered in Herzliya, Israel, has become a major mobile gaming player specializing in free-to-play casual and social casino games. The company went public in 2021 and is known for its data-driven approach to game development and user acquisition. It has built a strong brand in the social casino genre, which accounts for 57 percent of overall revenues, and established itself as a category leader. However, in its most recent quarter, the firm reported $627 million in revenue, down -2.5% y/y, and for the last twelve months ending Q2 2024, gross revenues were also down, totaling $2.681 billion.
Playtika is expecting the addition of Superplay to reverse its trajectory. The substantial earnout structure suggests that the true value lies in the future earnings potential of SuperPlay's main titles, Dice Dreams, and Domino Dreams. It’s an approach built on previous successes, such as June's Journey (part of the $220 million Wooga acquisition in 2018) and Solitaire Grand Harvest (from the $174 million SuperTreat acquisition in 2019). Quick math tells us that these acquisitions have generated significant revenue. Based on the reported years alone, June's Journey brought in at least $533 million, while Solitaire Grand Harvest raked in $629 million. Combined, these two games have generated $1.2 billion in revenue. After subtracting the initial acquisition costs, Playtika has seen a gain of about $768 million from these two games. Keep in mind, that this is a simplified calculation that doesn't account for operating costs or missing years of data. But, given the rate of return, it is understandable that Playtika insists on building on the success.
Moreover, nine of Playtika's eleven top-performing titles were acquisitions. It’s a tried-and-true strategy. The question is: will it pay off this time?
According to its financials, the percentage of paying players is declining. The average daily paying users in 24Q2 was 298,000 compared to 307,000 a year ago, down -2.9 percent, but average spending per daily active user is up from $0.83 to $0.85.
Stock analysts are divided on whether the SuperPlay acquisition is going to revitalize the firm. Some believe that the added revenue will propel Playtika forward and continue its previous pre-pandemic winning streak in terms of successful acquisitions. Playtika’s pedigree, combined with Superplay’s current success and additional titles in development suggests a hammered-out path to profitability.
Others are more skeptical and point to the difference in underlying economics: where Playtika spends approximately 18% of total revenues on user acquisition, SuperPlay is estimated to spend around three times as much. Playtika’s management regards current spending levels as part of an aggressive growth strategy that they expect to reach profitability in 2025. According to CFO Craig Abrahams, "the years 2023 through 2025 are really going to be the years that drive growth, 2026 and beyond" suggesting that the full financial benefits of the acquisition are expected to materialize in the longer term.
Personally, I’m skeptical. As I’ve previously laid out, the games industry has entered a period in which distribution innovation reigns supreme over portfolio expansions and acquisitions. Pursuing economies of scale in a market characterized by softer demand and increased marketing expenditure does little to improve publishing economics. The strongest argument to make here is that some of these titles will manage to establish themselves as brands, allowing Playtika to offset user acquisition costs. But in commodified categories like Social Casino and Coin Looters, past performance offers little guarantee of future results. As the gaming industry grapples with post-pandemic realities, Playtika’s latest bet could either solidify its market dominance or expose the vulnerabilities of a strategy rooted in the past.
NEWS
Ubisoft announces delays and lowers guidance
After first pulling out of the Tokyo Game Show, Ubisoft has now both delayed its upcoming release of Assassin’s Creed Shadows and lowered its financial forecasts.
Previously, Ubisoft had downplayed the impact of earlier delays, suggesting they were immaterial to the company's financial performance. However, the current delay of Assassin’s Creed Shadows contradicts this narrative, as it has directly contributed to the downward revision of Ubisoft’s financial forecasts and shaken investor confidence, highlighting a much more significant impact on the company’s outlook than prior delays.
That makes the title a make-or-break moment after Ubisoft’s more recent release Star Wars Outlaws received a muted reception, resulting in the firm’s shares hitting a 10-year low. According to the firm’s statement, “the game is feature complete, [but] the learnings from the Star Wars Outlaws release led us to provide additional time to further polish the title." Over the past four years, the firm has struggled with cancellations and delays and it has decided to do away with its traditional Season Pass model. Assassin's Creed Shadows is delayed by three months and is now slated for release on February 14, 2025. That may improve its odds for success but also places it within sword distance of a recently announced Sony exclusive, Ghost of Yōtei (loved the Red Dead Redemption vibe of the trailer btw).
In the same breath, Ubisoft sharply cut its fiscal 2025 guidance. Net bookings are now expected to fall to around $2.16 billion, a significant decline from last year’s $2.66 billion and far below earlier expectations. The second-quarter forecast was also slashed, now projected at $388 million to $411 million, down from $555 million. These revisions underscore the mounting pressure on Ubisoft as it struggles to regain financial stability in a highly competitive market.
It amounts to a moment of introspection. "Beyond the first important short-term actions undertaken, the Executive Committee is launching a review aimed at further improving our execution," says CEO Yves Guillemot, reflecting management's focus on shoring up operations amid ongoing challenges. Say it with me: layoffs are coming. CFO Frederick Duguet confirmed that "as the growth transformation continues, we may progress on our cost reduction initiative, with headcounts steadily decreasing over the first half." Despite these measures, investor confidence remains shaky. Can Ubisoft streamline its business to greater success?
Despite over a decade of digitalization and the widespread adoption of a service-based publishing model, which was supposed to reduce risks in blockbuster game development, even one of Europe’s most prominent game makers faces an uncertain future. What’s keeping Ubisoft upright and in favor of investors is its catalog of intellectual property (and, of course, that distribution deal with Microsoft). For Ubisoft, 2025 can’t come fast enough.
PLAY/PASS
Pass. After already making cuts back in July, Gamurs Group laid off another 30 people this week. It should be obvious, but let me reiterate: The erosion of professional reporting in interactive entertainment has a negative impact on the overall risk profile for investors and publishers across the industry.
Play. According to this Oxford University study, 72% of PowerWash Simulator players experience an affective uplift during play. Looks like Doja Cat was on to something.
UP NEXT
I’ll be reporting from the road next week. You can expect some highlights from Tim Sweeney’s thoughts on off-platform mobile app stores, and where venture firms are placing their bets for the decade ahead.