CSR Racing 2 usage and revenue results: Is NaturalMotion finally paying off for Zynga?

By Abhinav Agrawal

Led by then-CEO Don Mattrick, Zynga acquired NaturalMotion, the maker of mobile hits like CSR Racing and Clumsy Ninja, for $527 million in early 2014. Investors appeared to endorse the (expensive) move to expand Zynga’s mobile portfolio with polished, “wow factor” games, sending the shares of the company 22% higher.

For the next two years, the NaturalMotion division failed to release any major new games and saw revenues from existing games decline. Finally last month, CSR Racing 2 (or “CSR2”) launched on mobile devices, prompting high praise for its striking visuals. In its review, Polygon claimed “CSR2 obliterates the line between tablet and console graphics.”

But could a visually-impressive racing game keep users engaged and paying once the initial “wow factor” wore off? And if so, could CSR2’s results signal that Zynga’s acquisition of NaturalMotion is finally starting to pay off?

To find out the answers to those questions, we examined CSR2’s usage and revenue results using insights from SurveyMonkey Intelligence, comparing its performance to other popular mobile racing games including Real Racing 3, Racing Rivals, Asphalt 8: Airborne, Need for Speed No Limits, and the original CSR Racing.

A month after successful launch, CSR2 download numbers still lead the mobile racing category

Thanks to favorable press coverage, featuring in the app stores, brand-recognition, and cross-promotion, CSR2 was strong out of the gates in terms of downloads in the United States. It even spent a few days enjoying more than 200 thousand daily downloads.

While that initial spike is over, the game is still getting more than 30 thousand new downloads every day. That download rate is quite healthy for a game that’s more than a month old, and is more than any other mobile racing game is getting in the U.S. market.

CSR2 revenue leads the category by a large margin

Importantly, the game’s revenue seems to be sustaining quite well so far. It’s down from an initial peak, but still making around $150 thousand per day in the United States at a seemingly-stable rate. We estimate an average revenue per daily active user (ARPDAU) of $0.30 in the United States. Further, we estimate global revenue of roughly $300 thousand or more per day.

CSR Racing 2 is also currently the largest mobile racing game by revenue, making more than twice as much per day in the U.S. than its closest competitor.

CSR2’s healthy revenue numbers reflect an sizable active user base

CSR Racing 2 seems to have stabilized over the last few weeks with approximately 1.5 million active users in the United States on a weekly basis. That makes it the most-used mobile racing game in the U.S. by quite a comfortable margin.

But CSR2’s success isn’t pure upside for Zynga and NaturalMotion

CSR2’s healthy download, usage, and revenue numbers are likely at the expense of the older titles in the CSR franchise, CSR Racing and CSR Classics. For example, coinciding with the launch of CSR2, you can see gradual but clear declines in the usage of and engagement with these older CSR games.

This is not particularly unexpected, as fans of the older titles are likely upgrading to the latest, greatest thing, thanks in part to cross-promotion across the titles by Zynga.

So, is NaturalMotion finally paying off for Zynga?

Thus far, based on our estimates, Zynga’s acquisition of NaturalMotion doesn’t look like it’s paying off from a purely financial standpoint. But if NaturalMotion’s next big title, Dawn of Titans, can perform as well as CSR2 has, then the story can change for the better.

Here’s one way to think about it: Valuation of gaming companies is frequently based on 3–4x forward revenue. Working backwards from purchase price of $527 million, NaturalMotion should ideally drive at least $130M-$175M per year in revenue (ignoring the time value of money for simplicity’s sake).

NaturalMotion revenue, based on our estimates:

  • CSR Racing 2: $110M annual run rate globally (generously assuming revenue doesn’t decline over time)
  • Other NaturalMotion games: $15M annual run rate globally
  • Total: $125M run rate globally

The $125 million annual gross revenue that we estimate for the NaturalMotion division at this point is pretty close to the bottom end of the range that would justify a $527 million valuation.

The real test of whether the NaturalMotion deal can be a financial boon for Zynga will be the launch of the next big game in the pipeline, Dawn of Titans. If NaturalMotion can launch another game that performs as well as CSR 2, Don Mattrick’s bold move might finally bear fruit for new Zynga CEO Frank Gibeau and founder and chairman Mark Pincus.

Note: The author worked at Zynga from 2011 to 2014 in product and business roles in the FarmVille and Words With Friends divisions.

This post originally appeared on August 3, 2016 on the blog of SurveyMonkey Intelligence, a provider of competitive intelligence for the mobile app industry.