Zynga Files to Raise $1 Billion via IPO
techcrunch.com
techcrunch.com
heh. Just realized the wsj article is 2 days old. Still better than TC's.
Honestly, I don't think TC is as bad as you characterize it, especially when it comes to breaking news (as opposed to high-level commentary). They've done a good job at breaking several big stories in the past year, even though I disagree with a lot of the more opinion-type pieces.
A $1 billion valuation would seem awfully low, since last I heard they have multiple hundreds of millions (possibly half a billion) in revenue. I personally have concerns about the long-term sustainability of their business model, but I'd expect a valuation much higher than this.
Personally I won't invest. Too evil for my tastes.
"If we are unable to maintain a good relationship with Facebook, our business will suffer,” according to the filing. “Facebook is the primary distribution, marketing, promotion and payment platform for our games."
So the interesting thing is if they can plug into Google+ and do other things to keep usage up they will continue to print money. That is not as disruptive as what other folks are asking you to believe they might have to do to survive.
[1] http://techcrunch.com/2010/10/05/stupid-questions-vcs-ask/
Here's the point of view of a former facebooker about zynga+facebook: http://www.quora.com/Will-Zynga-leave-Facebook
Outside of any agreement Zynga and FB have, if FB takes an action that hurts Zynga (for example, hiding all Zynga games), there's little recourse for them. Technically, you can still play farmville on farmville.com, but many, many people play farmville by searching for "facebook" in their address bar.
Let me explain a bit more: no other social network has the combination of virality (some call it spam), reach and suitable audience (non-geeks, and non-teens) that facebook offers. With the current roster of games, zynga can only be successful on facebook. Sure, if facebook shuts down their channels, zynga will move to orkut, or hi5 or some chinese social network. BUT, over there zynga will make 1/10 of the revenues, basically because they are popular in non-lucrative markets. OTOH, Zynga has signed an agreement with facebook, in which, i presume facebook has agreed not to cut off the viral channels for a number of years.
That beast is hungry. I wouldn't bet against it.
I hope more game developers take this (especially the last point) to heart. Too many game developers are latching onto publishers who demand games on an unreasonable timeline. To give one example, Valve is a testament to how putting the appropriate amount of time into development of a game produces great results (not to mention an amazingly loyal fan base).
That said I do understand game companies need money to produce these games but I do think a culture shift is in order and publishers need to realize great games take time. I think they undervalue how much more money a great game make than a good game. Also nothing builds more hype than anticipation!
"That could value the game publisher, which had about $850 million in revenue last year, at roughly the same as the two biggest videogame publishers—Electronic Arts Inc. and Activision Blizzard Inc.—combined."
Dont undererstimate the gaming market.
Stocks tend to be valued based on future earnings more than present earnings - after all, if you know that a company will be making more money next year, it's rational to buy their underpriced stock today and wait for it to appreciate.
Has any other company in recent history grown this fast?? Did Facebook or Myspace grow this quick?
That said, Groupon has something like 8,000 employees, most of whom were hired in the last two years.