Zynga Preps Offering That Would Put 'FarmVille' Game Maker at $20 Billion

Discussion in 'Other games and gaming' started by Mac y Lir, Jun 29, 2011.

  1. Zynga Preps Offering That Would Put 'FarmVille' Game Maker at $20 Billion


    With Internet valuations surging and bankers circling Silicon Valley, online-games maker Zynga Inc. is preparing to test investors' appetite for an initial public offering that values the young company as high as $20 billion.

    That would be double the price tag the San Francisco start-up, which makes "FarmVille" and other simple games played on Facebook's website, fetched just a few months ago when it sold shares to venture capitalists.

    But since then, several Web companies have raised money at eye-popping valuations. Others have filed for multi-billion dollar IPOs. Shares of LinkedIn Corp. gained 80% its first day of trading last month, and the professional social network now sports a market value of $8 billion. Groupon Inc., which has racked up losses, has filed for an initial public offering that could value the online coupon site at more than $20 billion.

    Zynga expects to raise as much as $2 billion in its IPO and it could file its paperwork as early as Wednesday, said people familiar with the matter. It will seek a valuation between $15 billion and $20 billion, these people said.

    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.

    Zynga has selected Morgan Stanley to lead the offering, the people familiar said. Goldman Sachs Group Inc. is also a lead underwriter, and J.P. Morgan Chase & Co., Barclays Capital and Bank of America Merrill Lynch will play a role in the IPO, these people said.

    Zynga is also talking to banks about a credit facility of at least $1 billion, which can perhaps be used for acquisitions or other methods of expanding the company's services, one of the people familiar with the matter said.

    A Zynga spokeswoman declined to comment.

    The rush of Web IPOs, coupled with a frothy start-up investment environment in Silicon Valley, has fomented fears that the Internet sector is reaching a frenzied level not seen since the late 1990s dot-com bubble.

    Unlike LinkedIn and Groupon, however, Zynga is expected to generate a profit this year. Nitsan Hargil, an analyst at GreenCrest Capital Management LLC, a research firm that analyzes private companies, estimates Zynga will have revenue of nearly $1.5 billion this year and be profitable. Mr. Hargil, whose firm isn't involved in Zynga's fundraising efforts, said he is more intrigued by Zynga's potential for profits than other Web companies.

    Founded four years ago by Internet entrepreneur Mark Pincus, Zynga offers its games free and generates revenue mostly through the sale of virtual goods—for example, a tractor that helps FarmVille players harvest crops. While the vast majority of players never spend a cent in its games, some players pay up so they can accelerate their progress in the game and enhance their status in the eyes of other players.

    Still, Mr. Hargil says there are concerns about Zynga's dependence on Facebook. While the company has sought to diversify its business through mobile games, its greatest successes have been on the 600 million-member strong social network.

    Zynga's games collectively have about 271 million active monthly players on Facebook, an audience nearly eight times the size that of the next biggest Facebook app developer, according to AppData.com, a firm that tracks activity on Facebook.

    The relationship between Zynga and Facebook has been tense at times. Over a year ago, the two companies butted heads after Facebook pressured Zynga to adopt a payment system called Facebook Credits inside Zynga games. They finally reached an accord in May 2010, when Zynga agreed to a five-year deal to use Facebook Credits in its games.

    So far, Zynga has turned its early success on Facebook into a formidable barrier to competition from other game developers. The company heavily promotes new games, like its recently released strategy game "Empires & Allies," to its huge audience of existing players, giving the company a marketing advantage its rivals lack.

    "Empires & Allies" is now the second most popular app on Facebook, with about 42 million average monthly players. Zynga's "CityVille," with 88 million monthly players, is the first.

    It's unclear how long Zynga can keep its edge as more established games companies become more serious about Facebook games. Electronic Arts, for one, recently announced plans to bring "The Sims," one of the most popular PC games of all time, to Facebook.

    An IPO would likely lead to huge paydays for many Silicon Valley elite, most notably founder and CEO Mr. Pincus, who stands to become a billionaire, at least on paper. Other Zynga investors include Digital Sky Technologies, Kleiner Perkins Caufield & Byers, Union Square Ventures and other venture-capital firms, along with individuals like LinkedIn founder Reid Hoffman and Peter Thiel, an early investor in Facebook and other companies.

    CNBC earlier reported about Zynga's possible IPO and its launch as early as this week.

    Read more: http://online.wsj.com/article/SB10001424052702304447804576414111297459234.html#ixzz1QdJu8Os4

    lol @ MA
  2. Lerp

    Lerp blind combantant

    To some of us video games are old news.
    I grew up with pac-man at every store.
    Space invaders was being pounded by the then older teenagers.
    My brother would not let me have my turn at pong and my atari was state of the art.

    My point. I know games. Im not a game junky but Ive played my share.
    Ive learned a few things. I know what they do to people and why people like them.
    Zinga is a fad. It is over valued. It owes it success to facebook and its understanding of the human condition.
    Pluss it has the power to reach a group of people who never saw video games as any fun....
    It does not imply that the games have staying power! They produce new titles in order to keep its money rolling in and its stock looking good. Its a bubble and it will burst just as it reaches its peek. It will never die but it is only a stepping stone for players to grow to larger more real human condition games. Such as Entropia. Im not saying Entropia is the best game. It has its flaws too.

    Zinga and facebook. We all know facebook was a form of comunication unkown to us. Its was a new way to talk to our friends and co-workers. To find old people we once knew. This is how my girlfriend came to play farmville, she is 52 and would never enjoy WoW with me in its day. Said it was to difficult. Just seemed to have no attraction for her. Just as it hold none for me today. She started using facebook and soon one of her friends "liked" the game of farmville. Told her about it in one of the many easy ways to "share" the game. Do you see the hype the media allready? Facebook made the expansion of Zinga not the game of Zinga itself. It was able to tap into a groups of people who wanted to be part of their friends lifes. These same friends were telling them "Yes come play here! This is where I; your friend is playing. So mass groups of friends looking for other friends started playing so they could feel closer to the friends they wanted to be close to.

    Then the game of farmville or other such games comes in to capture them. So if you allready wanted to be closer to the old friend you use to be close to and they told you they were playing here then you would want to show your friend you are also good at this. It was a success from the start. Yes the farmville allowed the player to feel as if he/she was growing the they owned something a bit more powerfull or usefull then the friends they wanted to impress and be closer to: but it real power was behind the connection it tapping into.

    Do you want Entropia to be as Zinga is? Take the next step. I see others taking the next step. Turn Entropia into a place where one can venture into other real areas.
    Example your avatar walks into a movie house ingame and pays for a movie. The movie takes over the screen and then you sit on your couch and watch the movie because you paid for the view of this movie you should be allowed to share this movie with another person in your life. You invite then to view the movie you paid for from their own house.
    Bam. You just connected yourself to the sellers of the movie. Pluss in trying to be a good friend you just connected your friend to the movie, entropia and yourself. You look and feel good. The people who made the movie are happy and now have reason to check out entropia too as does your friend.
    Stores, Travel agents. The point is bring the whole internet into the game. Make it easy to communicate. MA has no mail. This is a huge downfall. They see it as protection from hate but its not. Step outside of the game inside of the game. Bring them into the game for other reasons and then they will play the game just to best the ones they are trying to impress.
    We dont play to only play. We play to grow and share our growth and feeling of pride. Learn to connect people and they will play the game only for the sake of the stronger connection they think it makes.
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