

Zynga About to File for IPO - ignifero
http://allthingsd.com/20110524/exclusive-zynga-about-to-file-for-ipo/?refcat=news

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hugh3
At some value in excess of ten billion dollars? I won't be buying.

Sure, they're making huge profits right now. But prices should reflect future
earnings potential, and what are they going to be doing in ten, twenty, thirty
years from now?

They were the first folks to stumble across the secret of making addictive
social games. But I see these as a fad, not a long-term trend. There's only so
many variations on [ * ]ville you can play before you get bored of it, and
only so many times you can be talked into spamming all your friends.

Sure, maybe they'll keep on adapting and having hit after hit. But what are
their real advantages? A few programmers who sort-of know how to make a sort-
of good game, and some rather nebulous slice of social graph. Compare to some
game publishers who have a _lot_ of experience in making _many_ profitable
games instead of a little bit of experience making a couple of variations on
just one:

Activision/Blizzard: $12.87 billion

Electronic Arts: $7.75 billion

Take Two Interactive: $1.38 billion

If it's 1967, you might want to buy RCA Records, but you don't want to buy The
Monkees. The record company can keep on adapting to changing fashions and
business conditions and will keep putting out hits for decades to come, but
the band will have a brief revenue spike and then vanish.

~~~
ignifero
The thing with Zynga, is they have zero innovation and zero IP capital. You
might as well invest in a chinese ripoff and it would be the same. Sure they
make tons of profits but they will never earn my respect. They stole everyone
else's ideas, continuously spammed and manipulated their users, and did every
horrible trick in the book. That's not hacker attitude; that's borderline
criminal. To illustrate, here is a post in facebook's forum from Pincus
himself, trying to make excuses for gambling ads they'd been running on games:
[http://forum.developers.facebook.net/viewtopic.php?pid=12983...](http://forum.developers.facebook.net/viewtopic.php?pid=129830#p129830)

I would buy. I would sell before the end of the day though.

~~~
noahth
I'm not saying that they're a paragon of virtue or anything, but if you don't
have respect for Zynga's abilities then you're missing some really valuable
insights. Sure, they "ripped off" the idea for almost every game they've ever
made, but as many commenters here love to point out, it's not just the idea
that matters, but the execution (setting aside for now the point that everyone
steals ideas - remember when those jerks at Google "ripped off" the idea of a
search engine?).

Zynga didn't just make another farm game, they used their familiarity with
FB's viral channels to make it the biggest silly little farm game on the
platform. Then they turned around and used that audience as a springboard for
a number of other games that, while derivative, were simply the strongest
distillations of their respective types.

I get it, everyone loves to hate Zynga, but the fact is that they are really
good at what they do, and lots of people out there enjoy their games.

~~~
ignifero
As an indie fb game developer, i 've been following zynga over the years.
Their spam tactics were the reason that facebook started changing their
platform policies every month. Zynga took advantage of the fact that facebook
at the time was not enforcing its app policies (remember forced invites?) so
they maxed out their reach by using shady tricks and consistently breaking or
bending the ToS. I remember me and other devs complaining to facebook for
months and nothing was ever done. When facebook started limiting viral
channels, zynga was already too big to be touched.

In the process, they destroyed many indie developers and the fear of being
wiped by zynga is still everpresent. Personally, i find it hard to love
anything about them, even after years. I 'm not jealous of them or their
profits, but i find it hard to wish them "good luck". Maybe if they had
started their own social gaming network i'd give them some credit. Zynga is
still a parasite on facebook.

Here is a relevant answer from a former facebook engineer:
<http://www.quora.com/Will-Zynga-leave-Facebook>

Here's them posting fake reviews of their games:
<http://forum.developers.facebook.net/viewtopic.php?id=41577>

~~~
hugh3
_I 'm not jealous of them or their profits_

Y'know, I think it's perfectly legitimate to be jealous of their profits.

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Apocryphon
Zynga, FB, Groupon are the big ones besides LinkedIn... who else? I've heard
Twitter, but perhaps they won't yet, they have a huge valuation but little in
the way of a business plan. I've also heard Yelp and Pandora. Anyone else?

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Lewisham
Seeing how well LinkedIn did, I am very tempted to try and daytrade these
stocks, buying at release then selling about lunchtime.

I'm only interested in trying it with about $200.

This would be my first time trading. Does anyone know which service would be
good for this? ETrade?

~~~
radicaldreamer
You can't really daytrade with $200, most brokers require at least $1000 to
start an account. You'll also be limited to 4 or 5 roundtrips until you get
dinged by an SEC rule that limits day trading to accounts with at least 25k
equity and margin capabilities.

Don't start trading with an IPO stock or anything that's bound to be volatile,
it's just a bad idea in general.

~~~
Lewisham
Bummer. My Get-Marginally-Richer-Very-Quickly scheme is ruined!

~~~
trotsky
It's really for the best. Trading like that it's much easier to end up on the
wrong side of than it appears from the outside. Take that $200 and put it in a
roth ira or similar - you 20 years from now will appreciate it.

~~~
nostromo
This is generally good advice, but I'd point out two things:

1) It's only $200. Even the most conservative investors will often put aside
5% or 10% of their portfolio for active investing.

2) 10 years ago, the S&P 500 was around $125 a share, and is now about $130.
If we have another decade like that, $200 invested in the S&P 500 10 years ago
will be a whopping $216 after being invested 20 years -- barely keeping ahead
of inflation.

~~~
jerf
This infographic is so good I just can't resist whipping it out every time
it's even remotely related to the conversation:
[http://www.nytimes.com/interactive/2011/01/02/business/20110...](http://www.nytimes.com/interactive/2011/01/02/business/20110102-metrics-
graphic.html)

~~~
nostromo
Fantastic link, thanks! I'm amazed that money invested in 1928 was negative in
real dollars if withdrawn in 2011. It's also interesting how devastating
inflation can be -- notice how the great depression and the dot com bubble
look mild compared to stagflation in the 1970s.

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nikcub
It was sorta obvious after the success of LNKD last week that they were all
going to pile in now. Profitable and related to social? By all means, after
you..

Somebody had to test the market out.

If LNKD hit $12B then Zynga will hit .... a lot more.

~~~
ignifero
What makes you think so (the balance sheets maybe?). I think it's gonna be a
hit-and-run.

~~~
nikcub
Zynga has 5x the revenue of LinkedIn and will likely file already showing
30-40% net profit.

~~~
ignifero
But what about long-term value? It may hit tens of billions the first day, but
what happens in a few months?

~~~
nikcub
When the economy picks up again it will likely go on for a while. Zynga built
a multi-billion dollar business in a recession.

I wouldn't go short on either of those stocks, especially considering how much
demand there is in the public markets for something new. We are witnessing a
5-year backlog of public listings

~~~
Aloisius
I wouldn't dismiss the idea that Zynga is only popular because of the
recession. After all, their userbase is the same as the daytime soap opera
watchers - people without jobs.

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veyron
Go public before people get bored with social networking as a whole! I think
that's what we are seeing now -- people actually seeing a slowdown in the
explosive segment.

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brg
Is there a valid estimate between time to file and time to trading? Or is this
always on a case-by-case basis?

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zaius
From a couple months ago, their estimated revenues for 2011 are $1.8 billion
[1]. This is a completely different beast to linked in. I'm very interested in
seeing how it goes.

[1] [http://blogs.forbes.com/afontevecchia/2011/03/02/zynga-
revea...](http://blogs.forbes.com/afontevecchia/2011/03/02/zynga-reveals-
profit-and-revenues-as-it-looks-to-raise-500-million/)

~~~
SwellJoe
I smell something; maybe it's the smell of freshly cooked books? That article
raises some questions for me in the context of Zynga (which, I'm pretty sure,
has for its motto: "Evil is fine, as long as it pays."). Why would a company
with $630 million in profits need to raise $500 million? Where is the revenue
really coming from (maybe tit-for-tat deals like the ones Enron made to make
profits look huge)? How will they sustain that revenue?

Zynga is mostly a modern spammer, as far as I can tell, and the spam business
is a constant arms race. They can't win it forever, unless facebook remains
mostly complicit in the process (which would hurt facebook in the long run,
even if it is profitable for them in the short run).

So, I'd believe that Zynga is making money, even a lot of money, but I have a
hard time believing they can sustain that level of profitability as people's
tolerance for facebook spam declines. And, I have a really hard time believing
those specific numbers. I guess there really is a lot of money in stupid.

~~~
ignifero
I 'd actually bet their profitability is even higher than that. You have no
idea how much revenue these games generate, and we 're talking about massive
user base. Just consider the fact that they have foregone display advertising
in their apps - which should be a huge extra pile of cash. They really hit a
gold vein.

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dreamux
I unfortunately know very little about their business model (advertising? pay-
to-play? gifts/items?), but would be very curious to see how it all breaks
down. Specifically, where their special-ness lies, and how high the barriers
to competition really are.

I want to criticize the high valuation, but in fairness I don't know enough
about the company or industry.

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andrewdotcross
And let the web 2.0 stock bubble begin.

People are just buying up these stocks cause they are cool, no thought to
value.

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iphoneedbot
Ok.. I gotta get in on this! I totally flaked on LinkedIN

