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Zynga Files to Raise $1 Billion via IPO (techcrunch.com)
113 points by devinfoley on July 1, 2011 | hide | past | web | favorite | 61 comments

A much better article. Techcrunch is useless. http://online.wsj.com/article/SB1000142405270230444780457641...

heh. Just realized the wsj article is 2 days old. Still better than TC's.

Yeah - why do TC articles end up as #1 on big breaking topics? They have nothing to add but snark.

Lots and lots of people here read TechCrunch. It's still essentially the paper of record for the startup scene. Consequently, when major interesting news breaks, several different people see it on TechCrunch first and all submit the article at about the same time. The duplicate submissions count as upvotes, and just 5-10 of these immediately after an article breaks is enough to get a submission near the top for a short period of time, during which it's the first link on the story people coming to the HN frontpage see, so it gains momentum.

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.

there is zero snark in that post - just the s1 summarized

Because of the emotionally provocative titles they choose.

Unfortunately there's no way to downvote articles, so I usually just click the flag link under TC headlines.

that post is about the filing being a rumor. what happen an hour ago when this news broke was that the s1 was filed

A few media outlets including http://twitter.com/#!/TheNextWeb have claimed this means Zynga has a $1 Billion valuation. That's not true. Zynga is RAISING $1 billion. Some of the stock will not be available on the IPO day.

So... how much of the company are they going to sell? Or haven't they announced this yet either?

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.

While I don't know specifically how much equity they intend to sell, investment banks typically like to make their IPOs between $12-14/ share. Given their last VC round was funded by Morgan Stanley and T. Rowe Price [1], I would guess they will be shopping the deal among their investors to gauge interest, and then price the shares as they see fit.


The tech IPO floodgate truly has opened. This is like the 5th high profile IPO within the past few weeks.

I'd put a lot more on this than I would on Groupon. Zynga is profitable, scalable, and has a huge amount of dedicated fans - three things Groupon doesn't have.

Indeed, but this time someone is actually making a profit! That's a refreshing change.

There have been 64 internet stock IPOs so far this year.

I wouldn't touch this IPO for one major reason - reliance on FB. In fact, the first risk that Zynga lists in the filing docs:

"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."

I would. A friend who works at Zynga showed me around a week ago. It looked like Wall St. meets Silicon Valley. Real-time metrics scrolled across flat screens. And huge teams of engineers packed into single rooms plotted different ways to bilk housewives. It was the first software company I'd ever seen where money was the metric. They have a quarterly bonus schedule and everyone was aware of how much money they've made for the company. If it weren't for the giant cardboard cartoons hanging from the ceiling, the dyed hair and the dogs, it would be indistinguishable from my sister's high yield bond desk at Morgan Stanley.

That beast is hungry. I wouldn't bet against it.

Sorry but that sounds like an absolutely awful place to work. :(

I agree. But the energy was undeniable.

Betting _for_ this is like betting against humanity!

That is nice and all, but it isn't argument against his fear.

If they're great at making money, they're great at making money, and they'll do a good job of overcoming roadblocks, especially those they see coming

could the focus on bottom-line have anything to do with the CEO's top-tier MBA? after all, The Wall Street Way is what they teach MBAs, right?

amazing that the mere mention of "mba" on here with anything other than a negative implication results in down votes...

I agree in principle on the risk, but compared to the GroupOn S-1 it looks like the proverbial dogshit-into-gold product [1].

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/

But they have been moving away from their complete reliance on Facebook. It will always be a (major) distribution channel, but they've moved onto iPhone/Android apps too, and I'm sure they're planning on diversifying further.

Yes, but the majority of the 1bn+ valuation rests on FB. That's exactly why it is listed first in the risks section.

They're raising $1B .. their valuation is going to be in $15B - $20B range

They're RAISING $1bn, not a 1bn valuation. More like 15-20bn val.

It very much looks like they are already integrated with Google+ so I'm not sure how reliant they will be long term.

Facebook is just a client. Users, content, and data are all portable. If a user can access his or her Farmville world in 1 of 5 places, I don't think it's such a big deal that 1 of those places goes away, which itself is unlikely for now.

No they're not. If they were, Zynga would have created their own portal. They did launch farmville.com for farmville. They did not launch cityville.com for cityville. That, imho, means they concede they can't make it on their own.

Here's the point of view of a former facebooker about zynga+facebook: http://www.quora.com/Will-Zynga-leave-Facebook

Mm I think you misunderstood my comment. I said Facebook is just a client, to which you say they're not, to which you contradicted yourself by saying that they launched farmville.com for farmville. Let me clarify. By client, I mean the technical term for client, as in the Facebook canvas is just a play client for the Farmville game. They built another play client on their home portal to support Farmville. They built yet another play client app on iOS that supports Farmville. Users/content/data are all portable between each client. If Facebook is gone, Zynga has other places to go. Yes, they may lose virality, marketing, user base, and all that, but their accounts/content/data are not gone, and users have many places to still play Zynga games should Facebook go away. Your article just tells me Zynga won't leave Facebook. I know that. I'm just saying they're not necessarily dead if Facebook is dead and touching their stock isn't such a silly thing to do.

I don't think the concern is that FB will die, but that FB is in control of the platform.

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.

Yes, that is technically correct. Technically, because in practice zynga is dead without facebook: http://arstechnica.com/gaming/news/2011/07/zyngas-ipo-filing...

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.

The relationship benefits both parties though, if Zynga wasn't on the Facebook platform Facebook's numbers would look a lot worse. Sure Zynga relies on Facebook more than the other way around but I see it as unlikely that Facebook would ever cut them off.

I really enjoyed the quote from founder Mark Pincus: " Games should be accessible to everyone, anywhere, any time; Games should be social; Games should be free; Games should be data driven and; Games should do good."

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!

Hmm... $90.6 million of net income in 2010? Can it sustain the growth to justify a double-digit billion market cap?

Absolutely not. A key quote from the WSJ article:

"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."

This is bonkers, because Activision Blizzard alone are making money hand over fist with WoW. There's no way that Zynga is worth that much.

The market for casual games is potentially much, much larger than the market for games like WoW. WoW targets college students and young adults who identify as gamers. Farmville targets middle-aged housewives. There are many more of the latter than the former, and they control many more dollars in spending decisions.

still WoW alone rakes in more money than Zyngas complete Revenue in 2010. Top AAA games generate more than 1 Billion in revenue (GTA Series for example).

Dont undererstimate the gaming market.

I'm not, but I'm also not underestimating the casual gaming market. To me it seems like a classic disruptive innovation: leverage a new technology to serve the low end of the market better, vastly expanding it, and then slowly ramp up quality until you've eaten the whole 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.

What you have to remember is that top AAA games take 3+ years to develop, whereas top zenga games take 6 months and generate just as much revenue. The risk factor is far, far lower for zenga, and that makes great financial sense :)

Sure, but Zynga also needs a couple of games to reach the revenue of a Top selling AAA+ title. Of course its more risk per title but what i am just saying is that there is also alot of money to be made with the classic gamers.

And on the numbers side EA and Act/Blizz brought in $8 Billion in revenue combined.


Check your math. It's a P/E of 222. Given the risks involved, namely that the Zuck can end it anytime he pleases, I think it's insane.

Zuck won't end it, at least until their IPO, as Zynga is a drug that keeps folks coming back to Facebook.

If there are signs that Facebook is concocting their own game-crack, then yes, Zynga better worry.

yea, I deleted my parent comment for an obvious lack of math. you are absolutely correct

why would zuck end something that he gets 30% of?

To get 100% of something.

"As of March 31, Zynga had 1,858 employees -- 64% of whom have been there less than one year. More than 90% of Zynga's staff has been with the company for less than two years."

Has any other company in recent history grown this fast?? Did Facebook or Myspace grow this quick?

The story I've heard to explain this is that it isn't the growth rate so much as the turnover. I have friends who joined Zynga straight out of college (Berkeley) and are looking around for something new a year later, now that they have some vesting in their options. It really doesn't sound like a pleasant place to work -- I was told eighty-hour weeks are the norm.

That said, Groupon has something like 8,000 employees, most of whom were hired in the last two years.

It's ironic that they're IPOing before Facebook...

I'm not very familiar with corporate management salaries, but these kind of seem silly. Example: Mark Pincus made a 300k salary in 2010, what may be a 100% annual cash bonus, plus quarterly bonuses of "$22,500, $0, $75,000 and $37,500, "

How did brad Feld get 30M shares? Just curious.

If you look in the footnotes, it includes the shares his fund, Foundry, owns.

Ah, thanks!

There were probably originally 10,000,000 or 100 million shares authorized. That would have been split several times before IPO.

Maybe in Farmville cash...

Hey, let's be careful. At this rate it may actually become real currency.

I'd invest in Farmville cash before I'd invest in bitcoin!

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