6 ms·

Zynga About to File for IPO

61 points by ignifero 15y ago

zaius 15y ago
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-reveals-profit-and-revenues-as-it-looks-to-raise-500-million/ http://blogs.forbes.com/afontevecchia/2011/03/02/zynga-revea...
- SwellJoe 15y ago
  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 15y ago
    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.
dreamux 15y ago
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.
nikcub 15y ago
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 15y ago
  What makes you think so (the balance sheets maybe?). I think it's gonna be a hit-and-run.
  - nikcub 15y ago
    Zynga has 5x the revenue of LinkedIn and will likely file already showing 30-40% net profit.
    - ignifero 15y ago
      But what about long-term value? It may hit tens of billions the first day, but what happens in a few months?
      - afterburner 15y ago
        Most people will be thinking: "who cares."
        hugh3 15y ago
        I like it when that happens, it creates an opportunity for those who do think ahead to profit. I don't usually dabble in options, but if Zynga is at some crazy valuation shortly after the IPO then I just might acquire some long-term puts. (Or is it calls? I forget, I don't usually dabble in options...)
        nikcub 15y ago
        the barrier of entry to derivatives is simply knowing what they are, which thankfully is often high enough for most people not to face a margin call and lose everything
brg 15y ago
Is there a valid estimate between time to file and time to trading? Or is this always on a case-by-case basis?
hugh3 15y ago
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.
- yid 15y ago
  I think your argument is that Zynga, essentially being a video game company like the other three you mentioned, can innovate itself out of the -ville space once people start getting bored out of it. While this is certainly possible, we haven't seen any hint of innovation from Zynga remotely at the level of Blizzard, etc. This makes their long term prospects questionable, and thus I would be wary of their IPO. I also would be extremely wary of a company that is so reliant on a fickle third party for its very existence. Unless of course all this Zynga exuberance is at the prospect of a Facebook buyout...
  - hugh3 15y ago
    My argument isn't that they can, it's just that they'll have to. I don't see any particular reason to suppose that they actually will, though, and that's why I personally wouldn't touch this deal with a ten-foot pole. Unless of course all this Zynga exuberance is at the prospect of a Facebook buyout... Does facebook have enough cash to buy Zynga at these valuations? I doubt it. (But they do have programmers who could clone Cityville in two weeks, and the ability to ban Zynga from their system with a few keystrokes if they felt like it...)
deleted 15y ago
[deleted]
Lewisham 15y ago
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?
- jonknee 15y ago
  With $200 you will not have the ability to purchase shares at the IPO price (or if it's anything like LNKD anywhere near the IPO price).
- radicaldreamer 15y ago
  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 15y ago
    Bummer. My Get-Marginally-Richer-Very-Quickly scheme is ruined!
    - trotsky 15y ago
      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 15y ago
        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.
Apocryphon 15y ago
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?
iphoneedbot 15y ago
Ok.. I gotta get in on this! I totally flaked on LinkedIN
veyron 15y ago
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.
deleted 15y ago
[deleted]
andrewdotcross 15y ago
And let the web 2.0 stock bubble begin. People are just buying up these stocks cause they are cool, no thought to value.

61 points by ignifero 15y ago

zaius 15y ago

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

SwellJoe 15y ago
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 15y ago
  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.

dreamux 15y ago

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.

nikcub 15y ago

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 15y ago
What makes you think so (the balance sheets maybe?). I think it's gonna be a hit-and-run.
- nikcub 15y ago
  Zynga has 5x the revenue of LinkedIn and will likely file already showing 30-40% net profit.
  - ignifero 15y ago
    But what about long-term value? It may hit tens of billions the first day, but what happens in a few months?
    - afterburner 15y ago
      Most people will be thinking: "who cares."
      - hugh3 15y ago
        I like it when that happens, it creates an opportunity for those who do think ahead to profit. I don't usually dabble in options, but if Zynga is at some crazy valuation shortly after the IPO then I just might acquire some long-term puts. (Or is it calls? I forget, I don't usually dabble in options...)
        nikcub 15y ago
        the barrier of entry to derivatives is simply knowing what they are, which thankfully is often high enough for most people not to face a margin call and lose everything

brg 15y ago

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

hugh3 15y ago

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.

yid 15y ago
I think your argument is that Zynga, essentially being a video game company like the other three you mentioned, can innovate itself out of the -ville space once people start getting bored out of it. While this is certainly possible, we haven't seen any hint of innovation from Zynga remotely at the level of Blizzard, etc. This makes their long term prospects questionable, and thus I would be wary of their IPO. I also would be extremely wary of a company that is so reliant on a fickle third party for its very existence. Unless of course all this Zynga exuberance is at the prospect of a Facebook buyout...
- hugh3 15y ago
  My argument isn't that they can, it's just that they'll have to. I don't see any particular reason to suppose that they actually will, though, and that's why I personally wouldn't touch this deal with a ten-foot pole. Unless of course all this Zynga exuberance is at the prospect of a Facebook buyout... Does facebook have enough cash to buy Zynga at these valuations? I doubt it. (But they do have programmers who could clone Cityville in two weeks, and the ability to ban Zynga from their system with a few keystrokes if they felt like it...)

deleted 15y ago

[deleted]

Lewisham 15y ago

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?

jonknee 15y ago
With $200 you will not have the ability to purchase shares at the IPO price (or if it's anything like LNKD anywhere near the IPO price).
radicaldreamer 15y ago
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 15y ago
  Bummer. My Get-Marginally-Richer-Very-Quickly scheme is ruined!
  - trotsky 15y ago
    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 15y ago
      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.

Apocryphon 15y ago

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?

iphoneedbot 15y ago

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

veyron 15y ago

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.

deleted 15y ago

[deleted]

andrewdotcross 15y ago

And let the web 2.0 stock bubble begin. People are just buying up these stocks cause they are cool, no thought to value.