4 ms·

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 poten

by 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...)
  - kmfrk 15y ago
    Another thing relevant to your argument is the brand value of the companies you mention. People initially buy Blizzard games, because they are Blizzard games. Will it ever be possible for a company like Zynga to do the same? I generally find it hard to promote the company brand in browser- or mobile-based games.
    - noahth 15y ago
      Zynga has proven their ability to cross-promote new games to their existing userbase again and again, most recently with FrontierVille and CityVille (although these games were - and still are - also bolstered by extensive advertising through Facebook ads, CPI campaigns, etc). They currently run 3 of the top 5 apps by MAU - CityVille, FrontierVille, & Texas HoldEm Poker, at about 90MM, 46MM, and 35MM MAU respectively. Even their "customer loyalty" Facebook Connect site (RewardVille) is a top-25 FB app (about 25MM MAU). In my own experience, it's also the only FB games company that most laypeople (people who neither work in tech/social games nor play Facebook games) recognize. It's hard to say whether they'll ever achieve the stature or reputation of a Blizzard, but I can't even think of many traditional game companies that enjoy the same type and intensity of customer loyalty that Blizzard does. Maybe Valve? Very few people buy every EA title but the Madden franchise has incredible loyalty... where does something like that fit into a comparison like this?
ignifero 15y ago
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=129830#p129830 http://forum.developers.facebook.net/viewtopic.php?pid=12983... I would buy. I would sell before the end of the day though.
- narrator 15y ago
  IMHO, Zynga's moto should be "There's a lot of money in stupid".
- noahth 15y ago
  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 15y ago
    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 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 http://forum.developers.facebook.net/viewtopic.php?id=41577
trotsky 15y ago
It's hard to believe a company that only a couple of years ago was relying on scammy CPA deals to float itself and mostly churns out formulaic gamified skinner boxes for facebook users is looking at a public valuation north of $10B. I've been wrong plenty of times before, but I certainly won't be a buyer here, especially considering Eric Tilenius' comments last week that an appreciating IPO is a sign of a poorly priced IPO. Given lofty private valuations compared to existing gaming properties, the apparently opportunistic timing and a stated propensity to price at the top of the market it's hard for me to believe Zynga will even manage to keep pace with the S&P.
johnrob 15y ago
What Zynga, Facebook, LinkedIn, Groupon (and other current hits) have in common is that they have found a way to serve customers all around the world. How many business can really do that? It's easy to underestimate them because we forget to multiply the value created times 6 billion (or whatever the current world population is).
- ssharp 15y ago
  Groupon isn't reaching people like Zynga, Facebook, and LinkedIn can. Those three sites are, at their core, web-based through the entire business. Groupon requires sales people linking with local businesses to offer coupons. Groupon cannot scale like those other companies. Anyone in Uganda can access Facebook by just going to Facebook.com, logging in, and start finding people. The same people in Uganda can look at the Groupon site, but they'd get no use out of it because the coupons aren't local.
  - johnrob 15y ago
    True - but a sales office is all they have to add. There's no shipping of inventory that Apple or Honda have to deal with.
nikcub 15y ago
Zynga has already innovated outside of the ville games, since Farmville was their second big hit after Texas Hold'em. Texas Hold'em is still ranked 4th[1], and if you look at who the developers are of the top games, Zynga completely kills the competition. They were not the first company with simulation games either, which suggests that they have a secret formula figured out for how to build and market these games. The restrictions Facebook places on viral marketing hurt everybody else and only put Zynga further ahead. As for IP, the reason why Pincus is a shareholder in Facebook, along with Reid Hoffman, is because Facebook licensed social networking patents from him. He has been in the field for a long time, long before the mainstream press was hot on 'social', and he has significant IP holdings in the space, which are with Zynga. The other companies you point out are now being prices in the same way music and movie studios are - ie. as hit-based businesses. Gaming budgets have become so large, and so much of it is tie-ins and licensing, that for each of these companies it is one or two big hits or franchises plus dozens of big misses. They are all big, large and inefficient companies - again, no different to the music and movie studios. The only one of the three performing well is Activision, and that is mostly because of the recurring revenue from the Blizzard merger. Prior to that they were also in a lot of trouble (at the time of the merger they were worth $18B, now $12B). EA has been bleeding money for years and unsure what to do - even their big old hits such as Guitar Hero and the FIFA franchise are costing them money. Take-Two hasn't made a profit in 3 of the past 4 years, and is currently valued at less than the revenue it receives from a single release of GTA - so the market has no confidence in them at all. It is actually the traditional gaming houses who are having trouble producing constant hits. If Activision lost World of Warcraft tomorrow they would be in a world of trouble. EA and Take-Two already are. The virtual goods market is showing no signs of slowing down, $2B last year and growing at 50%+. This is as big a shift in the gaming market as arcades to consoles was, with EA being the only one of the three making a decent effort in the new market (4th largest, but almost 10 times smaller than Zynga) Zynga, which represents the 'new model' is over 1,000 employees (vs 7,600, 7,600 and 2202 respectively) and near $2B this year in revenue (vs 4.47B, 3.5B and 0.7B respectively), and while there is a chance that their valuation will enter over-blown territory, there is little doubt that they are absolutely killing the old gaming companies atm. It might not be Zynga that is #1 in 10 years time, but it will be somebody - and atm nobody is even challenging Zynga in this space - but you seem to be arguing against a shift that is by all accounts very real. Edit: and on the issue of Hold'em - with the government shutting down the online poker sites in the USA it has seen a spike in play, which means it will be in a very good position if UEGA is repealed or if poker is found by a court decision to not be gambling. [1] http://www.appdata.com/ http://www.appdata.com/

by hugh3 15y ago

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...)
- kmfrk 15y ago
  Another thing relevant to your argument is the brand value of the companies you mention. People initially buy Blizzard games, because they are Blizzard games. Will it ever be possible for a company like Zynga to do the same? I generally find it hard to promote the company brand in browser- or mobile-based games.
  - noahth 15y ago
    Zynga has proven their ability to cross-promote new games to their existing userbase again and again, most recently with FrontierVille and CityVille (although these games were - and still are - also bolstered by extensive advertising through Facebook ads, CPI campaigns, etc). They currently run 3 of the top 5 apps by MAU - CityVille, FrontierVille, & Texas HoldEm Poker, at about 90MM, 46MM, and 35MM MAU respectively. Even their "customer loyalty" Facebook Connect site (RewardVille) is a top-25 FB app (about 25MM MAU). In my own experience, it's also the only FB games company that most laypeople (people who neither work in tech/social games nor play Facebook games) recognize. It's hard to say whether they'll ever achieve the stature or reputation of a Blizzard, but I can't even think of many traditional game companies that enjoy the same type and intensity of customer loyalty that Blizzard does. Maybe Valve? Very few people buy every EA title but the Madden franchise has incredible loyalty... where does something like that fit into a comparison like this?

ignifero 15y ago

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=129830#p129830 http://forum.developers.facebook.net/viewtopic.php?pid=12983... I would buy. I would sell before the end of the day though.

narrator 15y ago
IMHO, Zynga's moto should be "There's a lot of money in stupid".
noahth 15y ago
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 15y ago
  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 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 http://forum.developers.facebook.net/viewtopic.php?id=41577

trotsky 15y ago

It's hard to believe a company that only a couple of years ago was relying on scammy CPA deals to float itself and mostly churns out formulaic gamified skinner boxes for facebook users is looking at a public valuation north of $10B. I've been wrong plenty of times before, but I certainly won't be a buyer here, especially considering Eric Tilenius' comments last week that an appreciating IPO is a sign of a poorly priced IPO. Given lofty private valuations compared to existing gaming properties, the apparently opportunistic timing and a stated propensity to price at the top of the market it's hard for me to believe Zynga will even manage to keep pace with the S&P.

johnrob 15y ago

What Zynga, Facebook, LinkedIn, Groupon (and other current hits) have in common is that they have found a way to serve customers all around the world. How many business can really do that? It's easy to underestimate them because we forget to multiply the value created times 6 billion (or whatever the current world population is).

ssharp 15y ago
Groupon isn't reaching people like Zynga, Facebook, and LinkedIn can. Those three sites are, at their core, web-based through the entire business. Groupon requires sales people linking with local businesses to offer coupons. Groupon cannot scale like those other companies. Anyone in Uganda can access Facebook by just going to Facebook.com, logging in, and start finding people. The same people in Uganda can look at the Groupon site, but they'd get no use out of it because the coupons aren't local.
- johnrob 15y ago
  True - but a sales office is all they have to add. There's no shipping of inventory that Apple or Honda have to deal with.

nikcub 15y ago

Zynga has already innovated outside of the ville games, since Farmville was their second big hit after Texas Hold'em. Texas Hold'em is still ranked 4th[1], and if you look at who the developers are of the top games, Zynga completely kills the competition. They were not the first company with simulation games either, which suggests that they have a secret formula figured out for how to build and market these games. The restrictions Facebook places on viral marketing hurt everybody else and only put Zynga further ahead. As for IP, the reason why Pincus is a shareholder in Facebook, along with Reid Hoffman, is because Facebook licensed social networking patents from him. He has been in the field for a long time, long before the mainstream press was hot on 'social', and he has significant IP holdings in the space, which are with Zynga. The other companies you point out are now being prices in the same way music and movie studios are - ie. as hit-based businesses. Gaming budgets have become so large, and so much of it is tie-ins and licensing, that for each of these companies it is one or two big hits or franchises plus dozens of big misses. They are all big, large and inefficient companies - again, no different to the music and movie studios. The only one of the three performing well is Activision, and that is mostly because of the recurring revenue from the Blizzard merger. Prior to that they were also in a lot of trouble (at the time of the merger they were worth $18B, now $12B). EA has been bleeding money for years and unsure what to do - even their big old hits such as Guitar Hero and the FIFA franchise are costing them money. Take-Two hasn't made a profit in 3 of the past 4 years, and is currently valued at less than the revenue it receives from a single release of GTA - so the market has no confidence in them at all. It is actually the traditional gaming houses who are having trouble producing constant hits. If Activision lost World of Warcraft tomorrow they would be in a world of trouble. EA and Take-Two already are. The virtual goods market is showing no signs of slowing down, $2B last year and growing at 50%+. This is as big a shift in the gaming market as arcades to consoles was, with EA being the only one of the three making a decent effort in the new market (4th largest, but almost 10 times smaller than Zynga) Zynga, which represents the 'new model' is over 1,000 employees (vs 7,600, 7,600 and 2202 respectively) and near $2B this year in revenue (vs 4.47B, 3.5B and 0.7B respectively), and while there is a chance that their valuation will enter over-blown territory, there is little doubt that they are absolutely killing the old gaming companies atm. It might not be Zynga that is #1 in 10 years time, but it will be somebody - and atm nobody is even challenging Zynga in this space - but you seem to be arguing against a shift that is by all accounts very real. Edit: and on the issue of Hold'em - with the government shutting down the online poker sites in the USA it has seen a spike in play, which means it will be in a very good position if UEGA is repealed or if poker is found by a court decision to not be gambling. [1] http://www.appdata.com/ http://www.appdata.com/