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Zynga Files for $1B IPO
- jpancake 15y agoIt's 1999 all over again.
- lowglow 15y agobut this time we're smarter, right? right?
- jpancake 15y agoThe VCs would seem to be betting otherwise.
- cleaver 15y agoMake hay while the sun shines.
- rorrr 15y agoExcept that 1.7 billion people joined the Internet since 2000. http://www.internetworldstats.com/stats.htm http://www.internetworldstats.com/stats.htm
- jpancake 15y agoCool?
- jkap 15y agoExcept that Zynga actually makes profit.
- geoffschmidt 15y agoNo it's not. Zynga has 200MM+ monthly active users and a revenue run rate of $900MM. It's nothing like 1999. You may think Zynga is overvalued, but if so, I'd be curious to see you put that in the form of a quantitative argument.
- jpancake 15y agoAll of Zynga's established properties are trending down. The attention (DAU/MAU) new Zynga titles get does not last as long as it used to: http://techcrunch.com/2011/11/27/towerdefense/ http://techcrunch.com/2011/11/27/towerdefense/ They're spending more to market new titles: http://articles.sfgate.com/2011-11-26/business/30446059_1_zynga-game-mafia-wars-social-gaming http://articles.sfgate.com/2011-11-26/business/30446059_1_zy... As a result of the above two factors alone, their net profit is shrinking fairly dramatically. This is very similar to Groupon (also "profitable" at the time of IPO), and you can see how they're doing for yourself, here: http://www.google.com/finance?q=GRPN http://www.google.com/finance?q=GRPN (-25% since launch, in case you don't feel like clicking) Using the 'it's profitable' logic would mean that investing in Beanie Babies Corp while they were making money hand-over-fist would've been the height of financial prudence. Sure the VCs who have funded the company up to this point are going to make tons of money. But that's their model: stoke interest in a business, take profit, and get out.
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- geoffschmidt 15y agoAnd they've dropped their valuation target from $20B to $7B. OK, so you think it's worth less than $7B, but I suspect you also think it's worth more than $0. What do you think it's worth?
- jpancake 15y agoI don't think there's a good reason for them to be publicly held, at all. Due to their well-documented culture problems (I'm in games in SF, and only know one person who went to work there ... he's 24 and wanted to 'get rich' ... everyone else stays far, far away), and resulting inability to grow through acquisition, I'm not sure what they actually need an additional billion+ dollars for. To make new games, I suppose, but outside of Cityville and Words with Friends, they haven't been able to make the Farmville lightning strike at will. All of these new titles cost money, and more money to market, and they're missing far more often than they're succeeding. It just doesn't seem sustainable, to me. I think the IPO is chance for the funds that invested hundreds of millions of dollars in the company to profit-grab, pure and simple.
- drusenko 15y agoTech company IPOs do not imply a bubble. If there are lots of successful, profitable tech companies that are not IPOing, then something else is wrong.
- billyarzt 15y agoProfitable, yes. Vulnerability to competitive threats looking to undercut its position in the market, also yes. Zynga is a media company, and as such it's competitive advantage lies in its ability to use the FB graph and continue to pump out games. Will people get tired the constant barrage of new titles in the same way Facebook's users are starting to tire its core product? I would speculate yes, but that remains to be seen.
- zitterbewegung 15y agoAt least I can understand how Zynga actually does make money. On the other hand with a bunch of social media sites deemphasizing games or eliminating social network spam how will Zynga keep up?
- ConstantineXVI 15y agoBy starting their own network[1], of course [1] http://ztag.zynga.com/ http://ztag.zynga.com/
- kmfrk 15y agoThat sounds like a pretty modest valuation compared to all the recent craziness.
- hkmurakami 15y agoIt's still 10x sales, while Activision Blizzard is valued at 3x sales and EA is valued at 2x sales. It's probably not outrageous per se, but it's certainly on the high side.
- zeroonetwothree 15y agoEA and Blizzard have P/E ratios in the 10-20 range. Whereas Zynga makes almost no money, so this would put them in the 100 range.
- kd1220 15y agoI don't think a comparison to EA and Blizzard is appropriate. You'd likely find a better indicator of value by comparing to something like Dave & Buster's, which sold for ~$600M last year. D&B is aimed at wholesome entertainment for adults. Zynga is targeting much of the same market with a focus on women. EA and Blizzard mostly produce games for males 16-35. The main difference between D&B and Zynga is that Zynga is available to any one with a computer or smartphone, while D&B franchises are only built in cities of 500k+ people. That difference might create a multiplier on the order of 10. $600M * 10 = $6B. So $7B in valuation doesn't seem that ridiculous to me.
- omonra 15y agoHuh - you're comparing a restaurant chain to Zynga because they both sell to women? Sorry, that makes no sense to me. I think other game companies are a much closer match.
- kd1220 15y agoYour logic focuses on the product; mine the market. By your logic men's make-up should generate as much revenue as women's make-up. It doesn't though, and make-up exists for both men and women. Existing game companies aren't directly comparable to Zynga precisely because they don't market to women. However, a social gaming environment like Dave & Buster's is comparable, because they target adults in their late 20s/early 30s and families, whose social agenda is driven by women. Zynga's success comes from the fact that they tapped an underserved market: women who like to socialize through playing games.
- JonnieCache 15y agoA question to the SV hotshots on here: is there a social stigma in the valley around developing for companies like zynga? Or does nobody really care? When a load of devs meet each other in a bar, does one "admit" that one works for zynga, or simply say so?
- smokinn 15y agoI imagine that would depend on your position in the company. If you're a product manager you might face some stigma but if you're a software engineer I doubt anything matters other than the technical challenges you face. (And Zynga operates at a scale that would definitely create technical challenges.) *disclaimer: I'm not nor have I ever been in SV.
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- jpancake 15y agoPeople admit it, but usually there's kind of a 'haha, yes, I have no life' disclaimer that goes along with the acknowledgement.
- cdibona 15y agoZynga is a game company. Who would anyone feel any worse working there than at and enterprise software company or somewhere like fb, tw or google? I'd ask this question to the developers at CarrierIQ though....those guys should be ashamed. Edited to add: No, no one seems anymore ashamed to work at Zynga than one does at any game company.
- JonnieCache 15y agoThe aesthetic and ethical concerns with Farmville-style games are well documented. http://insertcredit.com/2011/09/22/who-killed-videogames-a-ghost-story/ http://insertcredit.com/2011/09/22/who-killed-videogames-a-g... And HN discussion of above: http://news.ycombinator.com/item?id=3114239 http://news.ycombinator.com/item?id=3114239 Although yes, working for cIQ is worse, and working for BAE is much worse still.
- DiabloD3 15y agoI want to know why this is getting so much attention in the news? All they do is sell some sort of weird game on Facebook[1]. How do you IPO a business that doesn't... well... do anything? I've googled around and asked people I know who are into this kind of stuff, but I still don't get it. I probably will get downvoted, but my question is legitimate. [1]: Still don't have a Facebook account
- notatoad 15y agozynga has a much more real business model than many other companies. they make addictive viral games that encourage their users to make microtransactions and participate in advertiser deals to progress in the game. unlike many well-loved companies with whom you're never quite sure how they make money or who their customer is, with zynga it is very clear what their revenue stream is and how they make money. as scummy as they are, i'd be much more confident investing in a zynga IPO than a twitter IPO.
- callmeed 15y agoAt any given time, my wife has at least 5 "Words with Friends" or "Hanging with Friends" games going. They get serious engagement and that's worth a lot of money. Zynga has moved aggressively into mobile gaming and, from what I can tell, they're going to be successful there. If they stay strong there, their reliance on the FB platform will be less of an issue. EA has a market cap of $7.68B so I see little issue with this market (granted, I no nothing of their specific financials so I can't comment on their valuation). http://www.google.com/finance?q=NASDAQ%3AERTS http://www.google.com/finance?q=NASDAQ%3AERTS
- joezydeco 15y ago5? Lightweight. My wife has 20 going and that's only because 20 is the max. But she purchased the $1.99 mobile app and hasn't bought anything from Zynga since. She abhors Farmville and all Facebook games in general. She doesn't see the ads from the paid app. So where is the revenue in users like my wife?
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- r00fus 15y agoFrom an IPO standpoint, I see a strong similarity between Groupon and Zynga... both were high-flyers that ran into profit problems and are now desperate to get access to the public market funding before their business model peters out. I wish the best for the rank-and-file at Zynga, but I feel like the IPO is rushed, and that usually isn't a sign of success.