5 ms·

Zynga May Be Valued at $1 Billion Feeding Off Facebook Craze

21 points by iamelgringo 17y ago

biznerd 17y ago
"That could make San Francisco-based Zynga the third-largest U.S. video-game publisher by market capitalization, bigger than Take-Two Interactive Software Inc., the maker of crime-game franchise Grand Theft Auto." Awful. A company that uses sleazy monetization tactics (until someone called them out on it) and blatantly ripoffs games from competitors will be worth more than one of the most innovative game developers. Mobwars > GTA? I guess the valuation though reflects the business fundamentals of social vs console gaming.
- omarchowdhury 17y ago
  yes, costs much less to acquire a social gamer than consolers, but revenue per customer is higher on the console side. i wonder how zynga's revenue is going to be hit when they stop running scammy ads... and if this IPO would even occur.
  - jfarmer 17y ago
    They have stopped. According to Zynga, offers consist of only 10% of their revenue.
    - bilbo0s 17y ago
      According to Lehman, just before the crash, their CDS exposure was '...limited.' At debut Novembre Zynga's revenue from offers was ~33%. With each interview since Arrington broke news on the scam, that percentage has gone down. All 'according to Zynga.'
- decadentcactus 17y ago
  "The game, which lets people manage a virtual farm, has more than 65 million users. That compares with more than 52.6 million units sold worldwide for the Wii, the most among consoles." This also struck me. How is 65 million free users even comparable to selling 52.6 million consoles at $xxx a piece. It's obvious free games would attract more users much easier, but which would be more valuable to a purchasing company? (Not saying Nintendo will be bought, but you know).
  - cellis 17y ago
    Production costs. Production costs and the type of customer make a big difference. Casual/Social gamers are, by and large, easy to please. You can spend $1 million on development and get $10 back. Not so with console game development.
socratees 17y ago
I hope someone standardizes things that go on inside social networks. Should we consider the money made from selling deceptive ads as a legal? Or is it even a proper revenue model? (For eg. certain ads say user will get points if he takes a 2 min IQ test, and in the end the user signs up for the service unintentionally, and ends up paying a monthly bill before he notices the charge and cancels it.) And I may be wrong, but what intellectual capital does a company like this have? Anyone who buys it, is just buying the user base. And what about the future of the company? What would be the revenue 5 years later? How does a quantitative analyst factor this while calculating the worth of the company?
- teej 17y ago
  I feel it important to clarify a few things: Zynga has already stopped running offers (scammy ads), they're too big to buy, and they don't own their userbase (yet).
  - Tiktaalik 17y ago
    There's now a Farmville.com, so that seems like a move to slowly separate away from being completely dependent on Facebook.
- drawkbox 17y ago
  The company with the best innovation was Playfish, EA snapped them up quickly. Playfish was building quality while Zynga was burning through users.
  - jrmurad 17y ago
    I'm a user they burned through. That was before the revelations about their offer tactics. I stopped playing their No-Limit Texas Hold-em poker app because I was suspicious that it was rigged. I thought that maybe I was just a typical unlucky player who would make such a claim. I feel less sure of that after seeing the "every horrible thing in the book" remark. I think the sleazy tactic would be to hook new players onto the game by weighting the odds in their favor. For those who care... what I saw was a lucky streak when I started playing. For my style of play, that meant good hands and good flops. After a few weeks, I started seeing that people were regularly getting sucked out on and losing to very rare hands on a frequent basis. Yes, the former can be blamed on the quality and aggression levels of Internet users playing without consequence (i.e. real money). I couldn't explain the latter. I saw players call very high bets on the flop and turn and end up with runner-runner straights or flushes on the river. It felt like the game might be rewarding stupidity more often than any decent pseudo-random number generation would dictate. Again, this could just be because a higher number of stupid hands are played in their game than IRL but I think I accounted for the probabilities in my incredulity. Most damning was that I played for about about 3 hours over a 48 hour period and saw a straight flush and 3 4-of-a-kinds. I've played 4 hours a week of "bar poker" (play for chips, not money) for 1 1/2 years and have seen 2 straight flushes and 2 4-of-a-kinds total that whole time at the real tables. They're (supposed to be) rare enough that I can recall each instance with clarity.

21 points by iamelgringo 17y ago

"That could make San Francisco-based Zynga the third-largest U.S. video-game publisher by market capitalization, bigger than Take-Two Interactive Software Inc., the maker of crime-game franchise Grand Theft Auto." Awful. A company that uses sleazy monetization tactics (until someone called them out on it) and blatantly ripoffs games from competitors will be worth more than one of the most innovative game developers. Mobwars > GTA? I guess the valuation though reflects the business fundamentals of social vs console gaming.

omarchowdhury 17y ago
yes, costs much less to acquire a social gamer than consolers, but revenue per customer is higher on the console side. i wonder how zynga's revenue is going to be hit when they stop running scammy ads... and if this IPO would even occur.
- jfarmer 17y ago
  They have stopped. According to Zynga, offers consist of only 10% of their revenue.
  - bilbo0s 17y ago
    According to Lehman, just before the crash, their CDS exposure was '...limited.' At debut Novembre Zynga's revenue from offers was ~33%. With each interview since Arrington broke news on the scam, that percentage has gone down. All 'according to Zynga.'
decadentcactus 17y ago
"The game, which lets people manage a virtual farm, has more than 65 million users. That compares with more than 52.6 million units sold worldwide for the Wii, the most among consoles." This also struck me. How is 65 million free users even comparable to selling 52.6 million consoles at $xxx a piece. It's obvious free games would attract more users much easier, but which would be more valuable to a purchasing company? (Not saying Nintendo will be bought, but you know).
- cellis 17y ago
  Production costs. Production costs and the type of customer make a big difference. Casual/Social gamers are, by and large, easy to please. You can spend $1 million on development and get $10 back. Not so with console game development.

socratees 17y ago

I hope someone standardizes things that go on inside social networks. Should we consider the money made from selling deceptive ads as a legal? Or is it even a proper revenue model? (For eg. certain ads say user will get points if he takes a 2 min IQ test, and in the end the user signs up for the service unintentionally, and ends up paying a monthly bill before he notices the charge and cancels it.) And I may be wrong, but what intellectual capital does a company like this have? Anyone who buys it, is just buying the user base. And what about the future of the company? What would be the revenue 5 years later? How does a quantitative analyst factor this while calculating the worth of the company?

teej 17y ago
I feel it important to clarify a few things: Zynga has already stopped running offers (scammy ads), they're too big to buy, and they don't own their userbase (yet).
- Tiktaalik 17y ago
  There's now a Farmville.com, so that seems like a move to slowly separate away from being completely dependent on Facebook.
drawkbox 17y ago
The company with the best innovation was Playfish, EA snapped them up quickly. Playfish was building quality while Zynga was burning through users.
- jrmurad 17y ago
  I'm a user they burned through. That was before the revelations about their offer tactics. I stopped playing their No-Limit Texas Hold-em poker app because I was suspicious that it was rigged. I thought that maybe I was just a typical unlucky player who would make such a claim. I feel less sure of that after seeing the "every horrible thing in the book" remark. I think the sleazy tactic would be to hook new players onto the game by weighting the odds in their favor. For those who care... what I saw was a lucky streak when I started playing. For my style of play, that meant good hands and good flops. After a few weeks, I started seeing that people were regularly getting sucked out on and losing to very rare hands on a frequent basis. Yes, the former can be blamed on the quality and aggression levels of Internet users playing without consequence (i.e. real money). I couldn't explain the latter. I saw players call very high bets on the flop and turn and end up with runner-runner straights or flushes on the river. It felt like the game might be rewarding stupidity more often than any decent pseudo-random number generation would dictate. Again, this could just be because a higher number of stupid hands are played in their game than IRL but I think I accounted for the probabilities in my incredulity. Most damning was that I played for about about 3 hours over a 48 hour period and saw a straight flush and 3 4-of-a-kinds. I've played 4 hours a week of "bar poker" (play for chips, not money) for 1 1/2 years and have seen 2 straight flushes and 2 4-of-a-kinds total that whole time at the real tables. They're (supposed to be) rare enough that I can recall each instance with clarity.