Zynga Files for $1B IPO

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 (-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.

drusenko• 15 years ago

Tech 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• 15 years ago

Profitable, 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• 15 years ago

At 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• 15 years ago

By starting their own network[1], of course

[1] http://ztag.zynga.com/

kmfrk2• 15 years ago

That sounds like a pretty modest valuation compared to all the recent craziness.

hkmurakami• 15 years ago

It'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• 15 years ago

EA 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.

hristov• 15 years ago

The valuation is 7 billion. 1 Billion is the money they expect to raise from the IPO.

7 Billion does not seem modest to me. Groupon's IPO was valued at a bit more (about 12.5 billion) and that seemed like a much more substantial business to me. And of course Groupon is not doing too hot right now.

nolok• 15 years ago

Groupon had to cheat their numbers to appear like they were making money. Zynga, for all their fault, don't need that.

kmfrk2• 15 years ago

If 7B is the actual number, I agree that it's an absurd sum.

JonnieCache5• 15 years ago

A 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• 15 years ago

I 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.

jpancake6• 15 years ago

People admit it, but usually there's kind of a 'haha, yes, I have no life' disclaimer that goes along with the acknowledgement.

cdibona• 15 years ago

Zynga 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.

JonnieCache5• 15 years ago

The aesthetic and ethical concerns with Farmville-style games are well documented.

http://insertcredit.com/2011/09/22/who-killed-videogames-a-g...

And HN discussion of above: http://news.ycombinator.com/item?id=3114239

Although yes, working for cIQ is worse, and working for BAE is much worse still.

seiji2• 15 years ago

There's a strong bully/prison experiment vibe to these companies. You get used to abusing people because all your friends are hi-fiving you about being good at abusing people.

The High Holy developers sit around thinking up ways of manipulating people into addiction. The developers and management get positive social reinforcement from co-workers and the board when they find another hook into people's brains ("Your character will DIE unless you come back RIGHT NOW!" "You haven't visited in 18 hours, VISIT NOW FOR FREE GIFT!").

Reinforcing shady practices of individuals ("It's not unethical, it's funethical!") over time makes developers and management banish any thought of wrongdoing. Users are just an abstract ID anyway -- an abstract ID with access to a credit card. If someone wants to spend $10,000 per day buying purple carrot pixels, why shouldn't we milk them dry?

teej2• 15 years ago

Your entire comment is bullshit and it pisses me off.

You've never worked at Zynga, so to purport that you know exactly what it's like to work there is bullshit.

Your comment reflects exactly what Silicon Valley nerds think of Zynga externally. They think that Zynga is nothing but people refining skinner boxes for people to play in. You've probably seen one or two talks of Mark Pincus talking about "doing every dirty trick in the book" or something like that. Have you ever met him? Do you even know the last time he worked directly on a game? You're allowed to have whatever opinion you like, but this opinion is bullshit.

Your entire comment is ridiculously biased and unreflective of Zynga internally or externally.

------------------------------

So yes, JonnieCache, there is a stigma for working at these companies. reflected by the parent comment. Is that stigma justified? Absolutely not. There are plenty of other reasons not to like developing at Zynga most people don't talk about:

* Zynga is not a technology company first. This means that product & revenue decisions are always prioritized over innovating tech. Most developers aren't comfortable with companies like that.

* Zynga isn't accepted as a legit member of "games companies" circles. You can't tell your buddy who works building a PC MMO or console FPS that you're in games because you work at Zynga. You'll get laughed out of the room.

* Developers are not decision makers at Zynga. Product managers and game designers call all the shots. So if you're writing code, you're not really "making games" in the traditional sense, you're just implementing someone else's spec.

So is Zynga the best place for a dev to work in the valley? It isn't the worst. You'll make more money and get more perks than you would working at a startup, but it won't be personally fulfilling. Do you spend all day scheming ways to exploit people? Fuck no, get over it already.

bitops• 15 years ago

In my experience, it's more like going to a bar and asking "where's so-and-so?" and hearing "oh, yeah, we never see them anymore after they started working for Zynga".

The reputation is: long hours, cut-throat environment, back-stabbing execs.

Just stating what I've heard.

wavephorm• 15 years ago

Their brand of "psuedo-entertainment" is in the same category as telemarketing, spam email, infomercials. I can't imagine anybody who works there goes home at the end of the day being proud of finding a new way to rope people into clicking a button 700 times in a row.

JonnieCache5• 15 years ago

I've just realised that my question was kind of ambiguous and could be interpreted to make me look like a dick.

As I can't edit it any longer, I'll clarify here: I was asking from an "I wonder if SV people have the balls to give the zynga lot flack for making those shitty games?" point of view, not an "I want to go and work for this company now it's worth $7B but I'm worried that nerds might be mean to me in bars" point of view.

Just for the record.

DiabloD3• 15 years ago

I 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• 15 years ago

zynga 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• 15 years ago

At 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

joezydeco• 15 years ago

5? 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?

xsmasher• 15 years ago

They make games and monetize them with a "Freemium" model - users start playing for free, but they can pay real-world money for in-world currency to advance faster or unlock special items.

afterburner• 15 years ago

Doesn't do anything? They sell things. Directly. What more do you need to do to be a business?

kin4• 15 years ago

Just ask how much a single top 10 Facebook game generates in revenue in one 24-hour period. You'll be quite astonished.

r00fus• 15 years ago

From 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.

kin4• 15 years ago

Zynga does not have the same profit problems as Groupon. The only reason they dip low is from over marketing whereas Groupon's operational costs really are pricey.

cma2• 15 years ago

what significant operational costs does Groupon have that aren't in actuality marketing related?

Zynga Files for $1B IPO

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