Farmville’s Zynga Planning to Raise $1B in IPO
Zynga, creator of hit social game 'Farmville,' is targeting to haul in at least $1 billion in its initial public offering.
Having submitted its S-1 on Friday declaring that it has 60 million daily users playing an average of 2 billion minutes per day, the San Francisco-based company expects to raise as much as $2 billion, sources told The New York Times and Reuters.
In Farmville, players are placed in a social arena where they are obliged to interact with others, produce, share and buy virtual items.
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Social games as such are an upward trend in the current gaming market, which is evident in Zynga's growth and revenues since its inception.
Established in 2007, the company's revenue stood at $19.4 in 2008 and jumped to $121.5 million in 2009. In 2010, it reached $597.5 million and in 2011 it seems that the company 2011 will end with almost twice the amount.
Although Zynga is undoubtedly profitable unlike other techies planning their IPOs, like Groupon, according to Forbes, Zynga also possesses a risk hard to ignore:
Zynga is not just highly dependable, but totally dependable on Facebook.
"Facebook is the primary distribution, marketing, promotion and payment platform for our games. We generate substantially all of our revenue and players through the Facebook platform and expect to continue to do so for the foreseeable future. Any deterioration in our relationship with Facebook would harm our business," read the Zynga submitted file.
If Mark Zuckerberg was to someday change his Facebook strategy and come up with his own social game or even favor other of Zynga's competitors, that could imply millions or even billions in losses.
Zynga stock should be appealing to the general public due to the games addictive nature, but the company's filing stated that the company depends "on a small percentage of players for nearly all revenue. In order to sustain our revenue levels, we must attract new paying players or increase the amount our players pay."
Brokers for Zynga stock include, Goldman Sachs, Bank of America, Barclays Capital, Morgan Stanley, JP Morgan, and Allen and Company, according to Techcruch.com.
