Zynga, maker of Farmville, says it will raise $1 billion for IPO
Zynga has filed for a $1 billion IPO. But is Zynga too dependent on Facebook for its growth?
Zynga, the four-year-old San Francisco company responsible for social media hallmarks such as CityVille and FarmVille, has filed to raise $1 billion in an initial public offering – apparently the biggest Internet IPO since Google. In the filing, Zynga said its yearly revenue had climbed from $19 million in 2008 to $597 million in 2010. Meanwhile, the company has already brought in $235 million in the first three months of 2011, up $101 million from the same time last year.
Zynga, unlike so many other Internet darlings, is profitable. "By offering our shares to the public we hope to enable Zynga to invest more in play than any company in history," Zynga CEO Mark Pincus wrote a statement. "We will continue to make big investments in servers, data centers and other infrastructure so players' farms, cities, islands, airplanes, triple words and empires can be available on all their devices in an instant."
As Ben Kuchera notes over at Ars Technica, the SEC filing is an important development for social media games – and the filing is also fascinating in its own right. He points to a passage where Zynga admits that "any deterioration in our relationship with Facebook would harm our business." Which makes sense: Although Zynga has developed games for other platforms, including the iPhone, the vast bulk of its business comes via Facebook.
"The filing is an interesting look at the financial health of the company, with its 2,000 employees and rapid growth," Kuchera writes. "But it's also a reminder of how dangerous it is to rely on a huge third party for your customer base; that company could exist fine with you... but you would be almost nothing without them."
Social gaming has skyrocketed in popularity in the past couple years, propelled by both the size of the Facebook community – some 700 million members and counting – and an increased interest in low-cost, accessible "parlor games."
"Historically, video games were bought at Wal-Mart and played at home or on a PC," gaming analyst Justin Smith told the Monitor recently. "What Facebook has done is open up gaming to a much wider audience – it has provided a platform for people who wouldn't even normally consider themselves gamers. It's changing the way that the gaming business is going to work. This is the biggest revolution in the gaming industry in quite a while."