Zynga plans $1 bn IPO; Facebook crucial for gaming co’s biz

Zynga plans $1 bn IPO; Facebook crucial for gaming co’s biz

New York: Better known for its ‘CityVille’ and ‘Farmville’ games on Facebook, American startup Zynga is all set to lure investors with a whopping $1 billion initial public offering.

However, Zynga’s business fortunes are heavily dependent on popular social networking site Facebook, which is the platform that provides almost all of the firm’s revenues.

Zynga has filed initial papers with US market regulator SEC for an initial share sale to mop up as much as $1 billion. The company has about 148 million monthly unique users spread across 166 countries.

“... because our users typically play more than one of our games each month, they account for 232 million monthly active users.

“Our players create and store more than 38,000 virtual items every second and spend 2 billion minutes a day with our service," according to Zynga’s CEO Mark Pincus.

The company, which started in 2007, has just over 2,000 employees in many countries including India.

Zynga’s financials have been improving in recent years. In 2010, the entity’s profit climbed to $91 million on revenue of $597 million.

It had posted a loss of $53 million and a revenue of $121 million in 2009.

“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," Zynga said in the filing.

Interestingly, Facebook is not only the revenue spinner but also a key risk factor for the games developer.

As per Zynga, any deterioration in our relationship with Facebook would harm our business and adversely affect the value of its common stock.

According to Zynga, any modification in Facebook’s services or policies or better relations with its competitors could have an adverse impact on the company.

“Beginning in early 2010, Facebook changed its policies for application developers regarding use of its communication channels.

“These changes limited the level of communication among users about applications on the Facebook platform. As a result, the number of our players on Facebook declined," the filing said.

Zynga also pointed out that any such changes in the future could “significantly alter how players experience our games or interact within our games, which may harm our business".