"Zynga's near $9 billion valuation is less than videogame maker Activision Blizzard Inc's $13.6 billion and higher than Electronic Arts Inc's $6.7 billion. In the last four quarters, Activision and Electronic Arts generated more revenue than Zynga."
Activision just brought in $1 billion for one game, and EA Just sold 10 million of it's flagship title, while both their markets are expanding.
I think the value of social network based games has been somewhat inflated.
You didn't say otherwise, but to be clear: revenue isn't profit. Somehow I think a failed Activision title costs a lot more to produce than a failed Zynga launch.
(I don't know the numbers behind what Zynga is doing well enough to make any judgement on their IPO in general)
Maybe they just priced their IPO shares correctly for a change. When the share price doubles on the first day, it means the offering price was too low. That means Wall Street gets the money, not the company and not the pre-IPO investors.
They could have priced it 40% lower, and seen a big runup. But this way the company gets more working capital. That's good.
Maybe that's a positive consequence of Zynga's CEO's need to hang on to so much control and equity.
But it doesn't necessarily shed doubt on Zynga either. What happened here is not that the IPO failed, it's "only" that the price went down from the initial offer. Predicting a "good" initial price is hard. I think people commenting here aren't taking that into account.
Besides, I bet every pre-IPO investor is still making a lot of money on this.
Is anyone seriously surprised that this is taking place? Zynga runs a business that is, at it's heart, parasitic and predatory. Such businesses may enjoy short term success but cannot be sustainable in the long run.
I don't quite understand the problem. Zynga's closing stock price reflects what the market perceives its value to be at market close. Just because it closed down doesn't mean that the market doubts the company. It simply reflects a difference between what they priced it at and and the closing market price.
You could say that this indicates that the bankers did a good job at maximizing the value for the company, and not leaving money on the table for an opening jump in price.
or you can say that investment bank client couldn't find dumb money to offload their shares to on opening day. And Pincus & insiders were probably fcking over investment bank clients by offloading their shares.
Investment bank clients are gonna be pissed that their P/L is already negative, day one, because of Pincus offloading.
Problem is - bankers usually price it low expecting a decent pop to keep their big clients that get IPO shares happy. So when one of the hottest companies out there doesn't pop and with Groupon well below their highs - not looking good.
"Empires & Allies, which was launched in June 2011, peaked soon after its launch at about 48 million monthly active users and has seen a big decline since. Currently, it has around 18 million monthly active users."
As andrewfelix said, none of the games Zynga makes has the same lasting potential as World of Warcraft or Call of Duty. When each new COD title is released, a large mass of gamers shift from one title to the next. There isn't the same transition for Zynga, so none of the same virality.
> As andrewfelix said, none of the games Zynga makes has the same lasting potential as World of Warcraft or Call of Duty.
Financially, this needs to be adjusted for cost of production. I'll go out on a limb and say that a Call of Duty costs vastly more to produce than Words With Friends. It's entirely possible that launching 4 titles annually, where each drops off to 18 million users is a good business. In another genre, id Software was able to make a good business releasing essentially a single title every 2-4 years, targeted at a small subset of male computer nerds. So comparing e.g. WoW to Words with Friends may not be a valid direct comparison.
Without making a big judgement about Zynga one way or the other, I can say that the social/Facebook aspect is just about distribution of their games. That's just the channel, which also happens to be a good buzzword for pricing the IPO at the top of the range. Zynga's business is casual games, which has been a good business for quite some time. Remember all the pre-Facebook articules on how casual gaming is letting companies make money by including women in gaming? The Sims was often cited in this genre of coverage. But again, I'd put hard money down that The Sims cost vastly more to produce than Words With Friends.
Knowing Pincus' history and the market they're in, I can't say I'm terribly surprised. Having him manage a company I have any shares in at all would make me awfully skittish.
There is some real negative sentiment here, that I understand, but don't at the same time.
Yes, their growth is flattening, they've done some less than honorable things in the past, but if you look at the big picture, they have some great talent (which may or may not be leaving), they really haven't had any prolific product failures or missteps, and they've made a solid name for themselves in the gaming business. (I doubt many of their users or potential users know about the stock option BS or their past with scammy offers)
I'm not saying Zynga is a clear winner, but what I am saying is, they are not a clear loser.
You have a good point but to offer a counterpoint, their many problems probably shine through or will shine through in other unpredictable ways. Its almost like having a friend who has a problem they don't want to talk about - after a while you start to notice some oddities. At the least, I would guess that their reported on behavior will drive away talent from working there and probably as a result the quality and value of their products will suffer.
How does this surprise anyone? It made perfect sense a few years ago for Google to go public. They had at a minimum a successful, growing business. It was also clear that there was plenty of room to grow in the core business (search) and that there were many other markets they could enter.
Zynga, to me, is like Groupon. Businesses with no clear foundation. Investing in them is like investing in tulips in Holland in the 1630's.
I feel that if Facebook goes public, that will be successful. They offer something very real, in connecting hundreds of millions of people and, eventually, billions. If you're looking at growing markets, there's at least 3-4 billion more on the way in the next few decades. There's lots of ways to build businesses around that.
Myspace would never have been successful in an IPO. On the surface, they seem like they did the same thing. But the focus of Myspace was always wrong. They weren't really about connecting people at the core. Facebook has been.
> I feel that if Facebook goes public, that will be successful. They offer something very real, in connecting hundreds of millions of people and, eventually, billions. If you're looking at growing markets, there's at least 3-4 billion more on the way in the next few decades. There's lots of ways to build businesses around that.
The clear question is how closely Zynga's and Facebook's fates are tied. There is no doubt that Zynga's social gaming really fueled Facebook's expansion in the past several years.
If Facebook's valuation is based on continued exponential growth over their ability monetize their existing base, the foundation is not solid... Zynga's faltering IPO in that case would just be a leading indicator.
The surprise, to me at least, is that the stock dipped on day one of trading. Even us negative nellies assumed that Zynga would follow the traditional arc: IPO, hype, price spike, slow fall into obscurity.
But, yeah, overall it's not really surprising. I'm a reasonably young man, but I don't recall another IPO with so much hype and disdain over the company behind it. True, they're printing money at the moment, but that's slowing. The obsession with "social gaming" will not disappear, but it will diminish. No one knows what will happen with Zynga's relationship to Facebook. Combine all that with the fact that Mr. Pincus doesn't come off as a very likable guy but still controls the company, and, well...
Your comment is very hard to interpret without clearly defining what you mean by "clear foundation" and "successful."
Overall you seem very down on Zynga and Groupon. Note that they have both IPO'd and have far from tanked. They are both in business with no apparent sign of bankruptcy etc.
You make them look bad by comparing them to the biggest tech successes(such as Google). The thing is, you can make vast majority of companies look bad in comparison to Google. But that misses an important point about public markets: there is plenty of room for non-googles in the stock market.
People bitched about Google's owners taking ridiculous control, and doing and an interview with Playboy. Google IPO'd at an absurdly low price (less than half of my bid). Google's IPO was the most underpriced offering in modern history. I think $9.50 is generous for Zynga. Zynga is a declining business.
I think you are right, but for the wrong reasons. Facebook will ultimately be only marginally profitable for the same reasons as Zynga. I value Facebook at $20B.
I and many others would probably like to say to Pincus "Karma is a bitch" but I'm sure him becoming a billionaire, despite the lackluster response from the market, would make that point kind of moot.
Are you implying that this underwhelming IPO somehow signifies that there is or was no bubble? That messes up cause and effect: Zynga's IPO results don't determine the bubble, the bubble brought us the Zynga IPO.
[+] [-] andrewfelix|14 years ago|reply
"Zynga's near $9 billion valuation is less than videogame maker Activision Blizzard Inc's $13.6 billion and higher than Electronic Arts Inc's $6.7 billion. In the last four quarters, Activision and Electronic Arts generated more revenue than Zynga."
Activision just brought in $1 billion for one game, and EA Just sold 10 million of it's flagship title, while both their markets are expanding.
I think the value of social network based games has been somewhat inflated.
[+] [-] cma|14 years ago|reply
(I don't know the numbers behind what Zynga is doing well enough to make any judgement on their IPO in general)
[+] [-] blake8086|14 years ago|reply
[+] [-] simonsarris|14 years ago|reply
I think it sheds doubt on Zynga.
[+] [-] OllieJones|14 years ago|reply
They could have priced it 40% lower, and seen a big runup. But this way the company gets more working capital. That's good.
Maybe that's a positive consequence of Zynga's CEO's need to hang on to so much control and equity.
[+] [-] nandemo|14 years ago|reply
But it doesn't necessarily shed doubt on Zynga either. What happened here is not that the IPO failed, it's "only" that the price went down from the initial offer. Predicting a "good" initial price is hard. I think people commenting here aren't taking that into account.
Besides, I bet every pre-IPO investor is still making a lot of money on this.
[+] [-] bitops|14 years ago|reply
[+] [-] andrewfelix|14 years ago|reply
[+] [-] ryanhuff|14 years ago|reply
You could say that this indicates that the bankers did a good job at maximizing the value for the company, and not leaving money on the table for an opening jump in price.
[+] [-] knowsnothing613|14 years ago|reply
Investment bank clients are gonna be pissed that their P/L is already negative, day one, because of Pincus offloading.
[+] [-] suking|14 years ago|reply
[+] [-] pagekalisedown|14 years ago|reply
[+] [-] dwynings|14 years ago|reply
[+] [-] cmcewen|14 years ago|reply
"Empires & Allies, which was launched in June 2011, peaked soon after its launch at about 48 million monthly active users and has seen a big decline since. Currently, it has around 18 million monthly active users."
As andrewfelix said, none of the games Zynga makes has the same lasting potential as World of Warcraft or Call of Duty. When each new COD title is released, a large mass of gamers shift from one title to the next. There isn't the same transition for Zynga, so none of the same virality.
[+] [-] runako|14 years ago|reply
Financially, this needs to be adjusted for cost of production. I'll go out on a limb and say that a Call of Duty costs vastly more to produce than Words With Friends. It's entirely possible that launching 4 titles annually, where each drops off to 18 million users is a good business. In another genre, id Software was able to make a good business releasing essentially a single title every 2-4 years, targeted at a small subset of male computer nerds. So comparing e.g. WoW to Words with Friends may not be a valid direct comparison.
Without making a big judgement about Zynga one way or the other, I can say that the social/Facebook aspect is just about distribution of their games. That's just the channel, which also happens to be a good buzzword for pricing the IPO at the top of the range. Zynga's business is casual games, which has been a good business for quite some time. Remember all the pre-Facebook articules on how casual gaming is letting companies make money by including women in gaming? The Sims was often cited in this genre of coverage. But again, I'd put hard money down that The Sims cost vastly more to produce than Words With Friends.
[+] [-] Karunamon|14 years ago|reply
[+] [-] eekfuh|14 years ago|reply
I'm not saying Zynga is a clear winner, but what I am saying is, they are not a clear loser.
[+] [-] moocow01|14 years ago|reply
[+] [-] geuis|14 years ago|reply
Zynga, to me, is like Groupon. Businesses with no clear foundation. Investing in them is like investing in tulips in Holland in the 1630's.
I feel that if Facebook goes public, that will be successful. They offer something very real, in connecting hundreds of millions of people and, eventually, billions. If you're looking at growing markets, there's at least 3-4 billion more on the way in the next few decades. There's lots of ways to build businesses around that.
Myspace would never have been successful in an IPO. On the surface, they seem like they did the same thing. But the focus of Myspace was always wrong. They weren't really about connecting people at the core. Facebook has been.
[+] [-] r00fus|14 years ago|reply
The clear question is how closely Zynga's and Facebook's fates are tied. There is no doubt that Zynga's social gaming really fueled Facebook's expansion in the past several years.
If Facebook's valuation is based on continued exponential growth over their ability monetize their existing base, the foundation is not solid... Zynga's faltering IPO in that case would just be a leading indicator.
[+] [-] tatsuke95|14 years ago|reply
But, yeah, overall it's not really surprising. I'm a reasonably young man, but I don't recall another IPO with so much hype and disdain over the company behind it. True, they're printing money at the moment, but that's slowing. The obsession with "social gaming" will not disappear, but it will diminish. No one knows what will happen with Zynga's relationship to Facebook. Combine all that with the fact that Mr. Pincus doesn't come off as a very likable guy but still controls the company, and, well...
[+] [-] badclient|14 years ago|reply
Overall you seem very down on Zynga and Groupon. Note that they have both IPO'd and have far from tanked. They are both in business with no apparent sign of bankruptcy etc.
You make them look bad by comparing them to the biggest tech successes(such as Google). The thing is, you can make vast majority of companies look bad in comparison to Google. But that misses an important point about public markets: there is plenty of room for non-googles in the stock market.
[+] [-] fijal|14 years ago|reply
[+] [-] unknown|14 years ago|reply
[deleted]
[+] [-] jcampbell1|14 years ago|reply
I think you are right, but for the wrong reasons. Facebook will ultimately be only marginally profitable for the same reasons as Zynga. I value Facebook at $20B.
[+] [-] OzzyB|14 years ago|reply
[+] [-] moocow01|14 years ago|reply
[+] [-] redthrowaway|14 years ago|reply
[+] [-] andrewfelix|14 years ago|reply
[+] [-] staunch|14 years ago|reply
[+] [-] tatsuke95|14 years ago|reply