Zynga's Stock Value could Reach $10 Billion after IPO
By: Stephanie Castillo
Updated: December 16, 2011
Web gaming
phenom Zynga, which is preparing to go public Friday, does not have a
complicated business. People love to hang out on Facebook and share
stuff with their friends. People also love to play online games.
So it's no surprise that people love to hang out on Facebook playing
Zynga games with their friends. They love it so much, in fact, that in
the first nine months of 2011 they spent nearly $800 million on virtual
goods that enhance the gaming experience, such
as extra "energy," increased "power," and various in-game objects like
buildings and animals. (Zynga's games are so addictive, apparently, they
can get you kicked off flights.)
Zynga, which makes
games such as Farmville, CityVille, and MafiaWars (as well as Alec
Baldwin's favorite, Words with Friends) boasts 54 million users who play
every day and 227 million users who play at least once
a month. The company's sales are growing like wildfire, jumping 392%
last year, when it achieved profitability for the first time, to the
tune of $90 million.
The company, which was
founded in 2007 by Mark Pincus, is expected to raise as much as $1
billion in its IPO, with an offering price of $10 per share. If the
offering follows the pattern of previous Internet IPOs this
year, the stock could jump soon after the market opens, propelling the
company to a valuation greater than $10 billion.
After the expected first day share price "pop," Zynga faces several challenges. First among them is to increase the number of people who actually spend money while playing its games. Zynga emphasizes its "play-for-free" model - the base games are free; players spend money to enhance their experience and buy virtual goods. But only 3% of Zynga's players do so, and Pincus and his team will surely be aiming to increase that percentage.
(Copyright: TIME) read more
