IPO is one of the most eagerly awaited floats of the year
Zynga, the maker of hugely popular Facebook games such as FarmVille and CityVille, has filed for a $1bn (�622m) stock exchange flotation.
The initial public offering is one of the most eagerly awaited floats of the year and unlike a number of other tech startups to go down this route of late it is making good profits.
Last year the company made about $91m in profit on revenues of $600m selling virtual products to players and advertising to brands, according to its Securities and Exchange Commission filing made on Friday. In the first quarter this year Zynga made profits of $11.8m on revenues of $235m.
A breakdown shows that $222m came from gamers paying and just $13m came from advertising.
The company was founded four years ago by the chief executive, Mark Pincus, who signed-off the company's SEC filing "let's play".
While Zynga is seeking to initially raise $1bn, this figure is an indicator filed to regulators and could change. The company also did not say how many shares or at what price.
However analysts believe this to be the tip of the iceberg with ultimate plans thought to be to offer up to 10% of its shares at a valuation in the region of $20bn.
"While I'm humbled by the size of the audience we enable to play today, we're just getting started," said Pincus. "With this offering we are inviting you to join our mission".
Zynga said it has 60 million daily active users, who collectively spend 2bn minutes each day playing its games.
The filing provides some interesting nuggets including that despite the huge popularity of Zynga games ? it owns the four most popular apps on Facebook ? the average number of daily users peaked in March last year at 67 million.
By December that number had dropped to 48 million, however, usage has crept up again more recently to 62 million in March. FarmVille achieved "record" revenue in the first quarter while Empires & Allies, Zynga's first move into "combat social" games, became the second most played game on Facebook with the first month after launch.
The filing also highlights the complete dependence the company has on Facebook, which is expected to float early next year, with all five threats to Zynga's business model related to what Mark Zuckerberg's social networking site does.
"If we are unable to maintain a good relationship with Facebook, our business will suffer," the filing says.
Threats include if Facebook limits access to games developers, establishes "more favourable" relations with rivals or launches its own competitive games.
And if Facebook somehow begins to struggle, it recently posted the first fall in users in several key markets, Zynga admits it would be in real trouble.
"If Facebook loses its market position or otherwise falls out of favour with internet users, we would need to identify alternative channels for marketing, promoting and distributing our games, which would consume substantial resources and may not be effective," the company said.
The impact of a fall from technology grace was highlighted earlier this week with the selloff of Myspace, the one-time darling of social networking which Rupert Murdoch acquired for $580m in 2005, for just $35m to an investor group including Justin Timberlake.
Source: http://www.guardian.co.uk/technology/2011/jul/01/farmville-zynga-floatation
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