After a week of speculation, Zynga has filed its S-I with the SEC and officially plans to go public to raise at least $1 billion. Highlights and my insights below the fold!
Zynga’s numbers are very good yet not surprising based on what’s been leaked over the past year:
- Zynga has 60,000,000 daily active users and 232,000,000 monthly active users. Revenues have grown from $597.5 million in 2010 from $121.5 million in 2009. The company is profitable, having turned a profit of $27.9 million in 2010 after a 2009 loss of $52.8 million.
- So far, 2011 is a good year. In Q1 2011, Zynga $234.5 million in revenues and a profit of $11.8 million.
- Zynga has $995 million cash on hand based on revenues and previous rounds of funding.
All is not good, however, in the land of Zynga.
The number one risk factor is its dependence on Facebook. According to the analysis by AllThingsD, between December 31, 2010, and March 31, 2011, 69 percent and 82 percent of its accounts receivable were amounts owed to it by Facebook.
Surprisingly, Zynga does not have special deal with Facebook in regards to Facebook Credits as I suspected. Zynga expects to have to pay Facebook 30% of each transaction just like everyone else. Combining these two factors together, a big goal of Zynga after going public has to be to spend the money to break its dependence on Facebook.
Other risk factors are that most of its revenues come from a few of its games and that most revenue is generated by a small minority of its users. Zynga does not break this percentage down, but Games.com guesses its 1 – 5% based on industry standards.
Regardless or risk factors, today’s filing suggests that this is going to be among the biggest IPO’s of the year. Zynga’s numbers dwarf those of LinkedIn, its revenue model puts Pandora to shame, and its management team is far more intelligent than that of Groupon. A bubble may be blowing on Wall Street, but these numbers are legit.
A successful Zynga IPO will further legitimize the social gaming and freemium markets and continue to the downward spiral of traditional video game companies. After its IPO, Zynga will officially be worth more than Electronic Arts and Activision combined!
Final note: the most interesting part of the fililng is Zynga’s stated philosophies: “games should be accessible to everyone, anywhere, any time; games should be social; games should be free; games should be data driven; games should be good.” What Google is to search, Facebook to friends, Amazon.com to shopping, Zynga wants to be for play and games.