Zynga raises 150 million big ones from Softbank – Now What?

OK, so we’re a little late to the reporting this news, but as a would-be journalist I must: Zynga has raised $150 million from Softbank (source: Techcrunch).

By itself, this would be a nice sum of cash to collect dust in your coffers. But, this is in addition to the $180 million in funding Zynga raised last fall from Russian firm DST, bringing the total funding up to $366 million. That’s a lot of cash but I was joking when I said, it would be just sit around collecting dust.

So, what will Zynga do with all that money? The best way to predict the future is to look at the present. Based on that, we can assume Zynga will continue its hiring and acquisition binges and use the money to strategically expand into the Japanese, Chinese, and if they are clever, the Indian sub-continent markets. These markets are very lucrative but also highly competitive. Slapping a “Ville” at the end of a game name is not going to cut it in Japan or China, and Zynga can use its cash to create content that is localized for those markets.

We can also assume that Zynga will continue to spend millions of dollars marketing its games on Facebook, to make up for the drop in usage since Facebook changed their notifications.

The next natural question is, what should Zynga do with its money? They should continue to do all the above, but Zynga has an estimated market valuation of $4 billion now and what they really need to do is justify it before they can go public. Their Achilles Heel is they are bleeding users on a daily basis for their current catalogue of games and remain dependent on Facebook for users.

Zynga can expand across the world but as long as Facebook continues to grow into the number one social network internationally, they can not escape the fact that their entire business model hinges the whims of Facebook. To justify a $4 billion valuation, Zynga needs to launch innovative new games without the words “Ville” or “Wars” at the end of the name, expand into Asia and iPhone, and build out Zynga Live as a competitor to Facebook. They can do all this with $366 million in the bank. The question is, will they?

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