The date is set! Zynga is going public on December 16 under the ticker “ZNGA.”
The date is set. Zynga is going public on December 16 under the ticker “ZNGA.” With the date quickly approaching, Zynga is making headlines, encountering resistance, and striving to win the trust of thousands of potential investors.
NetHosting has been following Zynga since publishing a case study on Zynga’s history, features and systems, highlighting the role cloud hosting played in helping Zynga accommodate its massive growth immediately after launch. A lot has happened since that publication and it seems that Zynga will keep making news in the coming weeks. With Zynga going public and the Zynga road-show journeying across America, Zynga has everyone paying attention.
With Groupon and Pandora falling short of their IPO pricing, investors have become very careful when investing in web companies who are starting to tap into the public markets. With that in mind, Zynga decided to take a more conservative approach by filing for a lower IPO value. Although the exact IPO will be announced on the 15 of December, the projected IPO is approximately $925 Million with 100 million shares selling between $8.50 and $10.00. If Zynga does reach $925 million, they will have reached the largest IPO for a U.S. internet company since Google in 2004.
With Facebook also moving towards the public market in 2012, some investors hope to get a head start on getting a piece on Facebook by investing in Zynga. Other investors are skeptical, saying that the growth of Facebook is slowing down, thus providing Zynga with a dwindling customer pool. Zynga answered these concerns by recently releasing an onslaught of new games such as CastleVille, which accumulated 5 million daily active users within 6 days of its launch and has recently become the most popular game on Facebook. There are even rumors of a new ForestVille game being released on iPad and iPhone in the future as Zynga has attempted to prove that its growth isn’t entirely dependent on Facebook’s growth.
Although Zynga has conquered the online social gaming scene on PC, many potential investors are apprehensive due to Zynga’s lack of presence in the mobile world. Zynga has confessed that they have, according to their S-1 report, “limited experience” with mobile gaming. Many gaming companies, such as the Japanese mobile gaming giants Gree and Mobage, have an exponentially smaller customer base yet have a dramatically bigger monthly profit than Zynga. This has many investors speculating that the future of the internet, especially online social gaming, lies on the mobile plane. Zynga decided to ease concerns on the 23rd of November by releasing Dream Zoo. Zynga has already released a few of its games into the mobile market, but Dream Zoo is Zynga’s first stand-alone mobile game and is the first mobile game to use mesh technology.
Dream Zoo has shown many potential investors that Zynga can have a strong presence in the mobile gaming realm when it was ranked as second most grossing iPhone title next to Poker by Zynga at the end of November.
Possibly the largest misgiving investors have about the Zynga portfolio is the lack of sustainability in the company’s profits. Memberships in Zynga games are free. Zynga receives its revenue primarily through the selling of virtual goods, such as farm equipment and weapons. With approximately 6.7 million of the 227 million users being actual paying customers, investors are worried that they would be investing in a company with very limited expansion potential. On top of that, Facebook receives nearly a 30 percent cut from all of Zynga’s revenues. Zynga, in turn, is pushing towards moving its products to the tablet and smartphone market, and has already made public comments about releasing a platform independent from Facebook that is wholly dedicated to gaming.
By tapping into the future of the mobile network, moving towards independency, and continuing to release innovative online games, Zynga has displayed its eagerness to prove itself as a viable investment opportunity.
"There are a lot of areas of growth for Zynga,” stated John Schappert, Zynga’s Chief Operating Officer. “And we are aggressively executing in each area."
Although Zynga has its fair share of challenges to face, it has provided evidence to investors that it can overcome them. Zynga will be the largest publicly traded American game developer on the NASDAQ, ahead of both Activision Blizzard Inc. and Electronic Arts Inc.