'FarmVille' creator Zynga to go public

LOS ANGELES (AP) — Zynga, the online game maker behind "FarmVille" and other popular Facebook pastimes, is going public, the latest in a crop of high-valued Internet IPOs expected after LinkedIn Corp. showed that the online networking craze is a hot commodity on Wall Street.

Zynga Inc. hopes to raise up to $1 billion in an initial public offering that follows LinkedIn's sizzling stock market debut last month. The amount of money Zynga is seeking in its IPO will likely change as its bankers determine how many shares should be sold and at what price. That process typically takes three to four months.

There's pent-up demand for the stock of large social media companies because so few of them have gone public, even as they have been steadily expanding their reach for several years. The opening of the floodgates could culminate next year in a long-awaited IPO of Facebook, the biggest social network of them all.

Because of Zynga's size, strong financials and potential for a valuation of $20 billion or more at the start, the 4-year-old company's IPO is already drawing comparisons to another high-profile stock-market debut.

"Google came to town like a three-ring circus and this one will too," said John Fitzgibbon Jr., founder of IPO Scoop, which tracks IPOs. "They're going like gangbusters, and they're coming to town with a lot of hype, and I'm sure that will carry over into the IPO and the aftermarket."

Fitzgibbon cautioned against talk of a "bubble" following the steady stream of recent IPOs.

He and other market watchers say there is a key difference now, compared with Silicon Valley's fiasco a decade ago. Although the Internet IPO market is as hot as it's been since the dot-com heyday, there are still comparatively few companies coming to market. And many already have solid financials, having been forced to stay private while the Great Recession sapped investor interest.

"The door is open for the specialty technologies — but it's not a bubble," he said. The dot-com era "looked like a stampede. Right now it's a cavalry charge. It's lacking the numbers to call it a bubble."

Meanwhile, there's little demand for those who fell from grace. News Corp. sold the struggling Myspace — once a social media darling — for a pithy $35 million on Wednesday. It paid a whopping $580 million in 2005.

LinkedIn, a service that connects people looking to advance their professional careers, doubled its IPO price in its first day of trading to give it a market value of nearly $9 billion — the highest for an Internet IPO in the U.S. since Google Inc. went public nearly seven years ago. LinkedIn's co-founder and executive chairman Reid Hoffman, now a billionaire, belongs to Zynga's board of directors. The daily deals site Groupon Inc. has also filed its initial IPO papers.

Zynga is expected to attract even greater interest than LinkedIn did because its games have become a much larger cultural phenomenon. About 230 million people every month play addictive Zynga games such as "Farmville," ''CityVille" and "Texas HoldEm Poker."

By comparison, LinkedIn has more than 102 million members.

Zynga makes most of its revenue by charging small amounts of money to buy virtual items in its games. It also makes some money from advertising and partnerships with companies such as Netflix or Vistaprint on special offers. Revenue grew to $597 million in 2010, from $121 million in 2009 and $19 million in 2008.

The company, which is based in San Francisco, has a co-dependent relationship with Facebook. Zynga probably wouldn't exist if it hadn't tailored its games for Facebook's audience of more than 500 million users. On the flip side, Zynga games give people another reason to keep make frequent visits to Facebook so they can tend to virtual farms, play online poker or watch over virtual cities.

Zynga was founded in 2007 by CEO Mark Pincus. It has about 2,300 employees, most of them in San Francisco. Private investments earlier this year valued the company as high as $10 billion well before the IPO. By comparison, Electronic Arts Inc., the iconic video game company behind "Madden," ''The Sims" and other popular titles, is currently valued at $7.8 billion. "Call of Duty" maker Activision Blizzard Inc., meanwhile, has a market capitalization of $13.4 billion.

Before its IPO, LinkedIn shares were recently traded for $30.79 on SharesPost, a private stock exchange. This gave LinkedIn an implied value of $2.8 billion. Zynga, meanwhile sold for $15 a share for a $12.6 billion valuation. But that's all dwarfed by Facebook, which had valuation of $72.6 billion based on a recent trade contract. Officially, based on a private Goldman Sachs investment, Facebook is valued at $50 billion.

The sky-high valuations of Zynga, Twitter and other tech darlings have sparked some worries of a bubble, echoing the late 1990s when companies with large online followings but little revenue triggered an investment frenzy that ended in what became known as the dot-com bust. This time, though, companies such as LinkedIn and Zynga are coming to the market more mature and, even more importantly, profitable. Zynga earned $90.6 million last year.

But that doesn't mean their market values can't be grossly exaggerated. It may take several more years to determine whether any of this generation of Internet stars will grow into huge companies or leave investors with a bad case of buyer's remorse.

___

Barbara Ortutay reported from New York. AP Technology Writer Jordan Robertson contributed from San Francisco.

Loading...

Editor’s note:Yahoo Philippines encourages responsible comments that add dimension to the discussion. No bashing or hate speech, please. You can express your opinion without slamming others or making derogatory remarks.

  • Filipina maid photographs "modern slavery" in Hong Kong

    By Emma Batha LONDON, May 26 (Thomson Reuters Foundation) - A Filipina maid in Hong Kong has published stark photographs of burned and beaten domestic workers to highlight the "modern slavery" she says has long been the city's shameful secret. "Hong Kong is a very modern, successful city but people treat their helpers like slaves," said Xyza Cruz Bacani, whose black and white portraits won her a scholarship from the Magnum Foundation to start studying at New York University this month. It's …

  • Philippines to fly over disputed South China Sea: Aquino
    Philippines to fly over disputed South China Sea: Aquino

    Philippine military and commercial aircraft will keep flying over disputed areas in the South China Sea despite Chinese warnings over the airspace, President Benigno Aquino said on Monday. "We will still fly the routes that we fly based on the international law from the various conventions we entered into," Aquino told reporters when asked whether the Philippines accepted China's position. The Chinese military last week ordered a US Navy P-8 Poseidon surveillance plane away from airspace …

  • ‘Kentex owners still in Phl’
    ‘Kentex owners still in Phl’

    The daughter of one of the Kentex Manufacturing Corp. owners has assured the government that the businessmen are still in the Philippines, contrary to some reports that they have fled the country. Barbara Ang, daughter of Kentex shareholder Veato Ang, said her father and his business partners have no plans of leaving the country despite the razing of the Valenzuela slipper factory, which killed 72 workers on May 13. Valenzuela Mayor Rex Gatchalian also stood by his promise to punish any local …

  • Gasoline prices up, diesel down
    Gasoline prices up, diesel down

    Oil companies announced yesterday a price hike of 50 centavos per liter for gasoline and a rollback of 50 centavos per liter for diesel effective at 6 a.m. today. Independent oil firms were among the first to announce the price adjustment. In an advisory, PTT Philippines, the local subsidiary of Thailand’s biggest oil firm said it cut diesel prices by 50 centavos per liter and increased gasoline prices by 50 centavos per liter. …

  • Lawmakers to review building code provisions
    Lawmakers to review building code provisions

    Lawmakers are set to review provisions of the National Building Code and Republic Act 10121, or the Philippine Disaster Risk Reduction and Management Act, to strengthen contingencies and policies to prepare the country for possible major earthquakes. The move came following proposals from Reps. Winston Castelo of Quezon City and Lito Atienza of the Buhay party-list to review the two laws and other regulations during a hearing of the House committee on Metro Manila development on the …

  • Noy: Phl may attain first world status with continued reforms
    Noy: Phl may attain first world status with continued reforms

    The Philippines’ attaining first world status may soon be imminent if significant reforms initiated by the current administration would be consistently pursued, President Aquino suggested yesterday. “Kung madidiligan ang ating mga pinunla, at makaka-graduate ang mga pinag-aaral natin upang makapasok sa maaayos na trabaho, baka po tuluyan nang nasa first world status tayo sa panahong iyon (If we water the seeds sown and those we sent to school will find better jobs, then time will come that …

  • Phl won’t recognize China air restrictions
    Phl won’t recognize China air restrictions

    The Philippines will not recognize restrictions on air and sea travel set by China in the West Philippine Sea, President Aquino said yesterday. “We will still fly the routes that we fly based on international law and the various conventions, agreements that have been entered into through various decades,” Aquino told reporters in an ambush interview after inspecting the Marikina Elementary School in preparation for the opening of classes in June. “Maybe we should not think about getting …

  • Rainy season likely in 2nd week of June
    Rainy season likely in 2nd week of June

    Filipinos may have to wait until the second or third week of June for rain, the Philippine Atmospheric, Geophysical and Astronomical Services Administration (PAGASA) said yesterday. Rene Paciente, chief of PAGASA’s marine meteorological services section, said they expect the rainy season to start in the second or third week of June. The criteria for declaring the onset of the rainy season include the prevalence of the southwest monsoon and the 25-millimeter rainfall recorded in at least five …

POLL

Should Aquino be held accountable over the Mamasapano operations?

Loading...
Poll Choice Options