The game is on. Zynga's IPO filing

Zynga filed on Friday IPO and in their filing are some interesting points.

Despite their high revenue in Q1 this year ($235 million) the net revenue is only $12 million. most of the costs went into R&D, cost of revenue (shares to FB) and Sales and Marketing. Zynga has 232 million active users and makes most of its money with virtual goods.






Reading through the filing makes it clear that Zynga's highest risk is the relationship to Facebook. Most players are playing through the Facebook platform and buying there virtual goods for Farmville etc. FB gets a 30% share of these virtual goods revenue.

Facebook is critical for Zynga and Zynga is critical for Facebook. The planned IPO ($1 billion) could help Zynga to build a stronger network outside from FB.

Zynga is less than four years old. Their first game on FB was poker. Since then Zynga did build games like Faemville and Fontierville. Mark Pincus (one of the Zynga founders) had founded three other companies before he started Zynga. The most famous one was tribe.net one of the first social networks. Zynga got from beginning $29 million in VC. Since then Zynga got hundreds of million of more VC and has been many months with their games on FB leading the top 10 apps on FB.

In July 2011 it had 3 games in the top 10.




In December 2010, Zynga did hold 6 of 10 top games see my blog.




In June 2009 only 2 games.





All images from allfacebook.com.

Zynga is still leading developer on FB but the MAUs (MAUs is the number of individuals who played a particular game during a 30-day period, as recorded by our internal analytics systems.) are declining.

And Zynga is not anymore in the top fast growing apps.





Is the filing maybe coming to late, where many people prefer to play angry birds or prefer to play outside of FB?

I don't think so, as long Zynga will work on building a network which can be without
FB and if Zynga is bringing out new games. Which might be not too hard. Zynga did acquire at least 11 companies in the last twelve months (XPD in Beijing, Challenge Games in Austin, Unoh Games in Tokyo, Conduit Labs in Boston, Dextrose AG in Frankfurt, Bonfire Studios in Dallas, Newtoy in McKinney, Texas; Flock team; Area/Code in New York, and Floodgate Entertainment, MarketZero).

Making most of the money with virtual goods is risky, it is just money from the consumer. But I believe VG will be even stronger and a part of our live in the future.

Zynga has now over 2000 employees which I believe is just ok, but they should not hire much more. I don't see really a need for more employees at a gaming platform or game producer. More people will water down the quality. Which means you need much more people to get to the same result as a few, which increases the costs extremely.

I still believe Zynga is a good buy and we all should consider to get some stocks. But if Zynga keeps staying so close connected to FB or is relying on FB and they don't come up with some more different types of games then we should sell within 12 months. Otherwise Zynga could have a chance to be the next Electronic Arts for social and mobile gaming.

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Location:Spinning Wheel Ln,Brooksville,United States

Zynga and Lady Gaga = GaGaVille

Mashable reported that Zynga and Lady Gaga teamed up:
GagaVille, a uniquely designed neighboring farm to FarmVille, that sports unicorns and crystals, according to Zynga, launches May 17. GagaVille visitors will get a first listen to unreleased songs from Gaga’s album Born This Way, available May 23. The full album also comes bundled as a free download when you buy a $25 Zynga game card at Best Buy.

The deal also includes a “Words With Gaga” contest in Zynga’s mobile Words With Friends game. Playing the designated Gaga word of the day — which will be announced on Gaga’s Facebook Page each day — will give players the chance to win concert tickets and a signed copy of Born This Way. Zynga is also giving players limited edition Lady Gaga virtual items on RewardVille that can be used across Zynga games.

Such a deal had been predicted after Gaga and Zynga collaborated on an earthquake relief effort for Japan in March. Last month, The Wall Street Journal reported that Zynga and Gaga were in discussions about a tie-in effort.


Zynga is pretty smart. Take the celebrity which has the biggest social fan base, combine it with a simple online game and make consumer to buy your products to get some free songs.
This is perfect. The only downside about Zynga, they have only their ...Ville games and a few others.
The ...ville games are too similar, And the users did recognize it too. Zynga had once all 10 spots in the top 10 apps on Facebook. Now they have just three and they are actually declining.











One reason is that people use more and more Facebook over mobile and therefore the apps don't work, or some people play Farmville outside of Facebook. But another reason is that the games get after a while boring and if all games are the same with even bother to play them.

Zynga Games

Blackjack
Café World
CityVille
FarmVille
FarmVille (iPod)
FishVille
FrontierVille
GagaVille
Live Poker
Mafia Wars
Mafia Wars (iPod)
Pathwords
PetVille
Street Racing
Pirates: Rule the Caribbean!
Scramble (browser game)
Scramble (iPod)
Scramble Live
Sudoku
Texas Hold'Em Poker
Treasure Isle
Vampire Wars
Vampires: Bloodlust (iPod)
WarStorm
Word Twist
Yakuza Lords
YoVille


Games discontinued:

Attack!
Dope Wars
Dragon Wars
Fashion Wars
Football
Gang Wars
Ghost Racer
Guild of Heroes
Heroes vs. Villains
Music Pets
My Heroes Ability
Ponzi Inc.
Prison Lockdown
Roller Coaster Kingdom
Space Wars
Special Forces
Street Racing[69]
Triumph
It Girl
Poker Blitz
Similar like angry birds. This is just one game in 10 different versions.
I see Farmville and Rovio soon losing ground and revenue (or at least no growth) if they don't come up with type of games. And not sure how long the relationship with Lady Gaga will help Zynga to grow as fast as they are used to.
At least they seem to understand that they need more different type of games and bought in last year a lot of companies, I think over 20. They bought a lot of companies in other countries to get a foot in the door. Here is a list of some (from Wikipedia).
Locations of Zynga:
Zynga Headquarters (San Francisco, CA)
Zynga India (Bangalore, India)
Zynga Los Angeles - opened February, 2010
Zynga China (formerly XPD Media, based in Beijing) - acquired May, 2010
Zynga Austin (formerly Challenge Games) - acquired June, 2010
Zynga Boston (formerly Conduit Labs) - acquired August, 2010
Zynga Japan (formerly Unoh Games, based in Tokyo) - acquired August, 2010
Zynga Germany (formerly Dextrose AG, based in Frankfurt) - acquired September, 2010
Zynga Dallas (formerly Bonfire Studios) - acquired October, 2010
Zynga New York (formerly Area/Code) - acquired January, 2011
Zynga Seattle - opened October, 2010 [34]
Floodgate Entertainment - acquired March, 2011
Wonderland Software, Britain, April 2011
There is not a month Zynga is not acquiring a company.
Zynga is valued right now around $10billion with almost a billion in revenue, but the danger is that they buy too many companies without releasing new hits.


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Social gaming is heating up

DeNA, a Japanese social game company, said on Tuesday that it would acquire Ngmoco (the maker of "We Farm" and "We Rule"),





a Silicon Valley iPhone game developer, for $400 million — one of the largest deals involving an iPhone software company and another sign that Apple’s products are fast becoming the hottest mobile game devices on the market.

The acquisition is also the latest in an overseas spending spree by DeNA, which is little known outside of Japan but aims to be a global rival to the big names in social networking and games, including Facebook and Zynga, which makes the FarmVille games.

The really interesting part is that at least Japan does understand how important social games will be in the future.

Social platforms like Facebook and Twitter are Social 1.5 (instant messaging 1.0 and forums 0.5 - my definition).
Social Games are Social 2.0

Facebook is big and will get bigger, but in terms of generating money, FB is heavily relying on ads and their payment system (Facebook credits).

Games like Farmville have three income sources. Advertisement placements, product placements and virtual goods.

Zynga (the maker of Farmville and the other top 10 facebook games) will have this year an estimated revenue of at least $500 million by selling virtual goods. The Zynga social games are free to make the user "hungry". The user can buy virtual items for the games, if he wants to get to a better level.

FB did grow because of the open developer network the thousand cool application and games. Unfortunately the games made more money than FB likes to see. Mark Zuckerberg mentioned many times that he does not care about revenue, but despite this, Facebook found multiple ways to participate from the games revenue.

The first way Facebook makes money from partners is through advertising. The best way for companies like Zynga to attract new game players is to advertise heavily on Facebook. So as soon as Zynga rakes in money from its users, it turns around and pumps some of that money back into Facebook to buy ad space. As a result, Zynga is not only a leading developer of games on Facebook, it’s also one of Facebook’s biggest single sources of revenue.

Facebook squeezes yet more money from Zynga and other partners by getting them to accept payments from game players using an online currency that Facebook has created, called Facebook Credits. Instead of buying virtual goods directly from game developers, players buy Facebook Credits—and Facebook keeps a 30 percent slice of the transaction.
By the end of this year most of the big apps will be using Facebook Credits, says Justin Smith, founder of Inside Network, a research firm that tracks the Facebook ecosystem. That could generate $300 million in new annual revenues for Facebook, since users by next year will be spending about $1 billion on social gaming on Facebook.

Game developers surely do not like having to give up 30 percent of their revenue, but what choice do they have?

A really big one, they could build mobile applications outside from facebook (like farmville) and build their own player database totally independent from facebook.

DeNA is understanding this concept and is building a platform for game developer which works on the two biggest mobile gaming OS, which is Android and iOS.

The games can use (on mobile devices) their own currency, they can run their own ads and totally control product placements. Which could reduce FB revenue extreme.

Japan is much further than the US in terms of mobile devices. In japan everybody is playing since years games on their phone or watching shows on their small 3inch screens.
But America is not far away to be a mobile country.

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Location:Spinning Wheel Ln,Spring Hill,United States

Facebook makes the life of game developers harder

Facebook is one of the biggest game platform in the Internet. A lot of games are relying on posts and notifications the games are posting to get more players or to get players to play more.

This will change with the new Facebook settings. Users will only get news from farmville when they are farmville players.
An user would not see anymore when a friend reached a new level in game as example.
This cuts off some marketing channels for game developers. An ext step from Facebook to find a way to monetize better on games.

See post from blog.facebook.com:

A Better Games Experience
by Jared Morgenstern on Tuesday, September 21, 2010 at 8:37pm
Games are an important way we connect with people, from family game night, to playing console games with siblings, to card games with friends. More than 200 million people play games on Facebook every month because it's easy to get started and play with friends. We're focused on improving the quality of the experience for those who play games, as well as those who do not. Today, we're launching features to give you better control over the updates you see in your News Feed.

Previously, you've had the ability to hide an application story, or block it completely. Now, we're putting changes in place so game stories only post to your feed if you're playing them. This means people who play games can post stories to their Wall without worrying about overwhelming their friends who aren't playing, and people who don't play games won't see irrelevant stories in their feed for which they have no context.

For game players, here are some improvements we're excited to be launching today:
§ Full stories in News Feed so they won't miss when a friend shares an action or needs help in a game. The more active a person is in a game, the more prominent the stories will be.
§ Smarter bookmarks on the home page that will automatically appear and reorder based on the games they're playing. They will no longer need to individually bookmark apps, and it will be easier to get to favorite apps.
§ A clearer, highlighted number for pending requests or tasks alongside bookmarks.
§ Requests in the Games Dashboard, where they can manage all their game activity and discover new games.

You’ll no longer need to bookmark individual applications, as the ones you use most often will automatically appear and reorder.
People who do not play games will only see stories when a particular game is added by a group of friends, instead of ongoing News Feed stories. These dedicated stories will show which friends are playing a game, making it easy to join them. Over the coming months, we plan to launch additional features that provide improved and personalized social games and News Feed experiences. Happy gaming!

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Location:W Laurel St,Tampa,United States

Marketing 4.0

Since marketing is around we went through three stages of marketing.

Marketing 1.0
Product-Centric Marketing
Interaction with consumer:
one-to-many transactions

Marketing 2.0
Consumer-orientated Marketing
Interaction with consumer:
One-to-one relationship

Marketing 3.0
Value-driven Marketing
Interaction with consumer:
Many-to-many collaboration

Marketing 3.0 is using social and crowd collaboration to promote products, However the next step is already on the market, which could be defined marketing 4.0

Marketing 4.0 is localized virtual marketing. The goal is to engage the consumer with virtual goods to get their opinion on products before they are ready for market. But at the same time to get the consumer attention in their one little virtual world.
More and more people are escaping the real world to play games like farmville or to be someone else in second life.
Many years the brands ignored the virtual life of consumers, but finally companies like General Mills are taking these worlds more serious.
ThinkEquity is estimating a revenue for virtual goods as high as $2 billion this year. The beauty on virtual goods is micro payments, usually they cost only between $1 and $4, which is small enough for impulse buy, but the real killer is the branding.
Take a game like Tiger Woods golf for the iPhone, why should the user not be able to buy a Nike Square driver for a few bugs to see how good his virtual player is performing with this club. For each fairway hit with the club, the user will get points, and these points will result into discount, if the user want to buy the real Nike Square driver.
This is marketing 4.0. H&M, Volvo, General Mills and others have already discovered this opportunity and spending together on Marketing 4.0 over $50 Million this year.
In the virtual world, users are represent themselves as what they want to be or, play things they have fun, these are the best places to catch the users interests and to sell branded products. Combined with marketing 3.0 and social, we as marketer get the full 360 degrees view of our consumers.
John Doe might play farmville in a cafe close to publix. General Mills could send via farmville coupons for their broccoli at publix.
Polo Ralph Lauren could test new jeans style in second life, to see how the consumer does accept the new style. The new Jeans might go in production when enough people have bought the jeans in the virtual world. This helps branding new products and save a lot of money for production of things people might not buy.


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