Zynga eyeing opportunities beyond Facebook
Online gaming juggernaut Zynga Inc. has unveiled a slew of products aimed at diversifying its business beyond Facebook and reassuring potential investors of its growth prospects in the burgeoning social games market.
In its first major announcement since filing for an initial public offering in July, the developer of FarmVille and Mafia Wars said Tuesday that it plans to launch a site separate from Facebook in which players can congregate and play its games. The San Francisco company also announced four new titles with flashier graphics and more sophisticated features, some of which can be played on smartphones and tablets.
“The message to investors is that Zynga has big plans to significantly grow its business via platforms other than Facebook,” where Zynga currently gets the bulk of its 150 million customers, said Michael Cai, an analyst with Interpret, a research firm in Santa Monica.
Although Zynga officials would not comment on its pending IPO, analysts widely believe the company, like others such as Groupon, is holding off until the stock market stops convulsing.
“They filed when the market was very favorable,” said Michael Pachter, an analyst with Wedbush Securities. “When the market melted down in August, they realized they were no longer going to get the valuations they wanted.”
Zynga indicated in public filings that it hoped to raise $1 billion from its IPO, a figure that implies that the company would be worth $10 billion or more. Unlike Groupon, which lost $456 million in 2010, Zynga is profitable. It recorded net income of $28 million on $597 million in revenue last year. But in the quarter that ended June 30, Zynga’s profit plummeted 90% to $1.4 million from $14 million a year earlier.
“The beauty of Zynga is that they generate a bunch of cash,” Pachter said. “So they don’t need the money. And they have patient investors who can wait until the market conditions are more favorable.”
For now, Zynga appears to be in spending mode, launching new games at a rapid clip and heavily investing in technology to expand its reach into mobile and other online platforms. The most ambitious is a site, temporarily dubbed “Project Z,” that the company outlined in its Tuesday news conference in San Francisco.
The new portal would import players’ Facebook contacts so users won’t have to re-invite friends.
The move to expand beyond Facebook’s site appears to have the social network’s blessing: Facebook’s head of games, Ethan Beard, was in attendance for the announcement.
Neither company would talk about how Zynga would split revenue from the players who migrate to Zynga’s site from Facebook. Zynga currently shares with Facebook 30% of the sales it generates from games played on the popular social network.
Zynga also declined to disclose when it would launch the site — except to say it would be soon — or which games would be available on it.
“We would like to eventually have all of our games there,” said Cadir Lee, Zynga’s chief technology officer, noting that the primary goal of the initiative was to create a smoother experience for players. Games on Facebook are plagued with crashes and delays, largely because of the massive amount of data that developers must funnel through Facebook’s platform. The new site is designed to minimize such hiccups, Lee said.
The company also unveiled four games — CastleVille, Hidden Chronicles, Zynga Bingo and Dream Zoo. In addition, it formed an umbrella franchise called Zynga Casino, which will encompass its popular Texas HoldEm poker game, Zynga Bingo and future casino games.
Zynga called CastleVille “Zynga’s most beautiful game to date.” When launched, it will join Zynga’s popular suite of “Ville” games, including FarmVille, CityVille and FrontierVille, which attract 114 million players a month, according to AppData.com, a site that measures traffic on Facebook.
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