Zynga worth $1 billion?

Matt Bowman · November 23, 2009 · Short URL: https://vator.tv/n/c01

Gaming company surpasses 100 million unique monthly visitors, launches destination gaming site.

 Earlier this month, Electronic Arts bought social gaming site Playfish for three to four times its revenue. Bloomberg points out that ratio would give Zynga a whopping $1 billion valuation.

Bloomberg’s method at first seems like a bit of hip-shot. The revenue estimate of $200 million comes from Inside Social Games, which conducted a four-month study into the virtual goods industry, and estimated Zynga’s revenues based on estimated revenue per active user—fair enough. Multiplying that number by the multiple Playfish reeled in is a pretty rough way to get a valuation.

There's more to back up the number, though. Word on the street is that Zynga spoke to EA about a possible $1 billion acquisition before the Playfish deal.

Gaming investor Tim Chang, a VC at Norwest Venture Partners who is not invested in Zynga, says the valuation is reasonable, given its growth, revenue, and the Playfish acquisition. “I wouldn't be surprised if they go IPO and have the valuation grow even higher from there in the public markets as the space grows and they continue to perform,” he said in an email to VatorNews.

According to a press release today, Zynga's growth remains impressive. It passed 100 million unique monthly visitors and has more than 200 million active users, one million of whom purchase virtual goods every month. Zynga’s newest games are boosting the company’s growth: Café World, which launched in September, has passed 9 million daily active users, and FishVille attracted over 6 million daily active users since its launch earlier this month. Zynga’s label FarmVille is the largest social game online with over 65 million users, 26 million of whom it says play every day. The company also launched FarmVille.com, a new web site that uses Facebook Connect integration to bring the game to a standalone portal—its first foray into building a destination gaming site.



The company also announced today that 90% of revenue comes from virtual goods. That’s good news as Zynga takes efforts to remove promotional offers that were found to result in many users unwittingly being signed up and billed for subscriptions. Zynga CEO Mark Pincus moved to remove these offers when they came to light earlier this month. In the past, such offers were estimated to account for 30% of the company’s revenue. Today’s announcement indicates the percentage is down to 10%.

Pincus says Zynga is emblematic of a new market just getting off the ground. “With the popularity of virtual goods today, we are in the early stages of a new economy that could grow and shape the future of the Web.”
---------------------

Be sure to catch Mark Pincus' keynote at VatorSplash on February 4, at Cafe du Nord in San Francisco. Click here reserve your spot and join Pincus, Smule CEO Jeff Smith, 10 of the hottest early-stage startups, and heavy-hitting venture investors from August Capital, Google Ventures, Greycroft Partners, Norwest Venture Partners and more. (Plus, you won't want to miss Tim Chang's band Black Mahal perform at the afterparty).

Read more from our "Trends and news" series

More episodes

Related Companies, Investors, and Entrepreneurs

Zynga

Startup/Business

Joined Vator on

Zynga is the largest social gaming company with 8.5 million daily users and 45 million monthly users.  Zynga’s games are available on Facebook, MySpace, Bebo, Hi5, Friendster, Yahoo! and the iPhone, and include Texas Hold’Em Poker, Mafia Wars, YoVille, Vampires, Street Racing, Scramble and Word Twist.  The company is funded by Kleiner Perkins Caufield & Byers, IVP, Union Square Ventures, Foundry Group, Avalon Ventures, Pilot Group, Reid Hoffman and Peter Thiel.  Zynga is headquartered at the Chip Factory in San Francisco.  For more information, please visit www.zynga.com.

Playfish

Startup/Business

Joined Vator on

Playfish is a social games company that creates games for people to play together.

Founded in October 2007 by casual and mobile games veterans and backed by $3M in seed funding, we believe games are more fun when played with friends and family. So we are working on combining the best elements of casual games, social networks, MMOGs and virtual worlds to create entirely new, more social ways of enjoying great games together.

Traditional computer games focus on standalone game play on consoles, your PC or on your mobile. Games that do allow you to play together with others online normally require you to buy the game, go online and try and find like-minded new friends who are also playing the game. This is something that usually only the most dedicated gamers are prepared to do.

Our social games are different. Social games allow you to play together with real-world friends and family using the infrastructure built by social networks. This is in some ways a return to the roots of games. You play with the same people you would play cards, board games or go bowling with in the real world. Sharing the game experience with friends makes it more compelling and fun.

At Playfish we believe social games are a big part of the future of the video games industry, and are working hard to be the leading company in this emerging sector.

Playfish is headquartered in London, UK with offices in Beijing, China and Tromsø, Norway.

10092

Jeffrey Smith

Joined Vator on

6524

Tim Chang

Joined Vator on

Tim is a proven venture investor and experienced global executive, and was named on the 2011 Forbes Midas List of Top 100 Dealmakers.
12951

Mark Pincus

Joined Vator on