Zynga
Two stories in the “Social Media IPO Candidates” realm got us thinking that corporate governance might be under fire. Zynga is reportedly creating a triple-class share structure and Groupon has apparently engaged – voluntarily or not doesn’t matter – in pre-IPO marketing during its quiet period. “Buyer beware” indeed.
We wrote last Thursday about LinkedIn’s IPO, which closed the first day of trading up almost 110% with some “interesting” valuation metrics. While there’s talk of other Web 2.0/ Socialmedia companies IPOing, Vanity Fair had a recent profile on Zynga – a “Web 3.0″ company, certainly a buzzword we’ll hear a lot in the next few months. We remain interested in the business models arising from social media – if not in the valuations surrounding the sector.
Zynga keeps popping up on the news as it reportedly heads for an IPO, and one piece asked if it can become the Google of online games. Sure, the business model seems fantastic – precisely what usually attracts competitors. So far they have suffered and didn’t really appear to threaten Zynga. Now Disney is making a move and it’s easy to imagine other players joining the battle. Plus, thinking about games reminded us of Electronic Arts.
Zynga Games creates games for Facebook and MySpace. Its users number in the tens of millions, and many of them pay real cash for virtual goods to spice up their gaming. In fact, Zynga might well be making more money with Facebook than Facebook itself is. In paper, the business model seems great. We’ll probably get to know this soon, since Zynga is supposedly preparing for an IPO. Anyway it’s a huge reminder that disrupting technologies don’t necessarily imply that the inventors will make the most money – in some cases, any money. For new and old industries, always look at the entire value chain, be it suppliers, service providers, etc.
