It’s Not All Fun And Games
Zynga this week announced it will make an initial public offering of stock in hopes of raising $1 billion in capital. This would make it one of the largest IPO’s to come out this year and certainly cements the online game maker as a major player in the tech game. No pun intended.
Not Just A Time Waster
Many people currently using social media consider those many online games a waste of time, but millions more play them every day. In fact, in China, where online games have become the biggest tech industry, billions of dollars changes hands every year from players buying virtual credits and items for their virtual games. These numbers make the Zynga IPO seem more like a good buy than a waste of time, don’t you think?
Bigger Piece Of The Pie
Zynga is the official gaming system of Facebook, but so far has only captured about 39 percent of the global market in virtual games. With the capital they get from the IPO and a good business plan, they could easier capture 50 percent of the market or more.
Social media gaming company Zynga has filed for an initial public offering and in the process may be legitimizing an industry.
Zynga said it is looking to raise $1 billion for its IPO according to an SEC filing. The company becomes the latest “social” phenomenon to go public, following in the footsteps of LinkedIn. According to a report from IHS Screen Digest, iSuppli’s IPO is significant for its impact on the social gaming industry.
“Not only will this preliminary filing completely legitimize the social network games market, which has experienced tremendous growth since its inception three years ago, it will also underline the game sector’s increasing shift away from a traditional product-based business to a digital, online and service-based growth opportunity. The filing will also demonstrate the games sector’s central role in growing and engaging users of social network,” said Piers Harding-Rolls, head of games at IHS.
Harding-Rolls says social gaming revenue exploded to $1.4 billion in 2010, which was up by a factor of 20 from $66.7 million in 2008. Zynga has been at the forefront of this explosion with a 39.1 percent share of the global market in 2010.
Zynga’s freemium and microtransactional business model, which in its games allows users to buy virtual goods, has driven its financial success. IHS says Zynga’s success legitimizes these models for revenue as well. The company’s 232 million monthly active users means mainstream adoption has been realized and will drive adoption of this monetization approach in the West says Harding-Rolls.
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