Zynga’s Quest for Big-Spending Whales – BusinessWeek

Image representing Zynga as depicted in CrunchBase

Image via CrunchBase

On July 1, Zynga filed with the Securities and Exchange Commission to raise up to $1 billion in a sure-to-be blockbuster initial public offering. To investors immune to ominous talk of tech bubbles, the numbers look alluring: The San Francisco company has 232 million active monthly users; last year it posted a net income of $90.6 million on revenue of $597 million, which was up fivefold from 2009. In the quarter that ended in March, profit was $11.8 million. Although its games are free-to-play and widely accessible on Facebook, Zynga makes money by selling virtual items that are avidly hoarded by collectors, competitive players, and obsessives. Among the risk factors Zynga listed in its prospectus: “We rely on a small percentage of our players for nearly all of our revenue.” It didn’t specify the percentage of people willing to fork over a few dollars for a virtual barn, building, or tractor, but multiple people familiar with the booming business of digital goods, including one former Zynga employee who did not want to be named discussing internal matters, suggest that less than 10 percent of Zynga’s players spend money and less than 1 percent are responsible for between a quarter and a half of the company’s revenue. Las Vegas has a name for that kind of incredibly profitable patron: whales.

via Zynga’s Quest for Big-Spending Whales – BusinessWeek.

Strange Random Community Quote:

The most perfect political community is one in which the middle class is in control, and outnumbers both of the other classes.” – Aristotle (Ancient Greek Philosopher, Scientist and Physician, 384 BC322 BC)

 

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Posted on July 7, 2011, in Article and tagged , , , , , , , , , . Bookmark the permalink. Leave a comment.

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