Zynga shares spike on Facebook IPO

Casual game company sees stock price jump 33% this week after social network announces plans to go public.

Mark Zuckerberg and his $28 billion-in-waiting aside, one of the biggest winners thus far from Facebook's initial public offering announcement is Zynga. Shares in the company have spiked 33 percent since rumblings of Facebook's imminent IPO filing emerged on Monday. The CityVille creator is currently trading up nearly 10 percent to $13.60 per share as of press time.

CityVille is the No. 1 game on the No. 1 social network.

Prior to this week, Zynga's stock valuation has floundered since its own heavily hyped IPO in December. The stock came out behind on its first day of public trading, after the company set an opening valuation of $10. Since then, the stock hadn't shown much signs of life, bottoming out at $7.97 per share in mid-January.

However, as revealed in Facebook's Securities and Exchange Commission filing, Zynga is a significant contributor to the social network's top line. Of the $3.71 billion in revenues Facebook earned in 2011, 12 percent, or about $450 million, came from Zynga's sale of virtual goods.

Zynga products account for seven of the top 10 games on Facebook, according to AppData.com. Currently, Zynga's CityVille, Texas HoldEm Poker, and CastleVille are the top social games on Facebook.

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10 comments
Phil-teh-Pirate
Phil-teh-Pirate

It's still only a passing fad until the next big thing comes out. I remember when Myspace was the big thing...

jamyskis
jamyskis

@MattyWoah: Exactly, it's about the ability to turn profit. I know plenty of companies in the industry that, while I really can't stand the way they do business, they will always turn a profit and have sustainable business models. As a gamer, I hate Activision, but as an investor, I'd love them. Zynga is turning a profit now, and indeed this is what investors are looking at - the extremely high revenues with low expenditure. A good proportion of these investors, however, have solely a financial background and have little experience in the industry, neither as a consumer nor as an industry rep. They look at Zynga and see it turning a profit, yet they don't consider why Zynga has been so successful thus far, i.e. the highly aggressive viral marketing techniques ("Such and such wants to be your neighbor") and how these techniques are under threat by an increasingly negative perception of them and by Facebook's constantly evolving security infrastructure. They don't take into account the extraordinarily high user churn and negative publicity like that surrounding addiction to Zynga games (there have been plenty of reports on people stealing money to feed their addiction to CityVille). Poor investors will focus on immediate short-term gains. Good investors will have a knowledge of the industry that helps them decide whether a business model is sustainable. No matter how crap I find Zynga's games, my objective opinion of Zynga as an investment is that it is not sustainable.

dawnofhero
dawnofhero

I'll admit, Cityville is fun, but it's sooo fr!c!n' annoying that Zynga constantly encourages you to spend real money on fake, digital cash just so you can buy a fake building in a fake world while at the same time limiting the gameplay by requiring the player to invite neighbors, collect crap loads of junk just to build a stupid building, and do all these unnecessary 'quests' that just keep piling up. And unless you have 50 neighbors in Cityville, you'll be crawling along trying to build up a decent city. The game's fun, but like I said earlier, Zynga is constantly trying to sell you stuff which makes it feel like you're being ripped off.

MattyWoah
MattyWoah

The comments below this article are a great indicator that gamers are generally not educated on the art of investing. It doesn't matter at all if the hardcore gaming community does or does not like Zynga or Facebook, they will move up and down completely independant of the opinions of people like jamiskis and kci89 Investing is about turning profit, and has little to do with public image. Halliburton would be a strong example of that.

gatsbythepig
gatsbythepig

I'll wait for Zynga to drop to 5. Facebook and Zynga are worth about a quarter to half of what people think.

PixelAddict
PixelAddict

In other news, pictures of my aunt's cat named Spike were seen all over Facebook. Again. Too much. Always too much. Make it stop.

jamyskis
jamyskis

Absolutely priceless - a gem of an example as why the majority of investors have absolutely no clue. They believe Facebook's going public automatically means that its business model is sustainable and that Zynga's future is therefore guaranteed. Apart from the fact that Zynga doesn't have a sustainable business model with or without Facebook, it's also highly debatable whether Facebook can be maintained in its current state. Social networks are, after all, not particularly resistant to competition. MySpace anyone?

kca89
kca89

I really don't see how Zynga is successful. I quit playing Zynga games because Facebook games that want me to add neighbors are !$@#ing annoying.

Freezezzy
Freezezzy

This isn't surprising. After Facebook's IPO value was posted, naturally, greedy investors are gonna buy up every share of Facebook's biggest (cr)app maker, Zynga.

chisoxrule
chisoxrule

If this continues for a while longer, I'll be the only one left who has never played 'Words with Friends'. :P