Social Gamer Zynga Set to Go Public

by Matt Klassen on June 30, 2011

I wrote yesterday about the efforts of Electronic Arts (EA) to break into the competitive mobile gaming environment, and if it’s to be successful it might want to look at how gaming market mainstay Zynga has done things.

Almost as if taking a page from some sinister drug dealer’s handbook, the social network gaming company has masterfully demonstrated its ability to hook customers with promises of free stuff, only later to make them pony up the cash—or hook other customers—if they want to keep the experience going.

But Zynga is taking its viral gaming business somewhere I would wager drug dealers don’t usually go—that is, I suppose, if you ignore the entire pharmaceutical industry—as rumours are swirling that the company will file its Initial Public Offering papers today, with an initial valuation as high as $20 billion dollars.

Certainly one of several highly anticipated social networking IPOs, it truly looks like Zynga will see great initial success with its plans to go public; long term success for the company, however, may depend on one important factor…divorcing itself from Facebook.

While the public markets await the day when Facebook finally submits its own IPO, it wouldn’t be a stretch to say that a close second in terms of anticipation would be Zynga’s Initial Public Offering, estimated to be around $2 billion.

The social gaming company has enjoyed meteoric success over the past few years, as its own unique brand of addictive online games has even my own technologically-inept Mother playing, drawn in by the company’s casual and interactive gaming atmosphere. In fact, one might say that Zynga has been growing faster than my Mom’s out of control soy bean crop in the companies’ popular game FarmVille, seeing an increase in users from about 52 million a few years ago to approximately 271 million this month.

Of course, as many of you know, Zynga’s business strategy is, as mentioned, deceptively simple, drawing users in with free-to-play options, holding back the more entertaining additional options in the game for those willing to pay or sign up their friends—or both.

The one major downside for Zynga, in the long term at least, is its seemingly unbreakable symbiotic relationship with Facebook, one that currently has clear benefits for both companies. To that end, while users can play Zynga games apart from Facebook, it’s a statistical rarity for it to actually occur.  To that end, while I have no doubt that Facebook will be around for years to come, there are signs that the social networking site’s popularity is beginning to wane, as flashier, newer social networking sites come online, meaning that Zynga may find to find other friends.

In the end,  the task for Zynga is clear: following its impending IPO the mission will be to build a business that doesn’t suckle at Facebook’s teat, that stands on its own two feet, and uses its own ingenuity to hook impressionable users looking to waste some time…and money.

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Written by: Matt Klassen. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Facebook, or YouTube.

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