No Love for Zynga IPO

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The trading day isn’t over yet, but so far the IPO for Zynga, the social casual game juggernaut, has fallen flatter than wilted crops on FarmVille (okay, that was a stretch -- anyone got something better?).  After debuting at $10, the company’s stock briefly reached $11 per share before dropping to $9.28 at the time of writing, down 7.2% from the initial offering.

It’s not clear what’s behind the weak performance, but investors may be concerned about a couple things. For one thing, Zynga’s financial stability and profitability depends on continuing to produce Farmville-like successes, as interest in casual games tends to wane over time. For example, after reaching 80 million monthly users in January 2010, Farmville dropped to 60 million monthly users by September 2010, and 36 million monthly users by October 2011. While Zynga has been able to reproduce FarmVille’s success with new games like FrontierVille and CityVille, keeping the game machine running with new products will be a continuous, unrelenting challenge for the company.

Meanwhile the company’s financial statements are not entirely reassuring. In the first nine months of 2011, Zynga’s revenues doubled to $829 million -- but its net income fell 35% to $31 million. What’s more, the company remains heavily dependent on virtual goods sales, accounting for some 94% of revenues, which in turn are driven by the popularity of its games; if the hit parade falters, revenues will sink too. And despite attempts to branch out, it continues to rely heavily on Facebook as a distribution platform, tying its fortunes to the social network’s.

Whatever the reason behind its lackluster performance (so far), at least Zynga has good company among social media and commerce companies with weak stock market debuts. After a promising start Groupon’s stock fell below its $20 IPO price in the second half of November, before creeping back to $22.25 at the time of writing. Online audio service Pandora’s stock is currently at $10.34, down from an IPO price of $16. Only LinkedIn and Angie’s List seem to have done really well, with LinkedIn’s stock rising from $45 at the IPO to $65 presently. Consumer review site Angie’s List has done moderately well, edging up from $13 at IPO to $15.40 at the time of writing.

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2 comments on "No Love for Zynga IPO".

1. Andre Szykier from maps capital management
   

   commented on: December 16, 2011 at 4:01 p.m.
   There you have it...the weakness of revenue models based on entertainment. Virtual goods in any game may have a short currency life. Just like movies, 10 blockbusters are dwared by the 100's of "B" and "C" class films done on meager budgets and "direct to cable" business models. Social gaming is indicative of time available in a new area of engagement = social media sites. But barriers to entry are non-existent and others like Phantom Games and Crowdstar can find themselves with the next hit. The best clue is Electronic Arts and their so far unwilligness to focus on social media games at the expense of video games. At least they know the business, unlike Zynga's CEO.
2. Joseph Benza, jr. from www.YourCity.MD
   

   commented on: December 17, 2011 at 12:27 p.m.
   We have something better. I agree you can't sell the games IUPO to the public because games come and go so fast that any another company could replace Zynga in minutes with a great game like Angry Birds. In an IPO you must be unique in platform, design and technology...that is why we put all our eggs into YourCity.MD LLC, the only reverse technology, Internet Platform that exploits 500 local city sites with the largest local platform on the Internet in any Industry with pure city names using a TLD extension which is intuitive for medical (.MD). This technology and domain platform turns the typical Google type search unside down and saves time...(see the news releases where .MD beat all search engines including google by as much as an hour in medivcal searches). Why would anyone search any Global site when all you really want is LOCAL information... you wouldn't and now don't have to. One Click, One Search, One Comprehensive result using .MD. YourCity.MD has been eyed and courted for 3 years by many major venture companies, several national media companies and health care industry giants as a take over candidate but we are not ready for this. YourCity.MD is looking for the "right partner" and timing before going IPO. This month, the Employer Health Coalition partnered with YourCity.MD to bring PCMH top doctors to the millions of Member employees using our one of a kind database with credentials, ratings, HCAHP and SCAHP like surveys and more. The Employer Health Coalition Members are already promoting and endorsing this new .MD platform and patent pending medical search engine to all their employees. Members include: P&G, G.E. Aviation, Kroger, J&J, Macy's, many Cities and more than 300 other huge USA Employers so far. More National endorsements are expected in the next few weeks. YourCity.MD was just chosen as the default search engine in many of the new StayHealthy Kiosks lauching in 2012 across the USA under the reknown Chairman Tommy Thompson, in pharmacies, groceries and work out centers across America. Mnay Employers requested Stay Healthy use YourCity.MD as their default seach engine in their kiosks just weeks ago. Local vs global on the Internet is a dream of the companies that tried AskCity, Ebay Local, Yahoo local etc but none had the domains to pull it off. This sets the 500 USA city .MD platform apart from all other models above..see http://www.MYCity.MD for the full USA list. YourCity.MD also owns all the major worldwide cities with the .MD extension but has not launched them yet. So, Looking for a better IPO...It may be 24 months or more away... but WAIT for it! Your Happy Holiday Gift from .MD! Joe

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