Zynga is the largest social gaming company in the world and competes with players like Electronic Arts, Activision Blizzard and Playdom, which was recently acquired by Disney. It has more than 220 million monthly active users, more than the next five players combined.
The firm recently reported revenues of around $600 million in 2010, and we expect it to earn more than $1 billion in revenues in 2011.
Based on our analysis, we have arrived at a near $10.25 Trefis price estimate for Zynga. Our analysis, however, depends on certain assumptions about the risk factors involved with Zynga�s operations. Here we highlight some of the major risk factors.
Check out our complete analysis of Zynga.
Heavy Dependence on Facebook
Currently, Zynga is almost completely dependent on the Facebook platform. It does have a minor presence on other platforms like Myspace, Google+, iOS etc., but it makes almost all of its money from Facebook. In 2010, it entered into an agreement with Facebook which stated that it would use Facebook Credits for their payments.
Under the agreement, Zynga agreed to keep certain games exclusive to the Facebook platform in exchange for guaranteed growth targets by Facebook. Those terms are undisclosed.
Zynga launched a few games on Google+ when the new social platform was launched, but since then the growth in Google+�s user base has slowed down considerably. It has also launched a few games like Words with Friends, FarmVille and CityVille on the iOS platform. However, for the near future, it seems that Zynga�s future is tied to Facebook.
Additionally, if Facebook imposes further limitations on developers or demands a higher cut from developers using Facebook credits, Zynga�s revenues could be negatively impacted. Similarly, if Facebook starts developing its own games, Zynga�s user growth could decline significantly thereby directly impacting its revenues.
Need for Continuous Innovation in Games to Attract New Users
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