2011年7月5日 星期二

Nothing Virtual About Zynga Profits

JULY 2, 2011   THE WALL STREET JOURNAL


Zynga isn't likely to have trouble securing its hoped-for $20 billion valuation.
While the social-gaming company is increasing revenue quickly, 130% in the first quarter, it also is highly profitable. That is unlike the recent vintage of Internet darlings. Without excluding stock-compensation expense, its profit margin using earnings before interest, taxes, depreciation and amortization is more than 30%.
Despite a 10% drop in the number of people playing Zynga games through 2010, it is impressive that revenue rose throughout the year. Zynga generates revenue from the sale of virtual goods, essentially tokens sold inside its games. One potential worry: The company notes a "small percentage" of players drive "nearly all" revenue.
The good news is that growth in total players resumed in the first quarter after the company released blockbuster CityVille. Another successful game was launched in June, meaning growth will continue as the company gears up to sell shares to the public in the fall.
Also impressive is that Zynga isn't paying lots to attract users. Unlike Groupon, for instance, which spends heavily on marketing, Zynga says it "acquires most of its players through unpaid channels."
The key is whether Zynga can move beyond Facebook, where "substantially all" of its games are played today. Indeed, last year's player decline was caused by Facebook restricting Zynga's ability to market on its platform.
While Zynga has at least the four most popular games on Facebook, it has none in the top 10 on Apple's platform, for instance. The good news is that Facebook is now making lots of money from Zynga, protecting the company's position on the platform. Still, Zynga investors won't want its fortunes completely tied to one platform.

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