Besides Yelp, Zynga is another online player that appears to be waiting to cash in on the IPO market. Analysts expect Zynga to file for an IPO by the end of this month. Meanwhile, the company is busy launching new games and creating attractive marketing tie-ups in the entertainment industry.
According to recent estimates, Zynga has 250 million players actively playing their games each month. Cityville was their largest game with a population of more than 90 million active players playing each month. Last year, the company had $850 million in revenues, 80% of which come from 3% of its customers who pay for virtual goods. The balance comes from advertising. It is estimated that Zynga turned a $400 million profit last year. For the current year, the company expects to earn $1.8 billion in revenues with profits of more than $630 million. Analysts pegs its valuation at over $14.5 billion and estimate that it earns $17 million free cash flow per month.
Zynga’s New Games
Zynga continued to launch new games which were received very well by the market. The new Facebook game, Empires & Allies, combines the classic game Risk with their popular CityVille. The game was launched in 12 countries at once, and was the first Zynga game which had a simultaneous international launch.
They also launched a new iOS game called Hanging with Friends which lets players virtually “hang out” with friends while playing Zynga’s version of hangman. The game connects with both Facebook or Twitter accounts of the players and populates the friend list automatically. The game is available as both a free ad-supported app and a $1.99 paid ad-free version.
To expand their advertising market, Zynga recently tied up with pop star Lady Gaga. Zynga introduced Gagaville, a farm which has Lady Gaga in FarmVille and acts as Lady Gaga’s marketing tool, enabling multiple downloading choices for users. Zynga’s FarmVille also got exclusive access to the most recent Lady Gaga album and is giving Lady Gaga game gift cards toward music marketing at U.S. and Canadian locations.
They also tied up with DreamWorks for the studio’s recently released animated movie, Kung Fu Panda 2. Through the tie-up, players of CityVille will be able to place Kung Fu Panda 2 drive-in movie theaters in their city and will receive collection items from the movie. Earlier, Zynga entered into a similar tie-up with Starbucks, and CityVille players could build in a Starbucks café within their cities.
Zynga’s new marketing tie-ups are being labeled as “smart” because of the interaction that the players need to create the theaters or cafes. They are thus more powerful than banner ads, say industry observers.
Zynga seems to be realizing some of the promise of earlier players like SecondLife in creating highly interactive, immersive, and engaging alternate realities within its games for brands to promote their message. They are clearly leading the market and showing the way to go beyond display advertising. Very interesting monetization models are emerging as a result.