"Zynga's near $9 billion valuation is less than videogame maker Activision Blizzard Inc's $13.6 billion and higher than Electronic Arts Inc's $6.7 billion. In the last four quarters, Activision and Electronic Arts generated more revenue than Zynga."
Activision just brought in $1 billion for one game, and EA Just sold 10 million of it's flagship title, while both their markets are expanding.
I think the value of social network based games has been somewhat inflated.
You didn't say otherwise, but to be clear: revenue isn't profit. Somehow I think a failed Activision title costs a lot more to produce than a failed Zynga launch.
(I don't know the numbers behind what Zynga is doing well enough to make any judgement on their IPO in general)
I'll say this: a company's products are IMO a far better predictor of future success than any of its ledgers and reports.
RIM was financially extremely successful for years, even though they were no longer building competitive products. It takes time for the books to catch up to reality.
Looking at Zynga's products, and looking at Activision's products, I know who my money is on for still existing in five years. The only thing I hear about Zynga outside of startup-IPO talk is about people quitting their games. Social gaming, in its current incarnation (that dastardly, insidious, vampiric incarnation) experienced a surge of novel popularity, and is quickly fading.
Contrast with Activision (and EA, and any of the major publishers) who seem to be selling more and more copies and gathering more and more fans with every iteration of their major franchises.
One company stands atop products with increasing popularity and mass-market appeal. The other has ridden past the highs of a fad and is on a slow spiral to irrelevancy.
Who else here feels like there are parallels to be drawn between this and Groupon? Companies past their prime, products with dubious futures... and overall widely criticized by industry insiders for being poor bets. Yet IPOed anyways, all smelling like just a way for people to cash out while they still can.
> I'll say this: a company's products are IMO a far better predictor of future success than any of its ledgers and reports.
Generally I'd agree. Although you get companies like Blizzard who (counter to usual advice) seem to put all their eggs in a couple of baskets, and other companies spread themselves way too thin. Titus' destruction of Interplay and Black Isles speaks of this; I don't think anyone has a clue of why Titus managed to pitch a profitable company into the dirt inside months.
Although again it speaks worlds that one IP (Fallout) was of enough value to resurrect a company from the brink of bankruptcy.
You didn't say otherwise, but to be clear: revenue isn't profit. Somehow I think a failed Activision title costs a lot more to produce than a failed Zynga launch.
The flip side to this is that Activision and EA's franchises are a lot more protectable. Put it this way, 5 guys in a garage (or more importantly 100 guys in 20 garages) aren't likely making the next Modern Warfare or WOW. But they very well could make the next Farmville.
I don't have the profit numbers. But I was making a comment on the markets.
If you're interested; Modern Warfare 2 cost around $200 million including marketing and has brought in around $1 billion. Not sure how much MW3 cost but it's bringing in even more than MW2.
The float is too thin to short. That is why all new web 2.0 IPO have thin floats. It's easier for larger stake holders to push the price around, and sucker in ma & pa, and momentum traders. But if you look @ ICI data, common folk are getting out of equities. If you own risk in this market, going into 2012, you are a fool. There's a high probability of a financial collapse in Q1 2012.
Thinking "x will happen" doesn't mean having a specific timescale in mind. If I'm not mistaken, that's a prerequisite to making money by shorting stocks
"I think the value of social network based games" - there are different concepts of value. One is a present value calculation of future profits. The other is market capitalization. The first might be what the OP was referring to. The second is subject to all sorts of shenanigans that makes shorting risky unless you know what you are doing. (Speaking as someone who has been on the wrong side of a short squeeze of an equity that came crashing down shortly after I covered when the bleeding just got to bad)
"Zynga's near $9 billion valuation is less than videogame maker Activision Blizzard Inc's $13.6 billion and higher than Electronic Arts Inc's $6.7 billion. In the last four quarters, Activision and Electronic Arts generated more revenue than Zynga."
Activision just brought in $1 billion for one game, and EA Just sold 10 million of it's flagship title, while both their markets are expanding.
I think the value of social network based games has been somewhat inflated.