Tuesday, October 26, 2010

Zynga Valued Higher than Electronic Arts

Mark Pincus, CEO of Zynga
   The maker of Farmville is currently valued higher than Electronic Arts based on trading in privately held shares of Zynga on Sharepost. The difference in market capitalization is approximately $300 million as of of today.

   According to a Bloomberg article today:
   Started by Mark Pincus almost four years ago, Zynga has become one of the fastest-growing technology companies by using Facebook Inc.’s social network to distribute games. It makes money by selling virtual goods, such as vehicles and weapons that help players advance in games. The company has grabbed about a third of that market, which is worth $1.6 billion this year, according to Inside Network in Palo Alto, California.

So, figure Zynga's revenue for this year is about $530 million and they'll probably net about $100 million in earnings. As a comparison, EA earned $98 million in the quarter ending June 2010 and they're on track to bring in nearly $4 billion in revenue for the entirety of 2010. Zynga's growth prospects allow traders on Sharepost to price the shares at bubble valuations but there are risks to Zynga's trajectory - namely, it's reliance on Farmville, Facebook, and competitors are on the prowl.


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