Zynga's IPO filing shows a weakness

Zynga has filed its IPO with the Securities and Exchange Commission, as Neowin has previously reported. The company is known for making games for Facebook, such as Farmville, Cityville, Frontierville, and other games; one of its newer games is Empires and Allies.

Zynga had $597 million in revenue for 2010, with a profit of $90.6 million. In the first quarter of this year alone, Zynga brought in $235 million in revenue, with profits of over $11 million. The company, however, is very dependent on Facebook, they even admit so in their filing:

"Facebook is the primary distribution, marketing, promotion and payment platform for our games. We generate substantially all of our revenue and players through the Facebook platform and expect to continue to do so for the foreseeable future," the filing explains. "Any deterioration in our relationship with Facebook would harm our business and adversely affect the value of our Class A common stock."

In addition, their future is very uncertain. Zynga also notes that "[a] small percentage of our players account for nearly all of our revenue. We lose paying players in the ordinary course of business... we must attract new paying players or increase the amount our players pay," the filing states.

The filing shows the rapid growth of Zynga, but it gives fair warning: It is dangerous to rely on a third party for your customer base when that company can exist without you.

 

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