Zynga, the creator of social games such as Farmville, and Mafia Wars has filed papers with the SEC to take the company public. That is a bold move for a company that whilst enjoying profits of over $392 million on $600 million in revenues in 2010, which somewhat justifies the valuation, is almost completely reliant on Facebook.
The filing lays the company’s Facebook reliance in stating:
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. Any deterioration in our relationship with Facebook would harm our business and adversely affect the value of our Class A common stock.
They even use “Facebook Credits, Facebook’s proprietary payment method, as the primary means of payment within our games played through Facebook” and go on to reveal their relatively fragile userbase in that a “small percentage of our players account for nearly all of our revenue”. They have created a number of games, but go on to note that
Historically we have depended on a small number of games for a majority of our revenue and we expect that this dependency will continue for the foreseeable future.
Zynga currently has 2,000 employees and is experiencing rapid growth tied to the all-conquering social network of Facebook – but with that much control out of their hands, investors must be a little wary.
[via Ars Technica]