Zynga's stock finds its legs in Facebook's IPO filing

With the new terms, Zynga will be able to maintain an edge over other social game developers.

By Trefis Feb 13, 2012 11:21AM
Zynga's (ZNGA) stock price has seen a significant increase in the last week, after Facebook filed its S-1 documents to go public. Thanks to Facebook's now public data we know that Zynga accounts for a large portion of Facebook's revenues -- almost 12% -- and that Zynga's Q4 2011 revenue growth will be better than expected.

Facebook filed an amendment to its S-1 filing on February 8, which further details its business relationship with Zynga. It outlines some of the most important agreements between Facebook and Zynga, including minimum user growth commitments that Facebook promised to Zynga.


Zynga Average Monthly Active Users for New & Other Games

Zynga's deal with Facebook will help it achieve user growth targets


Facebook's deal with Zynga includes the three terms below:

  • Zynga will use Facebook credits for managing payments on all its games on the platform
  • Some of Zynga's games will be exclusive to Facebook's platform. In return, Facebook has promised certain monthly user growth targets for those games
  • Facebook will not develop and launch any games itself

Zynga is currently the largest social gaming company in the world with over 230 million monthly active users. It competes primarily with Electronic Arts (EA), Playdom, which was recently acquired by Disney (DIS), and other independent social gaming studios.


Facebook accounts for the majority of its revenues. Thanks to these terms, Zynga may have an edge over other social game developers, and may be able to maintain its significant lead and grow its user base steadily in the coming years.


We currently expect its new games to attract an increasing number of users throughout our forecast period. New games account for around 44% of Zynga's $10.23 Trefis price estimate, which stands nearly 20% below its market price.

Tags: DISEAZNGA
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