NPR is reporting today that Zynga, the San Francisco-based maker of hugely popular (and some say addictive) online games, is looking to raise $1 billion from investors.
Zynga Inc. hopes to raise up to $1 billion in an initial public offering that follows LinkedIn's sizzling stock market debut last month. The amount of money Zynga is seeking in its IPO will likely change as its bankers determine how many shares should be sold and at what price. That process typically takes three to four months.
There's pent-up demand for the stock of large social media companies because so few of them have gone public while they have been steadily expanding their reach for several years. The opening of the floodgates could culminate next year in a long-awaited IPO of Facebook, the biggest social network of them all.
NPR's Two-Way Blog answers (very concisely) the oft-asked question: How does Zynga make money? The answer: "Users buy virtual goods using real money."
Unfortunately, the author of this blog post knows about this all too well, as his credit card number was stolen and used to purchase Zynga "points." A customer service representative at the company told me that this kind of thing was very common, and they had policies and procedures in place to deal with it. No questions asked, they returned my money and deleted the account of the person who used my card. I guess I can't really blame them -- I wouldn't want to spend my own money on virtual goods either.
But back to the slightly unsettling sense of deja vu we're all having. Are we at the beginning of another (hopefully smarter) tech bubble in the Bay Area? According to the NPR article, "It may take several more years to determine whether any of this generation of Internet stars will grow into huge companies or leave investors with a bad case of buyer's remorse."
Read more:
- Farmville's Zynga Plans $1 Billion Public Offering (at NPR.org)
- Maker Of Social Game 'FarmVille' Files To Become A Public Company (from NPR's The Two-Way)
- Zynga files for IPO of up to $1 billion (at MarketWatch.com)