The online game company, whose backers include US-based search engine Google and Japan-based telecoms and media conglomerate Softbank, plans to raise $1bn and reportedly up to $2bn in its flotation on an undisclosed US stock exchange.
In July last year, news provider New York Times reported recent investments by Google and Softbank had totalled a combined $300m. Softbank later confirmed an investment totaling $150m, while Zynga verified Google’s involvement for an undisclosed amount.The public filing for Zynga’s listing prospectus shows both own less than 5% of the company, with Russia-based investment firm Digital Sky Technologies (DST), itself backed by corporate venturing groups from Tencent and Naspers, owning 5.8%.
Venture capital (VC) firms Institutional Ventures Partners (IVP) and Andreessen Horowitz, and hedge fund Tiger Global Management (TGM) had previously contributed to a $180m series C round in December 2009.
Prior to this, in July 2008, Zynga raised $29m in a series B round led by VC firm Kleiner Perkins Caufield Byers (KCPB), with IVP, and existing investors, the US-based VC funds Union Square Ventures, Foundry Group and Avalon Ventures also participating.All these VC firms own more than 5% of Zynga.
The company’s series A round, participated in by Union Square, Foundry and Avalon, as well as Clarium Capital, Pilot Group and Reid Hoffman, closed at $10m just five months before in Febuary.
US-based investment banks Morgan Stanley and Goldman Sachs are leading Zynga’s initial public offering.
Zynga has emerged as an important player in the online games market, creating simple games such as Farmville and Zynga Poker, to be used predominantly as widget applications for social networking sites such as Facebook and Myspace. The company is reported to have over 20 million daily active users and their revenue for 2010 was estimated to be around $850m.
The move would follow in the wake of large IPOs from business networking site LinkedIn, which raised over $350m in May, and online radio company Pandora, which raised $235m earlier this month. Groupon, a US-based website which offers regionally-themed ‘deals-of-the-day’, also recently filed for an IPO, and hopes to raise $750m.
Dear potential Zynga shareholders,
I’m proud and excited to be writing this letter to you today.
Zynga is a company with more than 2,000 amazingly talented employees dedicated to engaging, surprising and delighting an audience that has grown to 148 million monthly unique users in 166 countries. And because our users typically play more than one of our games each month, they account for 232 million "MAUs" (monthly active users). Our players create and store more than 38,000 virtual items every second and spend 2 billion minutes a day with our service. In just over 4 years, we’ve generated over $1.5 billion in bookings.
We founded Zynga in 2007 with the mission of connecting the world through games. We believed play-like search, share and shop-would become one of the core activities on the internet.
Play is one of life’s big macros-it’s an activity people love to do and do often. Zynga was founded on a deeply held passion for games that family and friends play together-connecting, collaborating, gifting, bragging, nurturing, admiring and sometimes just doing silly stuff together. Reality is, we all wish we had more time to play together.
To put the play macro in perspective, games have become the second most popular internet activity based on time spent, and have even surpassed email. We’ve turned our rapidly growing base of smartphones and tablets into play devices. In fact, games are now the most popular category of apps on smartphones and represent nearly half of the time spent. But, Zynga has a lot of hard work, innovation and growth ahead of us to create a future where social gaming becomes a daily habit for nearly everyone.
Our strategy from the beginning has been to build the biggest macro bet on social gaming to provide our players with the most accessible, social and fun games. Despite our rapid growth, we have been careful to build for the long term. I’ve always thought of this journey as being a series of sprints that make up a marathon.
While Zynga has generated positive operating cash flow since the fall of 2007, we raised hundreds of millions of dollars to maximize our ability to make large investments in teams, games and infrastructure. For example, our Chief Technology Officer joined us in the fall of 2008 with a mission of building the greatest data warehouse in the game industry, which now processes 15 terabytes of game data every day. We will continue to make these big investments and big bets in pursuit of our mission.
Our operating philosophies have been fundamental to our growth. They include:
Games should be accessible to everyone, anywhere, any time. From the beginning, we have strived to lower the barriers to play in people’s lives. We want to build games to play with our parents, our children, our co-workers and our best friends.
Games should be social. Every week our teams test new features to make our games more social. Historically, our players have created over 4 billion neighbor connections. And, currently, our 60 million daily active users interact with each other 416 million times a day.
Games should be free. Free games are more social because they’re more accessible to everyone. We’ve also found them to be more profitable. We have created a new kind of customer relationship with new economics-free first, high satisfaction, pay optional. This model aligns shareholder value with delivering the best player experience.
Games should be data driven. Our culture combines the creative with the analytical. We develop and operate our games as live services with daily, metrics-based player feedback. This allows us to continually iterate, innovate and invest in the content our players love.
Games should do good. We want to help the world while doing our day jobs. Through Zynga.org our players have purchased social goods, raising more than $10 million for those in need from tornado-stricken communities in Alabama to earthquake survivors in Haiti. With programs like our Sweet Seeds for Haiti, our players have touched people around the world.
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As we look to the future, we believe our core values will be key to our continued growth. Our goal is for everyone at Zynga to be a CEO with accountability and authority to drive important outcomes. It takes inspired people to make inspiring products. We’ve endeavored to create an environment that fosters intelligent risk-taking in order to invent bold beats-innovations that really advance the social gaming experience for our players. Our company is diverse, creative and entrepreneurial. I often describe Zynga as a confederation of entrepreneurs.
More specifically, our core values that make up these philosophies are:
Build games you and your friends love to play.
Surprise and delight our players.
Zynga is a meritocracy.
Be a CEO and own outcomes.
Move at Zynga speed.
Put Zynga first, decisions for the greater good.
Always innovate.
And now, by offering our shares to the public we hope to enable Zynga to invest more in play than any company in history. To accomplish this, we will continue to make big investments in servers, data centers and other infrastructure so players’ farms, cities, islands, airplanes, triple words and empires can be available on all their devices in an instant. We will also continue to fund the best teams around the world to build the most accessible, social and fun games.
We believe we will maximize long-term shareholder value by delivering long-term player value. This means we will make decisions and trade-offs that are different from other companies. We will prioritize innovation and long-term growth over quarterly earnings. We will not make short-term decisions that sacrifice our core values or veer from our long-term vision.
As we have done with our current investors, we will strive to communicate with transparency to help you understand how we are doing against our mission. You will be able to track our performance every day in publicly available third-party traffic reports. And of course, you’ll be able to play our games yourself to be able to track our progress against being the most fun and most social.
With this offering we are inviting you to join our mission. Invest with us because you believe in the potential for the world to play together. Evaluate us by how many of your friends and family play our games. Before you invest, we hope you will play our games. And, if you’re part of the hundreds of millions who have already played our games, thank you. You’re part of the future.
At Zynga, we feel a personal connection to our games through our friends and family. I love that my brother in-law, who has five kids and no free time, religiously plays our game Words with Friends.
While I’m humbled by the size of the audience we enable to play today, we’re just getting started. We’re thinking every day how much more accessible, social and fun our games can get.
My kids decided a few months ago that peek-a-boo was their favorite game. While it’s unlikely we can improve upon this classic, I look forward to playing Zynga games with them very soon. When they enter high school there’s no doubt that they’ll search on Google, they’ll share with their friends on Facebook and they’ll probably do a lot of shopping on Amazon. And I’m planning for Zynga to be there when they want to play.
Let’s play.
Mark Pincus
Founder and CEO
July 1, 2011
San Francisco, CA