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FarmVille Creator Zynga Worth More than Electronic Arts According to Valuation
by Brian Leahy, Oct 27, 2010 4:20pm PDTAccording to SharesPost Inc., which handles trades for shares of privately held companies, FarmVille creator Zynga has been valued at an estimated $5.51 billion. This tops Electronic Arts' $5.22 billion valuation as calculated by its NASDAQ stock price (via Bloomberg).
Keep in mind that Zynga is not a publicly traded company and this valuation is based upon what people are spending for shares or stake in the company. This is similar to when Microsoft dropped $240 million into Facebook for a 1.6 percent stake in the social network, valuing Facebook at $15 billion.
Zynga might not actually be worth $5.51 billion, but at least some people think it is and when dealing with that stock market, that's usually enough. "The valuation is not that crazy, given what's going on in the market," said Atul Bagga, an analyst at ThinkEquity LLC. "It's not that terribly expensive seeing the growth prospects." Bagga "estimates the virtual goods market may reach $3.6 billion in three years," according to Bloomberg.
Activision Blizzard is currently sitting at $13.9 billion valuation, while China's Tencent Holdings Ltd. comes in at a whopping $43 billion. FarmVille's success continues to mystify me. It's no Cow Clicker, though.
Comments
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They are making money too easy, someone else will grab the pie.
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Show your code Facebook.
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I think its success is built on exposure and the context of that exposure. Think about how most people are first exposed to FarmVille. Players send progress updates to everyone on their FaceBook friends list. Someone who might not ordinarily play games sees this cute shit pop up on their granddaughter's Facebook page and thinks, 'Hey, what's this? I could play some cute shit with my granddaughter!' And then it just spreads, because it has a very low barrier to entry.
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EA’s market value has dropped this year. The company lost its title as the largest independent maker of video games to Activision Blizzard, which has titles such as World of Warcraft to fuel its growth. But EA is no slouch when it comes to online games. Digital online businesses at EA are expected to generate $750 million in revenue in the current fiscal year, or around 20 percent of overall revenue. That means EA’s online game revenue is significantly bigger than Zynga’s online game revenue (which, of course, is all of Zynga’s revenue).
Yet the market values Zynga as equal to EA in market share? Does this mean the market discounts the rest of EA’s nearly $3 billion or so in traditional video game console and PC game revenues? If so, then Zynga is truly overvalued.
It’s also interesting to compare Zynga’s value to one of its arch rivals in the social game market, Japan’s DeNA. DeNA has come on strong in the Japanese social mobile game market. It recently outbid Zynga to buy iPhone game publisher Ngmoco for $400 million. DeNA’s market capitalization in Japan is around $3.6 billion. But the company says its revenue run rate is currently around $1 billion. So DeNA’s revenue is likely bigger than Zynga’s (Zynga does not disclose its number). So Zynga’s stock is overvalued by that comparison as well. Yet another comparision: Activision Blizzard is valued at more than $13 billion.