Zynga, the online gaming publisher, is making a ton of money. Just how much? Well, earlier reports put revenue at something around $50 million, but some new numbers obtained by Sarah Lacy suggests that it’s closer to $100 million. And clearly, it’s accelerating. We’re hearing that the run rate for 2009 may even be well above that.
So in case it wasn’t already clear, there looks to be a bright future in the online gaming sphere and specifically around micro-transactions. That’s how Zynga makes most of its money. With some of its leading games on MySpace and Facebook, it charges users for playing time or for things like chips in poker. These small purchases which usually amount to only a few dollars at a time, start to add up quick. And that’s only with a small percentage of overall players opting to buy them.
And Zynga recently transitioned this model to the iPhone, but because the iPhone doesn’t yet allow for in-app purchases, it has been forced to sell expensive versions of its apps like Live Poker, with chips included. But that’s about to change with the iPhone 3.0 software due this summer. The new software’s in-app purchases could very well take Zynga’s revenues even higher.
Just last week, VentureBeat’s Eric Eldon speculated that Zynga, which is now the largest Facebook app developer, might be trying to raise another large round of funding — something to the tune of $30 million. Given these revenue numbers — and yes, Zynga is already profitable as well — that certainly doesn’t seem out of the question, but you have to wonder why. The company raised a $29 million round back in July of last year, and has raised $39 million total.
With all those revenues, why the hell they need more money? What about creating a sustainable business that can live on his own?
The revenue estimates have been around for some time and are valid. The point was raised that revenue does not = profit. Zynga is not necessarily an efficient company. The first round was to shore up working capitol to sustain their growing (booming) success. The explosive growth probably took them very much by surprise. Also keep in mind that it took time to actually monetize their core games. Huge numbers of players before revenue started to roll in.
I suspect that Zynga understands they need to diversify at this point. They don’t have time to wait in the space they have targeted. Barrier to entry is too low. The strategy is not to wait but to build quickly. Capitol infusion now will enable them to expand without waiting. If they don’t move fast then their dominant position could be in jeopardy. It is a race until the larger content rich companies come to the table. God help us all at that point.
Meh.. the 100mil revenue estimate is very much within reason considering the reg users numbers even with a very modest conversion rate/transaction per user amount.
Fun stuff.
are you just dumb… writing stupid games and running the company, would not even come close to costing 100 million.
Sigh.
Good luck to you.
Dumb people think facebook and all associated Zynga business will go bankrupt. When will they learn, at least not to post such comments at top of TC post.
Good going Zynga if true, hard to believe. I think that “pay per survey” (favorite money making in fb apps) is new business and prices yet to fall off cliff.
They have the users. That is their barrier to entry. Bigger companies will see them as take-over targets.
I agree – raising another round, unless essential for running servers etc, will just serve the common share-holders (read founders, employees) badly. If needed, a smaller round would do the job to overcome cash flow issues.
But then what do i know?
Gaming is tricky. Hardly any big company would like to buy. Even fb silently killed RockYou and Slide but they can never touch gaming.
How did FB kill Rock you and Slide?
well, zynga should buy FB because they have at least figured out how to generate revenue. maybe GM can buy FB with govt credit, or Obama can buy FB and give everyone free homes and surplus money! You finally get paid to blog and write wall comments!
almost all revenues are profit. social games are extremely easy to build
Good for them. At least one of the companies are making money by actually charging the users instead of ads.
yeah, if they’re asking for more money; then it’s a lie; no one wants to do the dog and pony show when they don’t have to. AND, if i already invested in Zynga. i’d be asking for my money back plus some. Plus you’re talking about giving away control, power, to VCs?
I calls bullshit.
Nonsense.
They just need financing for their next phase of expansion.
The existing investors will obviously “get their money back plus some” that is why people invest in the first place. I would imagine they are very happy with their investment and will be keen to invest in the next round too.
yeah. i still call bs
FUN FACT: 90% of articles on techcrunch that feature the word “revenue” never mention profit. its the new buzz word that brags about nothing but hype.
Fun Fact: Find the word “profitable” in paragraph 4.
MG’s fun fact > anon’s fun fact
LOL, you think running a web company costs more than 100mil?
I’m actually happy for them. It is tough to generate revenue by charging for video games. Plus 50$ million revenue on a desktop flash game is good. If the server cost is like 48$ million and profit of 2 million, man I would be happy and living on a beach somewhere and be in heaven.
Wow. $50 million. that’s a big money for a game publisher. nice
Millions of MMO players just threw up a little in their mouths.
Makes such a pleasant change to hear about a web related business that understand it is in business to make a profit.
Perhaps some of the others that still talk about “cash burn rates” will wake up and smell the coffee soon.
Good luck these guys!
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Yep, there’s definitely money in online gaming.
Gotta admit, I contemplated buying some chips but then I realize what a waste of money that will be (although some people might gain satisfaction from spending their time playing Poker).
That is really a big number for flash games. I really doubt that they have such running cost. They most definatly enjoy big profits.
How is Slide dead? Traffic is up 50% from this time last year. 9M uniques according to compete. I’ll take that traffic.
Zynga rocks
Umm… I am the only one to notice that the headline 9 figures!=100M ??
Count it. Slowly. 100,000,000
That question hurts me…
You’re so right!!!1!!
“100M” is only 4 characters!
this article misses the folks like http://www.omgpop.com and maplestory and others who are driving casual and social flash games off facebook and on their own sites.
Zynga maybe makes $$ but their games are simple and boring IMO…
Check out this game and you know what I mean:
http://www.realmofempires.com
Zynga is simply following the model TenCent has proven in a big way in China. TenCent a $1B company makes most of its money from micro transactions related to gaming and personalization (i.e. avatar clothing, etc). Bill Gurley published a great post in March of this year: http://bit.ly/otbaL
It’s too bad Facebook hasn’t figured out how to do this themselves. I wonder if opening up their platform will prove to be a bad decision in the end: it may have won them more users (because the Facebook ecosystem is richer) but to some extent they’ve given up the golden ring to others like Zynga.
you’d be surprised at the amount of money people are willing to spend when they really engage in a game. it’s not just ‘a few dollars’. it’s not uncommon to find users who have spend hundreds.
this is a huge market, and it is very unfortunate that the services that facilitate in-game transactions are so few. the greatest shame is that facebook has announced such a service years ago, and yet nothing.
“you’d be surprised at the amount of money people are willing to spend when they really engage in a game”
This is true. I ran an online MMO from 2001 to 2007 and I had one customer that spent ~$1500 in two weeks.
New Facebook revenue model, extort successful app developers…
That’s actually a good idea.
Jealous???
Recent changes have been made to the founding team at Zynga:
Zynga removes Eric Schiermeyer, VP of Market Development and Founding Team
http://exectrax.com/c/r/332/6
Also cute:
Zynga honors Chief Animal Officer
http://www.exec....com/c/r/332/2/
please someone just took me 600 millions, please Zynga do something, i was working for that very hard, you should know that. it’s not little, please, and now is something wrong and i just can write here, please answer to me, i took the picture of my profile where is written i have 602 millions and it’s updated yesterday and i didn’t play for maybe two weeks because of some my personal stuff so i didn’t even had Welcome Wagon achievements and now i have it so someone sit down with my account and took me everything, please do something, please answer to me, this is so wrong, you should really do something with it, please
(((((((((( i was privacy and i have password which is made of many many letters and numbers and nobody but nobody knew and know my password, OMG PLEASE do something Zynga, this is so so wrong 
(((((
Question:
Zynga -> estimated Revenue is $100 million – well okay that says techcrunch
but:
100 million (MAU, all games) x 1 $ (ARPU, monthly, reported in different blogs and the Social Gaming Summit 2009) = $ 1200 million?
It is amazing that a company with virtually no customer support can make so much money.