Zynga has invited Wall Street to play.
The San Francisco company yesterday initiated its long-anticipated IPO, in which it looks to raise at least $1 billion. The numbers in its public filings show a fast-growing, social Internet company with profits, unlike a number of its peers.
Zynga, the maker of online games such as CityVille, Mafia Wars and Allies and Empires, is perhaps the most attractive Web 2.0 company to go public this year, according to analysts, who said it stands apart from the likes of Pandora, LinkedIn and Groupon.
“Even though there are a lot of risks, this company is on a profitable, downhill roll,” said David Menlow of IPO Financial.
Last year, the company rang up sales of $600 million, with profits hitting $90 million. Revenues were up 134 percent in the first quarter, to $235 million, and profits grew 84 percent to $11.8 million compared to the year ago quarter, according to the filing with the Securities and Exchange Commission.
Zynga makes 95 percent of its money on the sale of in-game virtual goods; the rest comes from in-game advertising.
Still, Zynga has its risks — clearly outlined in its public filing — and chief among them is its reliance on Facebook as the platform to deliver its online game to its users.
Any Facebook tweaks could seriously jeopardize Zynga as demonstrated by a policy change in early 2010 that limited marketing by third-party developers, and Zynga’s ability to virally promote its games to friends of its users was curbed.
As a result, the number of Zynga gamers declined. In June 2010, Zynga had 60 million daily active users and 234 million monthly active ones, by September 2010 those numbers were down to 49 million and 203 million, respectively.
As of March, the numbers rebounded to 62 million daily and 236 million monthly active users, according to the filing.
Zynga hands over to the social networking giant 30 percent of the money it makes from the sale of its virtual goods. Gamers must use Facebook Credits to buy goods.
The terms of Zynga and Facebook’s arrangement are part of a five-year deal due to expire in 2015.
Zynga is on course to debut publicly by the end of summer, and analysts expect it to generate the type of frenzy created by LinkedIn. Shares in the professional social network more than doubled on the first day of trading, and LinkedIn isn’t even profitable, yet.
Zynga will raise at least $1 billion according to its filing, but people close to the deal said the real number could be closer to $2 billion. The company says it will use the money to “increase our capitalization and financial flexibility,” of which it should have plenty.
The filings also show Zynga has a $1 billion in cash, a staggering sum for a startup, and the company will have access to $1 billion credit facility thanks to its underwriters, being led by Morgan Stanley. gsloane@nypost.com