Facebook IPO Hopes Dip
Zynga, the hugely successful online game company and possibly Facebook’s biggest claim to fame, has scaled back expectations for their coming IPO.
According to the Wall Street Journal, Zynga has reduced their IPO to less than half of what the company hoped to be worth just a few months ago. What’ worse is that the IPO will now value the company far below what recent investors paid to get a piece.
This is a bad signal for Facebook. Zynga’s games are what propelled Facebook into the #1 spot in social media sites. Their games, and the fun people had with them, were what made putting up with Facebook’s rudeness and being hard to navigate worthwhile. Zynga has also been a significant part of Facebook’s revenue.
So if this massively successful company has had to slash their IPO hopes, it can only mean the same for Facebook.
Keep in mind that Zynga has also been looking for other outlets to distribute their games in a bid to get away from being so closely associated with Facebook. It makes good business sense. Having only one distributor means Zynga’s success is directly tied to the fortunes of that one company. And we all know “one” is a very lonely and dangerous number in business.
But that effort may have come too late for Zynga. They’ve added some of their games to Google+, and have had limited success in persuading other platforms to distribute their games. So they’re stuck with being tied into Facebook for the time being.
One ray of hope for Zynga CEO, Mark Pincus, is a special class of share he holds. Even though this IPO will reduce his equity stake to just 12%, the special class of shares gives him 37% of the voting power in the public version of Zynga – and all the decision making power.
And now that they’ve cut their IPO expectations by more than half, you have to wonder if the technology market is coming back to earth. The question very quickly becomes: Will Facebook get in on any of the technology rush? Or have they waited too long, and are now doomed to wither on the vine?
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