Who outguns the other? Electronic Arts vs Zynga
Social game maker Zynga, maker of games like FarmVille, filed for an initial public offering on Friday. The largest maker of games on Facebook will reportedly offer 10 percent of the company for sale at a $20 billion valuation.
Context & Ripple Effects
The filing caps an eighteen-month repricing: Zynga was talked about at a $5 billion valuation in April 2010, and the $1 billion IPO filing on July 1 now comes attached to reports of a $20 billion target — a number that would make it one of the year's largest tech offerings. The headline frames it as a duel because Electronic Arts is the incumbent being challenged on its home turf.
EA has been circling social gaming since 2009, when speculation had it buying either Zynga or Playfish; it ended up with Playfish, and as recently as June 25 was rumored to be acquiring PopCap Games, Zynga's closest direct competitor. Meanwhile Zynga is reportedly pushing into EA's franchise territory itself with Familyville, a FarmVille-style take on The Sims.
First-order effects
- Zynga converts its private-market position into public currency — up to $1 billion of capital and liquid stock that funds expansion and retention while rivals like EA must respond with their own balance sheets.
- EA now faces a competitor whose valuation ($20 billion reported, unconfirmed by the company) exceeds anything EA's own market standing implies, forcing the comparison onto every future acquisition EA makes in social gaming.
Second-order effects
- The PopCap rumor becomes more urgent for EA: if Zynga prices at reported levels, EA's cheapest path to scale in social games is buying proven studios rather than building against a funded Zynga on Facebook.
- Facebook's own moves — the Skype-powered video chat launch and the new social-gifting patent — tighten the platform both companies depend on, raising the strategic cost of Zynga's single-platform concentration.
Third-order effects
- If the pattern holds, game publishing splits into two structures: platform-native networks valued on user engagement (Zynga) versus traditional publishers buying their way in (EA), with M&A as the bridge between them.
- A successful mega-offering would set the reference price for the entire social-gaming category, pressuring every private studio's fundraising and giving Facebook leverage over suppliers who cannot afford to leave the platform.
The trend: Social gaming is moving from a private land-grab on Facebook to a public-market contest where EA's acquisition-led incumbency collides with Zynga's platform-native scale.