This Is The Billion Dollar Opportunity That Could Save Zynga
In Zynga's first month or so of trading, its stock from an IPO price of $10 to a price of around $8.90 today. — This happened because Zynga bookings (more important than revenues) and user growth have stalled. — It needs help.
Context & Ripple Effects
Zynga's public debut has unraveled quickly. After it filed to raise $1 billion in July 2011 and then upsized the offering toward $1.15 billion chasing a $10 billion valuation, shares slipped 10 percent below the $10 IPO price on day one and have kept sliding to roughly $8.90.
First-order effects
- Investors who bought at the $10 IPO price are underwater within weeks of trading, and the market is repricing Zynga off bookings and user growth rather than revenue — both of which have stalled per confirmed reports on January 5, 2012.
Second-order effects
- With organic growth flat, Zynga faces pressure to find a new monetization engine at scale — the 'billion dollar opportunity' Business Insider argues it needs — while any future secondary offerings or employee liquidity events price off a deflated valuation.
Third-order effects
- If the pattern holds, public markets will force consumer-internet companies to be judged on bookings and active-user trajectories rather than top-line revenue, raising the bar for the next wave of social-media IPOs.
The trend: Social gaming is crossing from private-market hype into public-market accountability, where stalled bookings and user growth — not launch-week enthusiasm — set the valuation.