Could Zynga really double its paying fans? CrowdStar's CEO thinks so

Sure, it's shattered every other record out there, so why the hell not? It Girl maker CrowdStar's CEO and OpenFeint chairman (busy guy) Peter Relan agrees when asked whether CityVille creator Zynga could truly double its paying base of players. If you remember from last week, company CEO Mark Pincus made the bold claim during a presentation to investors in Boston.

According to Relan, this could happen one of two ways: Either Zynga simply grows to engross 300 million unique monthly players (the number of Facebookers is slowly nearing 1 billion globally), or somehow get more like 4 to 5 percent of its existing players to start paying up. Even with the norm for paying players being 2 to 3 percent, this would be quite the challenge for the company, which is poised for its initial public offering this week.

"Could 30 percent [of Facebook users] play Zynga games over time? Yeah," Relan confidently replies. "That doesn't seem like a 60-70 percent number, right? I think [the latter] one is trickier, and not so easy. But I think that the definition of paying will change. I think advertising may become a bigger portion of their revenue, because often times when you have scale--people are not pulling out their credit cards--you can stick ads in front of them and they become monetized users in that way."

As for whether Zynga's current valuation of $6 to $9 billion is crazy, the CrowdStar chief's opinion seems to have changed since Zynga first revealed it would go public. "I think the $20 billion one was a little suspect," Relan admits. So, if it's really in that range [between $6 and $9 billion], I don't think it's totally out of whack. The fact of the matter is that they are the dominant--by far--player in the US social gaming market. And that's a position, as long as Facebook's alive, unlikely to be challenged."

However, Relan spoke to the famed Facebook game maker's internal culture. "[Zynga] has got a 'take no prisoners' style, and that works very well as long as the performance is there." We'll see whether the performance is there this weekend, no doubt.

Will Zynga raise $1.15 billion when/if it goes public this week? For how long can the social games giant keep this up, and could it really grip 30 percent of Facebook users worldwide?

Zynga profits plummet 90 percent, raises questions about imminent IPO

Will the big show still go on? That's what many wonder, as Zynga just revealed in an updated regulatory filing that its profits dipped by 90 percent in the June quarter, thanks to increased spending and a lack of major game releases earlier this year, Reuters reports. According to the news service, this raises questions as to whether the company can sustain growth ahead of its long-awaited IPO (initial public offering).

Zynga's net income took a nose dive to $1.4 million from $14 million a year earlier, and its net profit plummeted over 90 percent in three months from $16.8 million in March of this year. Reuters chalks this up to the fact that the filing shows that the FarmVille maker's expenses rose $149 million compared to a year earlier, and $59 million alone from the previous financial quarter.

We'd imagine a major chunk of those expenses are thanks to the 14 companies Zynga gobbled up in the past year. It's also worth noting that the developer didn't really release any major Facebook games in 2011 prior to Empires & Allies. (And no, we're not counting FarmVille English Countryside.) Since then, however, the company has been on a frenzy, launching three more Facebook games this summer: Words With Friends, Pioneer Trail and recently Adventure World.

This news speaks volumes to the fact that Zynga has reached a point where it constantly needs to produce in order to sustain its meteoric growth, and more importantly for them right now, the faith of investors. Since the company's last filing, Zynga conducted a third-party analysis that estimated the probability of an IPO at 75 percent. This is down from the 80 percent probability reported in Zynga's previous filing.

In other words, it looks like the anticipated Zynga IPO could be delayed, just as previous reports suggested, to wait for improved market conditions. However, EA is gaining on the company with The Sims Social, and fast. According to AppData, EA and Playfish's game has just about 1.6 million fewer daily players than CityVille's 12.9 million.

Do you think Zynga has anything to worry about, given the news? Would you ever invest in Zynga if given the chance? Sound off in the comments. 1 Comment