games people play
Posted by Sheila Shayon on February 24, 2011 02:00 PM
In 2009, BusinessWeek asked if Zynga could be the next Google. Now, depending how you look at it, Zynga is arguably the most profitable company ever, and certainly one of the most profitable tech companies in the world.
Last year it reaped a $400 million profit on $850 million revenues. That’s a 47% profit margin in a world where other major brands pale by comparison: Facebook, 30%, Google 29%, Apple 28%, and Amazon - closer to 5%.
Zynga’s 47% profit margin is after the gamer has paid the toll-keeper, Facebook, taxes on advertising to attract users and 30% of virtual goods sales. It’s the virtual goods that are the elixir – no overhead, no sales force, no shipping or shelf real estate.
Of course, it may not have the billions in liquid cash flow that other brands have in their coffers. But in this social economy, it boasts a loyal audience of gamers willing to pay to feed their online habit, whether that means acquiring more farmland for crops in Farmville, more guns in Mafia Wars or more treasure in Treasure Isle.
Silicon Valley venture capitalist John Doerr commented at November’s Web 2.0 Summit, “Zynga is the most-profitable, fastest-growing, and has the happiest customers of any company that Kleiner Perkins has invested in.”
“Just three years old, Zynga has an estimated market value above $5 billion, more than 320 million registered users, 1,300 employees and estimated revenues this year above $500 million.”