Zynga, the company behind popular Facebook games such as FarmVille and CityVille, is in talks with potential investors to raise about $250 million, which would value the startup at $7 billion to $9 billion, according to a published report.
The Wall Street Journal, citing unnamed sources familiar with the matter, said in a report Monday that a decision to raise money could be weeks away if it happens.
The report comes as the market for Internet startups is heating up. Facebook, the biggest, is worth $50 billion based on its latest round of funding. AOL Inc., meanwhile, recently agreed to buy online news and opinion service Huffington Post for $315 million and The Wall Street Journal has reported that short messaging service Twitter may be worth $8 billion to $10 billion.
Pandora, the popular Internet radio service, and LinkedIn, the professional networking service, have both filed papers for an initial public offering.
Zynga makes most of its money by selling virtual items for real money in its games. These can be tools and seeds in FarmVille or poker chips in Zynga Poker. Players generally purchase credits to buy these items in blocks that sell for as little as $1.50 for 15 credits to as much as $10 for 100 credits. In Cafe World, 10 credits, or $1, will get you a virtual stainless steel sink.
This, according to unidentified people cited in the report, helped San Francisco-based Zynga generate about $400 million in profit last year on revenue of about $850 million. A Zynga spokeswoman declined to comment.
Almost a 50% profit on income. Just shows how little Zynga is really investing in its forever in “beta” games. With a supposed 25 million plus players for Farmville alone most of its income seems to be spent on server space, salaries and administration.
After almost 2 years Farmville is still in “beta”…good business model by Zynga, using their players as crash test dummies. As long as the players & the investment community will give it money, there is no incentive to bring a complete & glitch free product to market.