How does this surprise anyone? It made perfect sense a few years ago for Google to go public. They had at a minimum a successful, growing business. It was also clear that there was plenty of room to grow in the core business (search) and that there were many other markets they could enter.
Zynga, to me, is like Groupon. Businesses with no clear foundation. Investing in them is like investing in tulips in Holland in the 1630's.
I feel that if Facebook goes public, that will be successful. They offer something very real, in connecting hundreds of millions of people and, eventually, billions. If you're looking at growing markets, there's at least 3-4 billion more on the way in the next few decades. There's lots of ways to build businesses around that.
Myspace would never have been successful in an IPO. On the surface, they seem like they did the same thing. But the focus of Myspace was always wrong. They weren't really about connecting people at the core. Facebook has been.
> I feel that if Facebook goes public, that will be successful. They offer something very real, in connecting hundreds of millions of people and, eventually, billions. If you're looking at growing markets, there's at least 3-4 billion more on the way in the next few decades. There's lots of ways to build businesses around that.
The clear question is how closely Zynga's and Facebook's fates are tied. There is no doubt that Zynga's social gaming really fueled Facebook's expansion in the past several years.
If Facebook's valuation is based on continued exponential growth over their ability monetize their existing base, the foundation is not solid... Zynga's faltering IPO in that case would just be a leading indicator.
The surprise, to me at least, is that the stock dipped on day one of trading. Even us negative nellies assumed that Zynga would follow the traditional arc: IPO, hype, price spike, slow fall into obscurity.
But, yeah, overall it's not really surprising. I'm a reasonably young man, but I don't recall another IPO with so much hype and disdain over the company behind it. True, they're printing money at the moment, but that's slowing. The obsession with "social gaming" will not disappear, but it will diminish. No one knows what will happen with Zynga's relationship to Facebook. Combine all that with the fact that Mr. Pincus doesn't come off as a very likable guy but still controls the company, and, well...
Agreed but just a small quible - Zynga just recently became mildly profitable - 25m on 500m revenue which is not exactly a stellar profit margin. So I guess the analogy might rather be they aren't printing money or rather they are printing money that immediately drops into a shredder. I agree though that I would not get my money anywhere close to this place.
Your comment is very hard to interpret without clearly defining what you mean by "clear foundation" and "successful."
Overall you seem very down on Zynga and Groupon. Note that they have both IPO'd and have far from tanked. They are both in business with no apparent sign of bankruptcy etc.
You make them look bad by comparing them to the biggest tech successes(such as Google). The thing is, you can make vast majority of companies look bad in comparison to Google. But that misses an important point about public markets: there is plenty of room for non-googles in the stock market.
"Overall you seem very down on Zynga and Groupon. Note that they have both IPO'd and have far from tanked. They are both in business with no apparent sign of bankruptcy etc."
It's not about bankruptcy. As you say, both Groupon and Zynga will likely continue as profitable businesses for the foreseeable future. But the IPO valuation isn't determined by their ability to stay in business; it's based off their ability to grow. The P/E ratio is close to 80 (Google's is ~20). That means the company is expected to increase earnings dramatically. Do you see that happening? All the data looks like they're plateauing or even trending down. Unless they have something innovative in the pipe, the stock isn't worth the money.
People bitched about Google's owners taking ridiculous control, and doing and an interview with Playboy. Google IPO'd at an absurdly low price (less than half of my bid). Google's IPO was the most underpriced offering in modern history. I think $9.50 is generous for Zynga. Zynga is a declining business.
I think you are right, but for the wrong reasons. Facebook will ultimately be only marginally profitable for the same reasons as Zynga. I value Facebook at $20B.
Zynga, to me, is like Groupon. Businesses with no clear foundation. Investing in them is like investing in tulips in Holland in the 1630's.
I feel that if Facebook goes public, that will be successful. They offer something very real, in connecting hundreds of millions of people and, eventually, billions. If you're looking at growing markets, there's at least 3-4 billion more on the way in the next few decades. There's lots of ways to build businesses around that.
Myspace would never have been successful in an IPO. On the surface, they seem like they did the same thing. But the focus of Myspace was always wrong. They weren't really about connecting people at the core. Facebook has been.