Zynga, a San Francisco based game maker of popular facebook games such as FarmVille, Café World and Mafia Wars, has raised $180 million in a new round of funding – according to NY Times. The round was led by Moscow based Digital Sky Technologies (DST). The Russian based digitial investment firm has previously invested $200 million in Facebook.
The investment is structured similar to that of DST’s investment in Facebook, whereby DST invested directly into Facebook and also bought stocks from Facebook employees. Similarly Zynga employees will get a chance to sell their shares to DST, allowing them to cash out before the IPO.
The valuations for the round were not disclosed, but Zynga is one of the most profitable off-shoots of Facebook with annual revenues around $250 million and increasing rapidly. These figures are markedly above and beyond the revenue figures boasted by Twitter, the popular social media service. Industry insiders believe that Zynga could be valued from around $1.5 billion to $3 billion.
With the latest investment DST is betting big time on social games, and virtual goods and currencies. Zynga’s FarmVille is a game where players spend real money to buy virtual goods, like fertilizers, and gasoline for their tractors etc.
According to Yuri Milner, DST’s CEO:
People did not believe that this Chinese model of micropayments and social games was real. I am pretty convinced this market will have tremendous pick-up on the Western side of the world.
The newly infused cash gives Zynga, alot of fire power to compete with newly entrenched rivals. Playfish, a rival social gaming company was recently acquired by Electronic Arts for $300 million in cash and stock – and shareholders could additionally receive $100 million in performance bonuses.
Speaking on the occasion Mark Pincus, Zynga’s Founder and CEO said:
The opportunity every quarter is proving to be bigger than we imagined and we always thought it was prudent to keep adding to the capital of the company as we grow.
Zynga’s FarmVille is the most popular game on Facebook with more than 70 million active users per month. The investment has also filled a lot of dots with DST now invested in both Facebook and Zynga and Zynga being the most successful offshoot of Facebook and Facebook’s biggest advertiser – there is a high likely hood that the two companies could merge in the future.
A possible merger of Zynga and Facebook might signal trouble for other Facebook game makers, but that’s the way it is in the entrepreneurship world. Platform owners open up their platform to let the community come up with innovative ideas – and then frequently come up with their own competing service or simply eat up the best service in the niche.
In either scenario, one thing is for sure, social media, social gaming and virtual currencies are likely to grow into a huge segment – bigger then what most of us could imagine at this instance of time.