Tech Bubble 2?

The plans announced by Zynga to do an IPO for a billion dollars seems like a stretch - but based on other internet startups like Linked In they may well raise the capital.   Zynga offers a series of interactive games that are supported by ads.   I first learned about them when I found Fish Wrangler.   The game has you fishing for an invented set of fish in an invented set of environments.   I lasted about six weeks on the game and then grew tired of the interaction.  Even though you advanced in levels the underlying premises of the game were constant.

Mark Pincus, the Zynga CEO commented "Play is one of life's big macros - it's an activity people love to do and do often," and so like his predecessors in the earlier tech boom he justified his pricing based on the appeal.  But I suspect the company will either have to continue to spin new and better games or will be a transitional phenomena.    I now play two Zynga games; Mafia Wars and Bejeweled Blitz.   The premise of Bejeweled is a simple game like Tetris.  The wrinkle on this variation is that you score points only for a minute.   There are online and offline versions.  Remember, that based on other IPOs of a similar type a $1 billion IPO could equal a $10 billion valuation - that is a lot of dough.

But the bread and butter of the franchise are the simulations and there I think there is a problem.  I have lasted on Mafia Wars for about a year.  The simulation is that you are a Mafia Don who starts in New York and then branches out to Italy, Brazil, Bangkok and Cuba and Las Vegas and Moscow.   Each has a set up phase and then a series of challenges.   But from my perspective the game has some serious limitations.  For example, it is impossible to leverage capital from one market to another - any good crime boss would use resources from one to build another.  I have just under 200 members of my "mob" - but what I have noticed is that a good number of the real ones (you can collect "default dons") no longer play.   The average length of commitment seems to be about the same as Fish Wrangler.

The revenue comes from three sources.  Each game has some spiffs that you can buy (in Mafia Wars reward points) that allow you to progress more quickly.  For the reported 168 million users I am not sure how many actually spend real dough.  I have not.   The company also does some ad support but I suspect that revenue is probably tiny.  Finally, they have released some offline games that you can buy as APPs.  In that arena there is a lot of competition.

I am not knocking the franchise.  The games probably have some appeal for younger people than me that lasts a bit longer.  But I do wonder whether the valuation is a bit north of reality.