The Banking and Strategy Initiative

A deal for facebook or is zynga different?

Not so funny if you think about it, The same investors in both the comanies could be very onteresting to the markets when they go for a sale on to the exchanges!! And mark our words, it will be at a valuation far exceeding any $3 billion, stratospheric valuations only count as stratospheric because you have been living in the wrong age..and the wrong fiscal models. Something that grew 15 times its last year’s traffic ( Twitter) or 3-4 times the daily ave time spent ( facebook) or that had revenues not worth talking about and sales extimates have gone up 2.5 times in less than 6 months!  We are probably talking about a conservative $# billion estimate if they can up the revenue estimate to $1 billion with the $180m in cash

Did you ever wonder what the brazilians are cooking? They are a pretty big community on Facebook and Twitter too! And they have their own languages like the Chinese which leaves their innovation effort rather a plurk! you would think. You would be wrong though.

This article in today’s N Y Times

As with Facebook, D.S.T. will invest directly in Zynga while also buying stock from shareholders, including the company’s employees. The move is aimed at giving employees and shareholders of the prominent start-up a way to cash out before an initial public offering. Tiger Global, a New York hedge fund, and the venture capital firms Institutional Venture Partners and Andreessen Horowitz also invested. Zynga had previously raised $39 million. The companies did not disclose Zynga’s valuation as a result of the new capital, but the game company’s annual revenue has been reported to be around $250 million and growing quickly. Two experts in Internet company finance said it would be reasonable for Zynga to command a valuation of two and a half to six times its annual revenue. That could put the value of the two-year-old Zynga at $1.5 billion; one industry insider believes the value could be as much as $3 billion. With the investment, D.S.T. is doubling down on its billion-dollar bet on social networks and online games, which draw people who do not normally play video games into virtual simulations that they can play with friends. Players might spend only a few minutes each day in the game, and are persuaded to pay real money to buy virtual goods, like bales of hay and gasoline for their tractors in FarmVille, a game in which players run a farm. D.S.T. began investing in 2005, mostly in Internet firms based in Russia and Eastern Europe, where, as in Asia, people have adopted social games and virtual goods marketplaces faster than in the United States. “People did not believe that this Chinese model of micropayments and social games was real,” said Yuri Milner, D.S.T.’s chief executive. “I am pretty convinced this market will have tremendous pick-up on the Western side of the world.”

With DST having picked up a stake in both Facebook and zynga, Farmville and Mafia Wars would be part of more daily lives.
Here are some recent Facebook and Twitter stories defining their early impact. Twitter has started testing its contributor feature to allow brands and businesses to set aside a permanent budget for Twitter and Facebook in their business. It will take a lot of business to keep steering this network esp as not just Asia and Eastern Europe is taking more to these networks but also because it is intuitively appealing to all age groups and takes a considerable bit of your time in the ‘daily diet’.

You can also expect some daily ‘interference’ from Fans on the more discernible social media than they could on Radio and TV. Scott Tozer of DST Technologies is himself listed on Facebook. Also see some recent ‘hits’

This just might be Russia’s next ticket after Gas/Oil without Ukraine. Seemingly the Chinese are still counted as the largest population on the internet despite that most social sites are banned in countries like China and Vietnam

Our estimate of the valuation of zynga conventionally as not exceeding $1 billion but wih hypergrowth, even $3 billion is cheap. Amazon started the same way and survived the bubble and the credit crisis. Our brands site had the first stab at this story, but we finally gave in too..

Also we think these decision games like Predictify and Filife from WSJ are a good way to latch on to not just brand and consumer behaviour but also a great social entrapment which is likely to benefit from the job losses and the new digital age, all that money lying with investors ..what a steal!

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