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Game maker Zynga joins list of Net IPOs

Zynga Inc. hopes to raise up to $1 billion in an initial public offering that follows LinkedIn’s sizzling stock market debut last month. The amount of money Zynga is seeking in its IPO will likely change as its bankers determine how many shares should be sold and at what price. That process typically takes three to four months.

There’s pent-up demand for the stock of large social media companies because so few of them have gone public while they have been steadily expanding their reach for several years.

Meanwhile, there’s little demand for those that fell from grace. News Corp. sold the struggling Myspace — once a social media darling — for $35 million on Wednesday. It paid a whopping $580 million in 2005.

LinkedIn, a service that connects people looking to advance their professional careers, doubled its IPO price in its first day of trading to give it a market value of nearly $9 billion — the highest for an Internet IPO in the U.S. since Google Inc. went public nearly seven years ago. LinkedIn’s co-founder and executive chairman Reid Hoffman, now a billionaire, belongs to Zynga’s board of directors.

Zynga is expected to attract even greater interest than LinkedIn did because its games have become a much larger cultural phenomenon. Every month, about 230 million people play addictive Zynga games such as “FarmVille,” “CityVille” and “Texas HoldEm Poker.”

By comparison, LinkedIn has more than 102 million members.

Zynga makes most of its revenue by charging small amounts of money to buy virtual items in its games.

It also makes some money from advertising and partnerships with companies such as Netflix or Vistaprint on special offers. Revenue grew to $597 million in 2010, from $121 million in 2009.

The company, based in San Francisco, has a co-dependent relationship with Facebook. Zynga probably wouldn’t exist if it hadn’t tailored its games for Facebook’s audience of more than 500 million users.

On the flip side, Zynga games give people another reason to keep making frequent visits to Facebook so they can tend to virtual farms, play online poker or watch over virtual cities.

Tags: Zynga, Zynga Joins