![]() Zynga investors include Menlo Park’s Kleiner Perkins Caufield & Byers and Foundry Group, based in Boulder, Colo. Big publishers “are seeing costs skyrocketing, sales plummeting, and it’s a vicious cycle which doesn’t really have a good outcome,” he said. He isn’t an investor in Zynga or Playfish. “The packaged-goods business is crumbling much faster than people expected,” said Mitch Lasky, a general partner at Benchmark Capital in Menlo Park and a former executive vice president at Electronic Arts. Media companies also may try to acquire them, he said. video-game sales through September, Bagga said. The companies’ growth makes them acquisition targets for industry leaders Activision Blizzard Inc., Electronic Arts and Ubisoft Entertainment SA, which are coping with a 12 percent decline in U.S. In Zynga’s “Farmville,” more than 60 million players harvest crops, raise animals and buy materials.īoth San Francisco-based Zynga and Playfish, based in London, are backed by former executives from Electronic Arts Inc., the second-largest publisher of traditional video games based in Redwood City. The 10 most-popular games on Facebook draw more than 100 million users a month. It expects revenue to exceed $100 million this year. Zynga, which is testing Facebook Credits in one of its games, sells virtual goods in games and lets players pay to advance their positions. “These are spur-of-the-moment purchases so if the whole payment system becomes seamless and painless it’s going to be a big driver of growth,” Bagga said.įor now, outside game developers are making most of the money. They will also be able to purchase music, the company said this week. Users can already buy virtual gifts for friends. The company is looking for ways to expand the use of Facebook Credits. Facebook, which turned profitable in the second quarter, expects more than $500 million in sales this year, according to Marc Andreessen, a board member. That figure represents more than 10 percent of current revenue. Assuming a similar rate at Facebook and Bagga’s $1 billion estimate for transactions at the site, the company could reap $55 million from the service by 2012. PayPal, the online payment system owned by San Jose-based eBay Inc., charges 5 percent plus 5 cents for each microtransaction. How much money Facebook makes will depend on how the system is structured, Bagga said. “But if you buy 20 credits on Facebook, now you can apply those credits wherever.” “If you buy credits on ‘Mafia Wars,’ that credit is only usable in that game,” said Bagga. By comparison, Nintendo Co.’s Wii, the leading current-generation game system, had sold 52.6 million Wii consoles through June.įacebook Credits, a payment service being tested by six outside developers, can become the “dominant payment method” on the site, where $1 billion in game-related goods and services will trade annually in three years, estimates Atul Bagga, an analyst with ThinkEquity in San Francisco. They have turned Facebook into the world’s largest game portal, with more than 100 million users. Zynga and Playfish, which both started in 2007, offer free- to-play titles and sell virtual goods to users through so-called microtransactions. “Virtual goods and microtransactions, especially inside games, can be a very big and thriving business,” said Ethan Beard, who runs the developer network at Facebook. That would give Palo Alto-based Facebook a piece of the hundreds of millions of dollars that are being pulled in by Zynga Inc., creator of “Farmville” and “Mafia Wars,” and Playfish Inc., maker of “Pet Society.” The social-games market will almost triple to $2 billion by 2012, estimates ThinkEquity LLC. The company is testing a payment system to gain a cut each time an online-game player buys a digital tractor, weapon or hat on the site. is tapping virtual farmers, mafia dons and online pets to generate cash from the social-networking Web site’s 300 million users.
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