LP Login

Think Big. Move Fast.

This also appears as a guest post on Techcrunch

________________________

There has been a lot of speculation about Zynga’s revenue. Last week Business insider said:

Zynga, the social gamesmaker behind Farmville, has a revenue run-rate around $600 million, a source close to the company tells us. Another source confirms that Zynga is doing well over $1 million in revenue a day.

Businessweek says:

More than 120 million people play Zynga’s online games. Employee headcount has almost quadrupled in the past year, to 775. Revenue for the three-year-old company should surpass $450 million in 2010, according to two people who have been briefed on its financials.

We thought that we would estimate Zynga’s revenue ourselves by looking at publicly available info. Here is what Linus Chung and I did:

  • Focused on only top games on Facebook
  • For each game, pulled DAU numbers on first of every month since 1/1/09 from Developer Analytics.
  • To get the average DAU for each month, took the average of the first of the month and the first of the following month. So for March, the average DAU for the month is the average of DAU on 3/1 and DAU on 4/1.
  • Inside Virtual Goods published a monthly ARPU range (low and high end) for each game genre. In general, we used the average of low and high, with some exceptions:
    • For virtual gifts, we used the high end: $0.50. This only affects Friends for Sale.
    • For simulation games (e.g., CafeWorld, PetVille), we used the low end: $1.00. These games have been wildy popular in terms of users. We assumed that the recent increase in users results in lower monetizing users being added.
    • For poker, we used the low end: $2.00
    • For FarmVille, we estimated ARPU at $0.50 due to its scale
  • Mapped each game to its game genre, and multiplied average DAU each month with the ARPU.

This estimate is likely to be inaccurate for many reasons, notably (i) the coarse estimates of revenue/DAU (rounding to the nearest 50c), (ii) the low end of range estimates for many of Zynga’s most popular games, and (ii) the fact that we ignore revenue from MySpace, Zynga’s websites, and mobile. None the less, it shows some interesting results:

Again, note that these are all estimates. However, our estimates show that revenue ramped fast over calendar 2009. The H1 ramp was driven by Poker and Mafia Wars, and the H2 ramp driven by Farmville, Cafeworld and Fishville. Our estimates show that revenues have been flatish since the beginning of 2010, with a decline in older games compensated for by the launch of Treasure Isle.

Feel free to see the details and play with the assumptions yourself – the spreadsheet is here. It is a read only Google Doc so that your changes won’t affect others who are later to check it out, but you can download the spreadsheet to change assumptions. Note that there are four tabs to the spreadsheet (at the very bottom of the page). To download, click File–> Download as –> Excel.

Play with the assumptions, and let us know what you think.

  • http://facechipz.com George Zaloom

    This is a great piece of work! Is there any data on what percentage % of revenue that Zynga spends on advertising (specifically on Facebook)?

  • http://lsvp.wordpress.com jeremyliew

    @ George, I haven’t seen any data on that but business week says $5-8M/mth – http://www.businessweek.com/magazine/content/10_18/b4176047938855.htm

  • http://SecondShares.com Lou Kerner

    The key question is how accurate are the Inside Virtual Goods ARPU data that you used? Zynga guards this data very tightly. The numbers estimated are far, far below what we see in the public Chinese companies. We’ve done a lot of work on Zynga at SecondShares.com, and your numbers look pretty low to us. That said, I like the approach, just not sure the accuracy of the ARPU.

  • Insider

    $1 monthly ARPU feels very high for a Facebook game – this is what you would expect from a fremium service off Facebook, with much higher conv rates driven by lower churn (more core playerbase).

    You cannot compare a Chinese or western freemium game with a Facebook game.

    Based on knowledge of this business I would model something like $0.10-$0.15 per MAU for Zynga.

  • CQ

    Chinese numbers can be highly misleading.

    There are estimates that there are over 1million gold farmers in china,
    (http://www.virtualgoodsnews.com/2009/03/over-one-million-gold-farmers-in-china-70-in-world-of-warcraft.html)

    The vast majority of these gold farmers are working and selling virtual goods in traditional MMORPGs (WoW eyc). Thus a large part of the Chinese virtual goods market is, in fact, being driven NOT by F2P at all.

  • CQ

    The Ad spend is a very important part of a very important over-all question: what are they burning? There are other expenses besides the ad spend. Theres servers and bandwidth, and a workforce thats nearing 1000 people.

    Doing the on just the ads and the employees already leaves a pretty slim margin…

  • http://brianbreslin.com Brian Breslin

    I heard YoVille is their most profitable per user game. I also heard farmville did like $3M in 1 day in april. so i’d assume those numbers are lower than actual.

  • NrG

    Lou is correct, the big question is whether the ARPU assumptions are accurate. However, contrary to what Lou stated, I think they are possibly too high – if the Inside Social Network numbers were to be applied to the top 1000 FB titles’ DAU & MAU, the implied market size for FB games in 2009 alone would be many billions of dollars which not even the most optimistic of market observers would agree with.

    Lou, I am not sure how easily these ARPUs can be compared to the public chinese companies who all use a radically different definition of ARPU (their publicly stated “ARPU” is generally what we call ARPPU) for very different games services (targeting hard-core chinese MMORPGers).

  • http://lsvp.wordpress.com jeremyliew

    To be clear, these ARPU numbers are average revenue per month per daily active user (eg daily revenue/DAU * 365/12), which is the standard way that social gaming companies are quoting the metric.

  • http://www.BreakingNewsBlog.us BreakingNewsBlog.us

    .

    hello Lightspeed

    these are two [very] innovative projects seeking VC funds

    http://www.newspaceagency.com/

    http://www.olpcdesign.com/

    best regards

    gaetano marano

    .

  • Pingback: Free-to-play games will grow, but not as fast as some believe | Internet News for Geeks()

  • Pingback: Free-to-play games will grow, but not as fast as some believe « Tukko Report()

  • http://www.swfplay.co.uk 3d tetris

    thats a lot of money, wooof.

  • Abhishek Dadoo

    Insightful.

    I see DAU trends for certain genres. On average, before starting to decline, the monthly DAU increases for 7.3 months for X-Wars genre and 3.8 months for the Simulation genre.

    Is it fair to say that on average X-wars genre has 7 months to acquire as many customers as possible beyond which the genre has to figure out ways to increase ARPUs?

  • Pingback: A couple VC Gems()

  • Pingback: Discover GameWorlds » Blog Archive » A couple VC Gems()