March 21, 2011

Zynga Tempts Online Social Gamers With Rewards

The online social gaming phenomenon has reached a new level with Zynga's new Rewardville website.

"With RewardVille, our aim is to delight players by rewarding them with new Zynga-level points and exclusive limited edition virtual items," says Roy Sehgal, V.P. of Zynga.

Zynga is responsible for the more than 250 million players hooked on Farmville, Zynga Poker and Mafia Wars, most of whom connect on Facebook and come largely from the United States and Indonesia "“ the world's third and fourth most populous countries.

The company is known for their philanthropy as well. According to AFP, they have raised more than $5 million for charitable causes through game play. $1 million was raised in 36 hours for Save the Children's Japan relief efforts through user donations on purchases of virtual goods in Farmville, CityVille, Frontierville and other games.

Founded in San Francisco by Mark Pincus in July 2007, Zynga is a privately held company that has successfully captured people's free time and it has been profitable doing so, according to the company's executives. The games are simple, but require a lot of time and dedication. 

Barbara Ortutay, an AP technology writer, gives "Cityville" as an example. Here players start with a simple plot of land, roads and buildings. Through lots of faithful dragging and clicking of the mouse, they can add businesses, farms and landmarks. Invitations to play can be sent to friends as well as virtual gifts.

All of Zynga's games are free, but players have the option to spend real money in order to buy special items or reach higher levels more quickly. Zynga makes most of their money through the sale of virtual items in its games, but also has advertising sales and partnerships with companies such as Netflix.

Social Media analyst, Lou Kerner estimates that Zynga's revenue will reach $850 million this year, up from $529 million last year. Kerner predicts that Zynga will be worth a lot more if it maintains its momentum. Recently the company closed on $500 million of financing from that valuation.

Media conglomerates such as Walt Disney Corp. and Time Warner Inc. should be worried, says, BTIG Research analyst, Rich Greenfield. Zynga threatens to take viewers away from their televisions and movies. Disney responded to the threat by purchasing its rival, Playdom for $563 million last year.

Zynga isn't rushing to go public, though. Since they are very profitable, there is no need for investors. The next "Ville" will be created on its own terms and will be just as addicting as the rest of them.


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