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Technology & Innovation — December 16, 2011

Is Zynga’s IPO the End of the Tech Bubble?

Throughout the day, Zynga has been trading at or bellow its initial stock offering. While Zynga will still cash in, is its proportional success a sign that the tech bubble is shrinking?

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What’s the Latest Development?

The social media game maker Zynga became a public company today, making an initial public offering of $10 per share. But while morning trading raised expectations, shares have since slumped to below the initial $10 value. Some analysts blame Zynga’s dependence on Facebook for revenue (95% of its revenue comes from Facebook). Others take a broader view, saying that the technology bubble is deflating and that, in the midst of the economic crisis, companies are being valued more conservatively.

What’s the Big Idea?

Zynga’s business model of making games for people to play for free was once a laughable idea. During an earlier fundraising round, Zynga’s CEO Mark Pincus approached the popular gaming company Electronic Arts with his idea. At the time, EA was comfortable with its model of making a game that people bought at the store and manually inserted into their game consul home. Pincus did not secure funding from EA but still became a success. Now, EA is working hard to catch up with Zynga.

Photo credit: shutterstock.com

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