TC Teardown: Zynga’s Profit Machine At Risk
Posted on May 13, 2010 at 12:18 PM EDT
Editor's note : In this guest post, entrepreneur Steven Carpenter does a teardown of Zynga's business model and calculates an estimate of its profits. Like YouTube, Twitter, and Groupon, social gaming pioneer, Zynga is a member of the “fastest from founding to $1B valuation” club, having earned its membership in just 19 months. There are two significant traits that distinguish Zynga from its comparables, however. One, Zynga has generated the highest revenue and profitability numbers of any startup ever in such a scant amount of time (more so than even Facebook itself to date). Based on my estimates, Zynga is likely making a 30% net margin on $50 million in revenue a month , or close to $15 million in profit a month . Two, Zynga’s complicated relationship with Facebook means the company has less control of its own destiny. Zynga is under significant pressure to make a series of strategic moves to ensure its continued success. If it cannot do so, its attractive revenue and profitability metrics are certain to be impacted. In this teardown, I will detail how Zynga achieved its rapid success and dive into the key challenges facing the company.