Zynga Trefis Analysis

Zynga

ANALYSIS for NASDAQ : ZNGA OCTOBER 28, 2013

$3.33$3 B MKT CAP

Trefis Estimate

$3.70$3 B MKT CAP

Market Price

See the Full Analysis for Zynga on Trefis

— CORPORATE SNAPSHOT —

Social games are generally web based games that use a variety of social

platforms such as Facebook, Google+ and MySpace to enable gaming

interaction. The features that make social gaming attractive include the

ability to track how well an individual’s friends and other people within the

community are doing and the ability to have multiple players engaged at any

point in time if needed. The social aspect of these games makes gaming more

addictive and viral thereby attracting more users.

Founded in 2007, Zynga creates free social games such as FarmVille,

CityVille and Texas Holdem Poker. The company provides its games for

different platforms including Zynga Direct, Facebook, MySpace, iPhone,

Android and Google+.

Millions of people login to these platforms to play Zynga games, interact

with their friends and buy in-game items and virtual goods. Zynga also

operates Zynga.org which supports different philanthropic causes by utilizing

the power of virtual social goods.

— VALUATION HIGHLIGHTS —

Texas HoldEm Poker constitutes 23% of the Trefis price estimate for

Zynga's stock.

1.

New & Other Games constitute 20% of the Trefis price estimate for

Zynga's stock.

2.

See the Interactive Valuation Breakdown on Trefis

Our share price estimate and the overall company value is derived by

summing-up the values of individual divisions/businesses in a sum-of-the-

TEXAS HOLDEM POKER

6

Texas HoldEm Poker's Average

Revenue Per User (ARPU)

8


Monthly Active Users (MAU)

9Zynga's Gross Margin

NEW & OTHER GAMES

11

Average Revenue Per User for New &

Other Games

13

Average Monthly Active Users for New

& Other Games


FARMVILLE

17

FarmVille's Average Revenue Per User

(ARPU)

19

FarmVille's Average Monthly Active

Users (MAU)


CITYVILLE

22

CityVille's Average Revenue Per User

(ARPU)

24

CityVille's Average Monthly Active

Users (MAU)


CASTLEVILLE

28

CastleVille's Average Revenue Per User

(ARPU)

30

CastleVille's Average Monthly Active

Users (MAU)


EMPIRES & ALLIES

33

Empires & Allies Average Revenue Per

User (ARPU)

35

Empires & Allies Average Monthly

Active Users (MAU)


APPENDICES 40Summary P&L for Zynga

41

Detailed Texas HoldEm Poker

P&L

42

Detailed New & Other Games

P&L

43Detailed FarmVille P&L

44Detailed CityVille P&L

45Detailed CastleVille P&L

46Detailed Empires & Allies P&L

http://www.trefis.com/company?hm=ZNGA.trefis&from=pdf

http://www.trefis.com/company#/ZNGA?from=pdf


parts analysis. The value of each division is calculated using a discounted cash

flow (DCF) methodology.

We forecast fundamental drivers like pricing, market share, and profit

margins for different businesses in estimating the division’s value within the

DCF framework. The analysis below primarily focuses on those important

forecasts that drive our share price and value estimate.

Our complete analysis, including sources of historical data, underlying

equations and additional discussion are available on www.trefis.com.

— POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE —

New & Other Games

Average Monthly Active Users:

We currently forecast the number of average monthly active users for

Zynga's new and other games (except top 5 games) to steadily increase,

reaching close to 190 million by the end of the forecast period. We

expect Zynga's new games to attract users and compensate for the

decline in the user base of its current and older games. However, if the

figure declines to 120 million instead, there can be 5-10% downside to our

price estimate. There can be upside of similar order if the figure reaches

300 million instead.

•

Texas HoldEm Poker

Average Monthly Active Users: Texas HoldEm Poker is one of Zynga's

oldest games, and one of its most valuable ones. It has continued to

attract more users over the years. For 2012, we estimate that the game's

monthly active users stood at around 36 million. Given the recent

weakness, we forecast this figure to increase just about 37-38 million by

the end of the forecast period, following the dip in 2013. However, if the

exodus of users that the company witnessed in Q2 2013 continues, and

the user base declines to around 25 million by the end of the forecast

period, there could be a 5-10% downside to its current Trefis price

estimate.

•

Marketing, Advertising & Operational Expenses

SG&A as a % of Revenue:

We currently expect Zynga's selling, advertising and operational

expenses (SG&A) to increase from around 23.5% in 2012 to 33% by the

end of the forecast period. Given the increasing competition in the social

gaming space, Zynga may have to spend much more to market and

advertise its games going forward. It may also have to ramp up its

operational expenses if it wants to expand at a faster pace. If the

company's SG&A expenses as a percentage of revenues increase to more

than 37% by the end of the forecast period, there could be a downside of

about 10% to our Trefis price estimate.

•

TREFIS ANALYSIS for ZYNGA [email protected] + 1 617 394 8763 •2

http://www.trefis.com

http://www.trefis.com/company?hm=ZNGA.trefis&driver=2523&from=pdf



Research & Development Expenses

R&D as a % of Revenue:

We currently expect Zynga's research and development expenses (R&D)

as percentage of revenues to increase to around 37% over the long term.

For 2013, the figure seems to be heading towards 42%. Given the

increasing competition in the social gaming space, Zynga may have to

spend much more on R&D to continue developing new and innovative

games in order to attract users. If the figure increases to 45%, there can

be 10-15% downside to our price estimate. On the other hand if the

figure declines to 30%, there could be an upside of roughly 10%.

•

— SOURCES OF VALUE —

Dominant social gaming websiteZynga had around 187 million monthly active users as of March 2013. Its

competitors Electronic Arts and Playdom have a smaller active user base.

Apart from leading the internet in terms of total number of active users,

Zynga's popularity is highlighted by the fact that 6 of its games stood in top

12 games on Facebook (ranking as of May 2013).

Growth in international marketsGrowth in internet connectivity and the increase in use of social network has

enhanced the appeal of social gaming globally. In countries such as China,

the appeal of social gaming has already been quite strong. Zynga acquired

social gaming company XPD Media in China in 2010 as a way to expand its

presence in the region.

Competitive advantagesZynga has become the web’s most dominant social gaming website. Some of

its key competitive advantages are:

Strong capital position•

Zynga currently has close to $1.2 billion of net cash, which

essentially constitutes roughly 45% of the company's

value as per our estimates.

•

Marketing advantage•

Zynga’s huge gaming audience enables it to market games to its

user for free. New game developers often have marketing budgets

of 50% of the cost of developing the game.

•

Ability to imitate games•

Several of the most popular games currently on Zynga are similar

in nature and concept to those launched by other companies.

Zynga’s largest game, FarmVille, is similar to Farmtown which

was launched earlier. Having a strong development team of more

than 1500 individuals enables the firm to operate in a competitive

way and produce high quality games that will attract more users.

•



http://www.insidesocialgames.com/2013/05/01/the-top-25-facebook-games-of-may-2013/

http://www.insidesocialgames.com/2013/05/01/the-top-25-facebook-games-of-may-2013/

— KEY TRENDS —

Zynga to focus on mid core and real money gamingThe company expects its mid-core games to keep users engaged for longer

periods of time. A mid-core game tries to combine the engagement level of a

core game with the learning curve of a casual game, to provide an engaging

gaming experience to a larger user base. This can potentially allow for

retention of a large user base while promoting in-game purchases as the

games are designed to be more engaging and users are likely to pay to

upgrade, rather than drop off once the free-play scenarios are completed.

Zynga launched Battlezone in early 2013, which marks its foray into action

RPG (role playing game).

Zynga has also rolled out real-money games ZyngaPlusPoker and

ZyngaPlusCasino in the U.K. The online gambling market outside the U.S.

is worth more than $32 billion and Zynga can make a big difference to its

business if it can tap this market successfully. However, the company will

have to deal with the competition from gaming incumbents such as Caesars

Entertainment, which already operates online gambling services in Europe,

and has bought social and mobile game maker Playtika.

Due to lack of federal legislation, gambling is being introduced state-by-

state in the U.S. However, Zynga has dropped its plans of pursuing a license

in the country.

Reducing reliance on FacebookZynga has been actively reducing its dependence on Facebook for quite some

time. The relationship between the two companies can be described as

complicated at best. In Q1 2013, Zynga removed the requirement of Facebook

login in order to access games on its own website. The move comes a year

after the company launched its own platform for third party game developers.

Approximately 45% of Zynga’s value comes from its cash pool with

another 25% coming from new and smaller games (other than FarmVille,

CityVille, CastleVille, Empires & Allies and Texas HoldEm Poker)

according to our estimates. In other words, a significant portion of our price

estimate relies on the expectation that Zynga will continue to launch

successful games. One way to ensure this is marketing third-party games,

which is what the company has been doing for a while.

Revenue concentration in gamesCertain games such as FarmVille, FarmVille 2 and Texas HoldEm Poker

contribute the bulk of the revenues for Zynga as they represent majority of its

total daily active users (DAU). High dependence on certain games can

potentially be a risky strategy for social gaming companies.

Increasing penetration of social networksWe believe that there is still room for social networking phenomenon to

grow. While Facebook has over 1 billion active users, the reach of other social

networks such as Google+ is much lower. Even Facebook is yet to make an

impact in certain parts of the world. Zynga can leverage this potential growth


http://techcrunch.com/2012/08/16/big-fish-raises-the-stakes-with-real-money-gambling-on-the-iphone-with-big-fish-casino/

of social networking platforms and promote its new and existing games.

See the Full Analysis for Zynga on Trefis



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Texas HoldEm Poker The Texas HoldEm Poker division constitutes 23.4% of our $3.33 price estimate for this stock, based on our sum of the

parts analysis.The most important drivers for the Texas HoldEm Poker business are:

Texas HoldEm Poker's Average Revenue Per User (ARPU)

Texas HoldEm Poker's Average Monthly Active Users (MAU)

Zynga's Gross Margin

— TEXAS HOLDEM POKER'S AVERAGE REVENUE PER USER (ARPU) —

Texas HoldEm Poker's Average Revenue Per User (ARPU) denotes the dollar value of the average revenue generated by

Zynga per user in one month. Zynga generates this revenue primarily through the sale of virtual goods and advertising.

Zynga provides players with an option to use real money to buy virtual goods that help them in their gameplay.

Virtual goods come in a variety of different forms:

Functional Virtual Goods

These category of goods provide users with some functional benefit within the game. Some of the most common

examples include energy and weaponry

Decorative Virtual Goods

Decorative virtual goods are those types of goods that allow users to customize his/her online experiences to make it

more personal. Examples include clothing items, home goods etc.

Consumables

Consumable goods are those types of goods that provide users with some advantage such as health packs. Once

consumed, users may have to purchase more.

Texas HoldEm Poker's Average Revenue Per User (ARPU) ($)

2009 1 0 1 1 1 2 1 3 1 4 1 5 1 6 1 7 1 8 1 9 2 00.00

0.25

0.50

0.75

1.00


http://www.trefis.com//company?hm=ZNGA.trefis&division=2387&driver=2453&from=pdf

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We estimate that Texas HoldEm Poker's Average Revenue Per User (ARPU) increased substantially in 2010 and 2011 as

the game gained huge popularity on Facebook. However this figure declined slightly in 2012 amounting to $1.06. Going

forward we expect the figure to remain more or less stable.

Forecast RationaleTrefis considered following factors for its forecast:

Supporting:

ZYNGA'S TEXAS HOLDEM POKER IS STILL FACEBOOK'S TOP POKER GAME – Zynga's Texas HoldEm Poker is still one of

the most popular games on Facebook and one of the top Facebook games of all time, with more than 36 million

monthly active users as of 2012. The networking effect is helping Zynga maintain its grip on the social poker market,

despite the numerous poker games that have been introduced to Facebook. We expect that as this game builds up a

bigger user base, Zynga will benefit from ad revenues and sale of virtual goods. The company has also introduced the

game on smartphones.

IMPROVEMENT IN MOBILE PAYMENT PLATFORMS – Zynga and other gaming companies have started to develop

smartphone apps for their games in order to leverage the broader trend of higher smartphone usage. Mobile payment

services such as Zong and Boku work with different gaming platforms. These mobile payment services are expected

to provide smart-phone users an easy and quick way to purchase virtual goods for their game-play. There are variety

of other options available to social gamers to pay for virtual goods that include cash transactions via credit cards,

Paypal or site specific payment systems such as Facebook credits and prepaid cards offered by Zynga which are

available at various retailers.

COMPETITION COULD DRIVE DOWN PROCESSING FEE – Competition from new social gaming portals such as Google+,

which take only a 5% cut from each transaction, could force Facebook to lower its 30% cut. This could help Zynga's

average revenue per user.

GROWING VIRTUAL GOODS MARKET – The social gaming sector has witnessed remarkable growth in recent years and is

expected to continue to do so going forward. Growth in internet usage and social network penetration has helped

boost the social gaming market. According to a research study, the total time spent on social networks and online

games increased from 15.8% in June 2009 to 23% in 2011. We expect the time spent on social networks and online

games to increase further going forward. US virtual goods market was estimated to be around $2.9 billion in 2012. As

more users join social gaming platforms such as Facebook, more players are expected to join games from companies

such as Zynga etc . About 27 million users bought virtual goods via Facebook in 2012, up from 15 million in 2011. In

May 2010, Zynga entered Asian markets by acquiring, XPD Media, a Beijing-based social games studio. The overall

Asian virtual game market is growing and entering Asia's social gaming space should help Zynga's growth.

THE IMPACT OF ZYNGA REDUCING RELIANCE ON FACEBOOK – Zynga announced its new social gaming network, Zynga

Direct, in October 2011. Going forward, the users will able to create their accounts on Zynga's own platform to play

its social games and the company's reliance on Facebook as a platform to promote its games will reduce. The effective

average revenue per user could increase as Zynga won't have to pay Facebook's 30% cut. It could also give Zynga

more leverage in negotiations about transaction fees.

Mitigating:

DIFFICULTIES IN EXPANDING THE PAYING USER BASE – One of the main reasons why games are able to generate

revenues is their ability to attract and retain committed gamers. Given the time, effort and commitment required to

play and compete in social games, the potential revenue generating customers remain limited. Therefore, we don't

expect the average revenue per user to go up meaningfully.

WEAKNESS IN SUCCESSFUL FRANCHISES – Zynga's famous franchises such as Farmville, Cityville, Empires & Allies

and others are facing weakness. The number of active users have declined and the company's explosive growth has

halted. In Q1 2013, Zynga’s revenues declined by about 18% compared to the the first quarter of 2012 due to lower

number of monthly active users (MAU) and a decline in monetization. The company’s overall MAU stood at 253

million in Q1 2013 down from 292 million for Q1 2012. Even a sequential comparison showed a strong decline in these


http://mashable.com/2011/09/12/23-percent-online/

http://techcrunch.com/2011/12/07/us-virtual-goods-market-to-hit-2-9-billion-in-2012-with-facebook-games-maturing-mobile-booming/

http://www.insidefacebook.com/category/virtualgoods/

8.

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metrics as Zynga’s previously successful franchises lost users.

CONVERSION RATES ARE LOW – Historically the conversion rate from playing users to paying has been very low

compared to traditional games. In 2010 CrowdStar stated that most social games just see 1%-3% of players converting

into paying customers.

ZYNGA ARRIVED LATE TO MOBILE PLATFROM – In the Android market, Live Holdem Poker Pro is the top poker game

and has more number of downloads than Zynga HoldEm Poker. Considering the fact that people are shifting away

from traditional PC's and using smartphones and tablets more for their daily computing needs, this may be a problem

for Zynga.

Sources for historical data and explanations can be found on the Trefis.com website (link)

— TEXAS HOLDEM POKER'S AVERAGE MONTHLY ACTIVE USERS (MAU) —

Monthly Active Users represent the number of unique active users who played a game in a month. If a user logs in three

times a month, it is still counted as one unique user. This is a widely used metric used to measure the number of users in

social games. We calculate Texas HoldEm Poker's Average Monthly Active Users (MAU) by computing the average of

the MAU numbers over the entire year.

Zynga Poker (Texas HoldEm Poker), which was launched in June 2007, had more than 36 million monthly active users in

2012. The figure has consistently increased since the game's launch, but the growth rate has come down significantly.

Going by the recent trends, we expect it to continue to grow going forward, albeit at a slow pace.


Supporting:

TEXAS HOLDEM IS STILL VERY POPULAR – Texas HoldEm is still one of the top games on Facebook and the

smartphone version is seeing significant traction as well. The game had over 36 million monthly active users in 2012,

and its average revenue per user stood better than other Zynga games. The advantage for games such as poker is that

Texas HoldEm Poker's Average Monthly Active Users (MAU) (Mil)

2009 1 0 1 1 1 2 1 3 1 4 1 5 1 6 1 7 1 8 1 9 2 00

5

1 0

1 5

2 0

2 5

3 0

3 5

4 0


http://www.industrygamers.com/news/social-games-see-just-1-3-of-players-convert-to-paying-customers-says-crowdstar/

http://www.trefis.com/company?hm=ZNGA.trefis&division=2387&driver=2453&from=pdf&scroll=1


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the users play against each other which keeps their interest high. This translates into better user engagement and

therefore higher number of monthly active users. Unlike campaign based games, users do not stop playing once the

novelty wears off. In fact, they tend to play more as their skills improve.

MOBILE GAMING MARKET EXPECTED TO GROW RAPIDLY – Social gaming companies are expanding aggressively to

mobile platform. Zynga has already launched its popular games such as FarmVille, CityVille and Words with Friends

on iOS. In addition to this, the company has also introduced some other games on mobile devices such as Scramble

with Friends and Running with Friends, which is Zynga's version of popular mobile game Temple run. The U.S.

mobile virtual gaming market stood at $500 million in 2012, and is expected to grow rapidly in the near future.

According to Nielsen data, close to 60% of the U.S. mobile owners were using smartphone during the period of

March-May 2013. This figure has increased rapidly over the past few years and the trend is likely to continue. The

growth in the number of smartphone users and improving smartphone capabilities will drive the growth in mobile

gaming market.

ALTERNATIVE TO CONSOLE GAMING – One of the biggest benefits of social gaming is that it does not require any

hardware and expensive consoles to operate unlike PC and console based games. Additionally, several console based

services such as Xbox Live charge a subscription fee for certain titles. Social games, on the other hand, can be

accessed anywhere at any time and are mostly free to use. Several key technology players such as Microsoft have been

trying to make inroads in the social gaming space. In late 2010, the firm introduced a new gaming hub that connects

its three main social gaming portals allowing users of MSN Games, Bing Games and Windows Live Messenger the

ability to play games with their friends in a more social manner.

SHIFT TOWARDS BROWSER BASED GAMES – Historically, the majority of games have been distributed in the form of

physical media or a downloadable format. Advances in browsers and Flash technology have provided the ability for

social developers to create more graphically intensive and rich games. These advancements have enabled Zynga to

develop more unique and strategy oriented games, a shift from the traditional card playing and classic role playing

games.

Mitigating:

COMPETITION FROM OTHER PLAYERS – The social gaming market is becoming competitive as the cost of developing

games is low. Zynga will continue to face competition from other internet and gaming giants such as Google, EA

Games and Disney (Playdom), who are trying to enter the space owing to the immense popularity that social gaming

has seen in the past few years. In Augus 2010, Google acquired social game and app developer Slide and mobile social

game developer Social Deck to strengthen its position in the social gaming market. EA acquired Playfish in 2009 and

PopCap games in 2011 to compete with Zynga in this space.


— ZYNGA'S GROSS MARGIN —

Zynga's Gross Margin represents the company's gross profit (revenues - cost of goods sold) expressed as a percentage of

revenues.


http://www.nielsen.com/us/en/newswire/2013/mobile-majority--u-s--smartphone-ownership-tops-60-.html


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Zynga's gross margin increased from 53.7% in 2009 to 73.5% in 2012. The growth was steep in 2010 because of a new

agreement with Facebook wherein Zynga switched over to Facebook Credits for transactions. Before that, it used to

report its revenues from direct payment options and included the payment processing fees in its cost of revenues which led

to higher cost of goods. Since 2010, the company started reporting revenues net of the 30% cut retained by Facebook. This

change in reporting structure has resulted in a substantial increase in the company's gross margin. Going forward, we

expect this figure to remain more or less stable.

Forecast RationaleSupporting:

ZYNGA REDUCING RELIANCE ON FACEBOOK – Zynga announced its new social gaming network, Zynga Direct, in

October 2011. Going forward, the users will able to create their accounts on Zynga's own platform to play its social

games and the company's reliance on Facebook as a platform to promote its games will reduce. The effective average

revenue per user could increase as Zynga won't have to pay Facebook's 30% cut. As more users shift to from Facebook

to Zynga's platform, both the average revenue per user and gross margins will find some support.

ZYNGA BUILDING ITS OWN DATA CENTERS – Zynga primarily uses cloud computing infrastructure provided by

Amazon Web Services to host and distribute its games, which constitutes a significant portion of its 'cost of revenue'.

The company has announced that it will be investing in building its own infrastructure and data centers which should

lead to lower costs thereby supporting the margins.

FOCUS ON MID-CORE GAMES AND REAL MONEY GAMING – The company intends to focus on mid-core games and real

money gaming. A mid-core game can potentially allow for retention of a large user base while promoting in-game

purchases as the games are designed to be more engaging and users are likely to pay to upgrade, rather than drop off

once the free-play scenarios are completed. In addition to this, Zynga has also rolled out real-money games

ZyngaPlusPoker and ZyngaPlusCasino in the U.K. The online gambling market outside the U.S. is worth more than

$32 billion and Zynga can make a big difference to its business if it can tap this market successfully. These new

ventures will help the company in mitigating the negative impact of weakness in its famous franchises, thus offering

some support to revenues and gross margin.

Zynga's Gross Margin (%)

2009 1 0 1 1 1 2 1 3 1 4 1 5 1 6 1 7 1 8 1 9 2 00

1 0

2 0

3 0

4 0

5 0

6 0

7 0



4.

5.

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Mitigating:

INCREASE IN PAYMENT PROCESSING FEE AS ZYNGA EXPANDS ON MOBILE – Zynga stated during its Q4 2012 earnings

that as it expands on mobile platform, more of its revenues will be accounted on gross basis implying that the

processing fee from companies such as Apple and Google will be included in costs of goods sold. This will have a

negative impact on gross margin.






metrics as Zynga’s previously successful franchises lost users. This weakness has put pressure on average revenue per

user. If this pressure continues, it may be difficult for the company to grow its margin.


In addition, you can see the detailed P&L for the Texas HoldEm Poker business in the Appendix (link)

New & Other Games The most important drivers for the New & Other Games business are:

Average Revenue Per User for New & Other Games

Average Monthly Active Users for New & Other Games


— AVERAGE REVENUE PER USER FOR NEW & OTHER GAMES —

Average Revenue Per User for New & Other Games denotes the dollar value of the average revenue generated by Zynga

per user in one month. Zynga generates this revenue primarily through the sale of virtual goods and advertising.









Consumables

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Total Revenue (Mil $) 51.3 243 477 462 374 385 397 409 421 434 447 460

Direct Expense (Mil $) 23.7 70.9 130 122 97.5 101 105 109 113 118 123 128

Indirect Expense (Mil $) 60.1 49.5 284 252 162 173 186 197 209 220 258 270

Gross Profit (Mil $) 27.5 172 346 339 277 284 291 299 307 315 324 332

Free Cash Flow (Mil $) n/a n/a n/a n/a 114 111 105 102 98.3 94.9 65.2 62.0



http://www.google.com

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1.



We do not calculate average revenue per user for individual games except poker. The figure referred to here is a combined

metric estimated for all of Zynga's games (except poker). Average Revenue Per User for New & Other Games jumped

sharply in 2011 as Zynga's games gained huge popularity on Facebook. However, the figure declined slightly in 2012

amounting to $0.27. This decline can be attributed to recent weakness in social gaming in general, and Zynga in particular.

A lot of competitors have cropped up and Zynga's once famous franchises are losing fans.

Going forward, we expect the figure to remain stable due to the mixed impact of Zynga focusing on mid-core games

and real money gaming, and continued weakness of existing franchises.


Supporting:

ZYNGA TO FOCUS ON MID-CORE AND REAL MONEY GAMES – The company expects its mid-core games to keep users

engaged for longer periods of time. A mid-core game tries to combine the engagement level of a core game with the

learning curve of a casual game, to provide an engaging gaming experience to a larger user base. This can potentially

allow for retention of a large user base while promoting in-game purchases as the games are designed to be more

engaging and users are likely to pay to upgrade, rather than drop off once the free-play scenarios are completed.

Zynga launched Battlezone in early 2013, which marks its foray into action RPG (role playing game). Zynga has also

rolled out real-money games ZyngaPlusPoker and ZyngaPlusCasino in the U.K. The online gambling market outside

the U.S. is worth more than $32 billion and Zynga can make a big difference to its business if it can tap this market

successfully. However, the company will have to deal with the competition from gaming incumbents such as Caesars

Entertainment, which already operates online gambling services in Europe, and has bought social and mobile game

maker Playtika. Due to lack of federal legislation, gambling is being introduced state-by-state in the U.S., and Zynga

has already applied for operator license in Nevada. The U.S. online gambling market can reach $7.4 billion in the next

4 to 5 years, and Zynga will strive to be one of the leading operators driving this growth. However, the company will

have to compete against popular gaming providers and casino operators, who have significant mind share with

Average Revenue Per User for New & Other Games ($)

2009 1 0 1 1 1 2 1 3 1 4 1 5 1 6 1 7 1 8 1 9 2 00.00

0.05

0.10

0.15

0.20

0.25



http://techcrunch.com/2012/08/16/big-fish-raises-the-stakes-with-real-money-gambling-on-the-iphone-with-big-fish-casino/

http://www.bloomberg.com/news/2013-03-01/zynga-s-online-gaming-push-faces-hurdles-from-casinos.html

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gamers.

























Mitigating:















— AVERAGE MONTHLY ACTIVE USERS FOR NEW & OTHER GAMES —



social games. We calculate Average Monthly Active Users for New & Other Games by computing the average of the

MAU numbers over the entire year.







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Other games include all new games by Zynga, as well as its existing ones except the current top 5 games. In 2010, the

company had nearly 125 million monthly active users for its other games. The number declined to less than 60 million in

2011 before increasing to nearly 190 million in 2012 due to new launches. Going forward, we expect the figure to continue

to increase.


Supporting:

NEW GAMES TO ATTRACT CURRENT PLAYERS – Simulation gaming is a dynamic space where different games are

fighting for user base. Most users switch to newer games after a while and therefore, we expect most of Zynga's

current games including FarmVille, CityVille and CastleVille to show a decline in their monthly active users. To

compensate for this, the company will continue to invest in development of new games that can drive the growth in

its overall monthly active users.









gaming market.




accessed anywhere at any time and are mostly free to use. Several key technology players such as Microsoft have been

trying to make inroads in the social gaming space. In late 2010, the firm introduced a new gaming hub that connects

its three main social gaming portals allowing users of MSN Games, Bing Games and Windows Live Messenger the

Average Monthly Active Users for New & Other Games (Mil)

2009 1 0 1 1 1 2 1 3 1 4 1 5 1 6 1 7 1 8 1 9 2 00

2 5

5 0

7 5

100

125

150

175




4.

5.

ability to play games with their friends in a more social manner.





games.

Mitigating:










revenues.








2009 1 0 1 1 1 2 1 3 1 4 1 5 1 6 1 7 1 8 1 9 2 00

1 0

2 0

3 0

4 0

5 0

6 0

7 0




1.

2.

3.

4.

5.



















Mitigating:













In addition, you can see the detailed P&L for the New & Other Games business in the Appendix (link)

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Total Revenue (Mil $) 46.0 239 202 599 356 366 385 400 416 428 441 455

Direct Expense (Mil $) 21.3 69.8 55.5 159 92.7 96.4 102 107 112 117 121 126

Indirect Expense (Mil $) 53.9 48.6 120 327 154 164 180 193 206 218 255 267

Gross Profit (Mil $) 24.7 169 147 440 263 270 282 293 303 311 320 328





•

•

•

•

•

•

FarmVille The most important drivers for the FarmVille business are:

FarmVille's Average Revenue Per User (ARPU)

FarmVille's Average Monthly Active Users (MAU)


— FARMVILLE'S AVERAGE REVENUE PER USER (ARPU) —

FarmVille's Average Revenue Per User (ARPU) denotes the dollar value of the average revenue generated by Zynga per

user in one month. Zynga generates this revenue primarily through the sale of virtual goods and advertising.









Consumables




metric estimated for all of Zynga's games (except poker). FarmVille's Average Revenue Per User (ARPU) jumped sharply

FarmVille's Average Revenue Per User (ARPU) ($)

2009 1 0 1 1 1 2 1 3 1 4 1 5 1 6 1 7 1 8 1 9 2 00.00

0.05

0.10

0.15

0.20

0.25



1.

2.

3.

4.

5.

6.

7.

in 2011 as Zynga's games gained huge popularity on Facebook. However, the figure declined slightly in 2012 amounting to

$0.27. This decline can be attributed to recent weakness in social gaming in general, and Zynga in particular. A lot of

competitors have cropped up and Zynga's once famous franchises are losing fans.




Supporting:

PREMIUM CROPS AND CROP MASTERY DRIVES VIRTUAL GOODS REVENUE – Higher levels of crop mastery gives faster

and better yields and premium crops provide users with bigger harvests and more rewards. As users become invested

in the game and want to unlock achievements faster, they tend to spend money on premium content. Considering

FarmVille's ability to keep users engaged, we can expect the game to sustain its monetization to some extent.

VIRTUAL MERCHANDISE TO DRIVE REVENUES – CastleVille users who have spent significant time building up the

virtual lands and castles, and unlocking levels, tend to spend money on virtual goods to enhance game-play. Though

users tend to drop off or lose interest with time, those who continue playing invest in virtual goods and provide a

market for their sales.

























Mitigating:









8.

9.











— FARMVILLE'S AVERAGE MONTHLY ACTIVE USERS (MAU) —



social games. We calculate FarmVille's Average Monthly Active Users (MAU) by computing the average of the MAU

numbers over the entire year.

FarmVille, which was launched in June 2009, had approximately 30 million monthly active users that year. This figure

jumped to nearly 60 million in 2010 as the game gained huge popularity on Facebook. However, it has declined for the

past two years amounting to 23 million in 2012 as users continue to shift to new games. We expect this trend to continue

going forward.


Supporting:

FarmVille's Average Monthly Active Users (MAU) (Mil)

2009 1 0 1 1 1 2 1 3 1 4 1 5 1 6 1 7 1 8 1 9 2 00

1 0

2 0

3 0

4 0

5 0

6 0





1.

2.

3.

4.

5.

6.

7.

LIKE MOST OTHER SOCIAL GAMES, FARMVILLE'S LONG-TERM USER ENGAGEMENT CAPABILITY IS UNDER DOUBT –

FarmVille is a farming simulation social networking game which was launched in 2009 and is still quite popular with

Facebook users. The game faces competition from Farm Town and Happy Farm. It appears that the novelty effect is

wearing off as the game's monthly active users have declined in the past two years. Unlike Texas HoldEm, FarmVille

user's interest tends to decline once he/she has unlocked several levels and achievements. Users also tend to drop off

once the purchase of virtual goods become necessary to enjoy the gameplay.


fighting for user base. Most users switch to newer games after a while and therefore we expect FarmVille's Average

Monthly Active Users (MAU) to decline going forward. Most games including CityVille and CastleVille will

continue to show a similar decline.







Mitigating:









gaming market.




accessed anywhere at any time and are mostly free to use.

Several key technology players such as Microsoft have been trying to make inroads in the social gaming space. In late

2010, the firm introduced a new gaming hub that connects its three main social gaming portals allowing users of

MSN Games, Bing Games and Windows Live Messenger the ability to play games with their friends in a more social

manner.





games.




revenues.




1.

2.

3.


























2009 1 0 1 1 1 2 1 3 1 4 1 5 1 6 1 7 1 8 1 9 2 00

1 0

2 0

3 0

4 0

5 0

6 0

7 0



4.

5.

•

•

•

•

•

Mitigating:













In addition, you can see the detailed P&L for the FarmVille business in the Appendix (link)

CityVille The most important drivers for the CityVille business are:

CityVille's Average Revenue Per User (ARPU)

CityVille's Average Monthly Active Users (MAU)


— CITYVILLE'S AVERAGE REVENUE PER USER (ARPU) —

CityVille's Average Revenue Per User (ARPU) denotes the dollar value of the average revenue generated by Zynga per










Consumables

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Total Revenue (Mil $) 24.2 114 129 73.7 76.3 79.3 79.3 75.4 71.6 68.0 64.6 64.6

Direct Expense (Mil $) 11.2 33.2 35.5 19.6 19.9 20.9 21.1 20.2 19.4 18.6 17.8 18.0

Indirect Expense (Mil $) 28.4 23.2 77.1 40.3 33.1 35.7 37.2 36.3 35.5 34.6 37.4 38.0

Gross Profit (Mil $) 13.0 80.9 93.9 54.2 56.5 58.5 58.3 55.2 52.2 49.5 46.8 46.7

Free Cash Flow (Mil $) n/a n/a n/a n/a 23.4 22.8 21.1 18.8 16.7 14.9 9.42 8.70




•

1.

2.

3.




metric estimated for all of Zynga's games (except poker). CityVille's Average Revenue Per User (ARPU) jumped sharply







Supporting:

INCENTIVE FOR USERS TO CONTINUE BUYING VIRTUAL GOODS – CityVille users are more likely to purchase virtual

goods and stay on in the game, if they have already spent significant time and money building up the city. This makes

it a barrier to exit the game and start over from scratch in another city-building game. These users prefer to spend

time and money in the current established game as the switching costs are high.











CityVille's Average Revenue Per User (ARPU) ($)

2011 2012 2013 2014 2015 2016 2017 2018 2019 20200.00

0.05

0.10

0.15

0.20

0.25



4.

5.

6.

7.

8.















Mitigating:















— CITYVILLE'S AVERAGE MONTHLY ACTIVE USERS (MAU) —



social games. We calculate CityVille's Average Monthly Active Users (MAU) by computing the average of the MAU








1.

2.

3.

4.

CityVille, which was launched at the end of 2010, had close to 77.5 million monthly active users in 2011. This figure fell to

around 23 million in 2012. Going forward, we expect the decline to continue as users shift to newer games.


Supporting:

LIKE MOST OTHER SOCIAL GAMES, CITYVILLE'S LONG-TERM USER ENGAGEMENT CAPABILITY IS UNDER DOUBT –

CityVille is set in an urban situation and is a social city building game. The game is facing competition from other

games such SIMS, which was launched by EA and has taken away some market share. CityVille has lost some of its

novelty factor since its launch in 2010. Unlike Texas HoldEm, CityVille user's interest tends to decline once he/she

has unlocked several levels and achievements. Users also tend to drop off once the purchase of virtual goods become

necessary to enjoy the gameplay.


fighting for user base. Most users switch to newer games after a while and therefore we expect CityVille's Average

Monthly Active Users (MAU) to decline going forward. Most games including FarmVille and CastleVille will

continue to show a similar decline.







Mitigating:





CityVille's Average Monthly Active Users (MAU) (Mil)

2009 1 0 1 1 1 2 1 3 1 4 1 5 1 6 1 7 1 8 1 9 2 00

1 0

2 0

3 0

4 0

5 0

6 0

7 0

8 0



5.

6.

7.





gaming market.








manner.





games.




revenues.




2009 1 0 1 1 1 2 1 3 1 4 1 5 1 6 1 7 1 8 1 9 2 00

1 0

2 0

3 0

4 0

5 0

6 0

7 0





1.

2.

3.

4.

5.























Mitigating:













2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Total Revenue (Mil $) 0.00 0.00 260 74.2 43.4 34.7 29.5 26.6 23.9 21.5 20.4 20.4


Indirect Expense (Mil $) 0.00 0.00 155 40.6 18.8 15.6 13.8 12.8 11.9 10.9 11.8 12.0

Gross Profit (Mil $) 0.00 0.00 189 54.5 32.1 25.6 21.7 19.5 17.5 15.7 14.8 14.8




•

•

•

•

•

•

In addition, you can see the detailed P&L for the CityVille business in the Appendix (link)

CastleVille The most important drivers for the CastleVille business are:

CastleVille's Average Revenue Per User (ARPU)

CastleVille's Average Monthly Active Users (MAU)


— CASTLEVILLE'S AVERAGE REVENUE PER USER (ARPU) —

CastleVille's Average Revenue Per User (ARPU) denotes the dollar value of the average revenue generated by Zynga per










Consumables



CastleVille's Average Revenue Per User (ARPU) ($)

2009 2011 2012 2013 2014 2015 2016 2017 2018 2019 20200.00

0.05

0.10

0.15

0.20

0.25




1.

2.

3.

4.

5.

6.

7.


metric estimated for all of Zynga's games (except poker). CastleVille's Average Revenue Per User (ARPU) jumped sharply







Supporting:

VIRTUAL MERCHANDISE TO DRIVE REVENUES – CastleVille users who have spent significant time building up the

virtual lands and castles, and unlocking levels, tend to spend money on virtual goods to enhance game-play. Though

users tend to drop off or lose interest with time, those who continue playing invest in virtual goods and provide a

market for their sales.

























Mitigating:












8.

1.








— CASTLEVILLE'S AVERAGE MONTHLY ACTIVE USERS (MAU) —



social games. We calculate CastleVille's Average Monthly Active Users (MAU) by computing the average of the MAU


CastleVille, which was launched in November 2011, had approximately 15 million monthly active users in 2012. Although

the user count increased substantially in 2012, we expect it to decline going forward.


Supporting:

LIKE MOST OTHER SOCIAL GAMES, CASTLEVILLE'S LONG-TERM USER ENGAGEMENT CAPABILITY IS UNDER DOUBT –

CastleVille is set in a medieval environment, where users explore their virtual lands and build castles. The reputation

mechanism helps users unlock levels and achievements and is quite engaging. The game has faced competition from

other games such as SIMS, but is still one of the top games in its category. CastleVille was extremely well received by

the social gaming community on its launch and MAU reached 26.5 million. The game has since lost some of its

novelty factor. Unlike Texas HoldEm, CastleVille user's interest tends to decline once he/she has unlocked several

CastleVille's Average Monthly Active Users (MAU) (Mil)

2009 2011 2012 2013 2014 2015 2016 2017 2018 2019 20200.0

2.5

5.0

7.5

10.0

12.5

15.0





2.

3.

4.

5.

6.

levels and achievements. Users also tend to drop off once the purchase of virtual goods become necessary to enjoy the

gameplay.


fighting for user base. Most users switch to newer games after a while and therefore we expect CastleVille's Average

Monthly Active Users (MAU) to decline going forward. Most games including FarmVille and CityVille will continue

to show a similar decline.

Mitigating:









gaming market.








manner.





games.




revenues.




1.

2.

3.






expect this figure to slightly decline, and remain more or less stable.




















2009 1 0 1 1 1 2 1 3 1 4 1 5 1 6 1 7 1 8 1 9 2 00

1 0

2 0

3 0

4 0

5 0

6 0

7 0



4.

5.

•

•

•

•

•

Mitigating:













In addition, you can see the detailed P&L for the CastleVille business in the Appendix (link)

Empires & Allies The most important drivers for the Empires & Allies business are:

Empires & Allies Average Revenue Per User (ARPU)

Empires & Allies Average Monthly Active Users (MAU)


— EMPIRES & ALLIES AVERAGE REVENUE PER USER (ARPU) —

Empires & Allies Average Revenue Per User (ARPU) denotes the dollar value of the average revenue generated by Zynga

per user in one month. Zynga generates this revenue primarily through the sale of virtual goods and advertising.









Consumables

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Total Revenue (Mil $) 0.00 0.00 8.40 47.9 28.0 22.4 19.1 17.1 15.4 13.9 13.2 13.2



Gross Profit (Mil $) 0.00 0.00 6.10 35.2 20.7 16.5 14.0 12.6 11.3 10.1 9.56 9.53





•

1.

2.

3.




metric estimated for all of Zynga's games (except poker). Empires & Allies Average Revenue Per User (ARPU) jumped

sharply in 2011 as Zynga's games gained huge popularity on Facebook. However, the figure declined slightly in 2012

amounting to $0.27. This decline can be attributed to recent weakness in social gaming in general, and Zynga in particular.

A lot of competitors have cropped up and Zynga's once famous franchises are losing fans.




Supporting:

VIRTUAL WARS TO CAN ENTICE USERS – Once users have unlocked levels, powers and characters, they spend money to

purchase Empire extras and boosters to keep their armies strong and this virtual weapons escalation among the top

players keeps the sales of virtual goods high. We can expect this to continue as there are few popular alternatives to

this game on Facebook.











Empires & Allies Average Revenue Per User (ARPU) ($)

2011 2012 2013 2014 2015 2016 2017 2018 2019 20200.00

0.05

0.10

0.15

0.20

0.25



4.

5.

6.

7.

8.















Mitigating:















— EMPIRES & ALLIES AVERAGE MONTHLY ACTIVE USERS (MAU) —



social games. We calculate Empires & Allies Average Monthly Active Users (MAU) by computing the average of the

MAU numbers over the entire year.







Empires & Allies, which was launched in June 2011, had roughly 7.4 million monthly active users in 2012. As Zynga plans

to shut down this game in Q2 2013, number of monthly active users will fall to zero.



Zynga's Gross Margin represents the company's gross profit (revenues - cost of goods sold) expressed as a percentage

of revenues.

Empires & Allies Average Monthly Active Users (MAU) (Mil)

2011 2012 2013 2014 2015 2016 2017 2018 2019 20200.0

2.5

5.0

7.5

10.0

12.5

15.0

17.5


2009 1 0 1 1 1 2 1 3 1 4 1 5 1 6 1 7 1 8 1 9 2 00

1 0

2 0

3 0

4 0

5 0

6 0

7 0





1.

2.

3.

4.

5.

























Mitigating:













2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Total Revenue (Mil $) 0.00 0.00 62.2 23.6 4.25 0.00 0.00 0.00 0.00 0.00 0.00 0.00



Gross Profit (Mil $) 0.00 0.00 45.1 17.4 3.15 0.00 0.00 0.00 0.00 0.00 0.00 0.00




In addition, you can see the detailed P&L for the Empires & Allies business in the Appendix (link)



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Appendix

Summary P&L for Zynga Summary P&L for Zynga

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Total Revenues (Bil $) 0.12 0.60 1.14 1.28 0.88 0.89 0.91 0.93 0.95 0.97 0.99 1.01

Texas HoldEm Poker (% of total) 42.2 40.8 41.9 36.1 42.4 43.4 43.7 44.1 44.4 44.9 45.3 45.4

New & Other Games (% of total) 37.9 40.1 17.8 46.8 40.3 41.2 42.3 43.1 43.9 44.4 44.7 44.9

FarmVille (% of total) 19.9 19.1 11.3 5.76 8.65 8.93 8.72 8.12 7.55 7.04 6.55 6.37

CityVille (% of total) 0.00 0.00 22.8 5.79 4.92 3.91 3.24 2.86 2.52 2.23 2.07 2.02

CastleVille (% of total) 0.00 0.00 0.74 3.74 3.17 2.52 2.09 1.85 1.63 1.44 1.34 1.30

Empires & Allies (% of total) 0.00 0.00 5.45 1.84 0.48 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Direct Expenses (Mil $) 56.3 173 312 340 229 233 241 248 256 263 271 281







Gross Profit (Mil $) 65.2 423 827 941 652 655 668 679 692 702 715 732







Indirect Expenses (Mil $) 142 121 679 700 382 399 426 447 471 491 571 595







Free Cash Flow (Mil $) n/a n/a n/a n/a 270 255 241 232 221 211 143 136

Texas HoldEm Poker (% of total) n/a n/a n/a n/a 42.4 43.4 43.7 44.1 44.4 44.9 45.3 45.4

New & Other Games (% of total) n/a n/a n/a n/a 40.3 41.2 42.3 43.1 43.9 44.4 44.7 44.9

FarmVille (% of total) n/a n/a n/a n/a 8.65 8.93 8.72 8.12 7.55 7.04 6.55 6.37

CityVille (% of total) n/a n/a n/a n/a 4.92 3.91 3.24 2.86 2.52 2.23 2.07 2.02

CastleVille (% of total) n/a n/a n/a n/a 3.17 2.52 2.09 1.85 1.63 1.44 1.34 1.30


Detailed P&L for the Texas HoldEm Pokerbusiness The most important drivers for the Texas HoldEm Poker business are discussed above, here is the detailed P&L.

Summary P&L for Zynga continued

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Empires & Allies (% of total) n/a n/a n/a n/a 0.48 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Texas HoldEm Poker: Detailed P&L

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Revenues

Texas HoldEm Poker revenues (Mil$)

51.3 243 477 462 374 385 397 409 421 434 447 460


Monthly Active Users (MAU)15.6 31.9 35.5 36.2 32.6 33.6 34.6 35.6 36.7 37.8 38.9 40.1


Revenue Per User (ARPU)0.27 0.64 1.12 1.06 0.96 0.96 0.96 0.96 0.96 0.96 0.96 0.96

Total Revenues (Mil $) 51.3 243 477 462 374 385 397 409 421 434 447 460

Expenses

Direct Expenses (Mil $) 23.7 70.9 130 122 97.5 101 105 109 113 118 123 128

Zynga's Gross Margin (%) 53.7 70.9 72.6 73.5 74.0 73.7 73.5 73.2 73.0 72.7 72.5 72.2

Indirect Expenses (Mil $) 60.1 49.5 284 252 162 173 186 197 209 220 258 270

SG&A Expenses as % of

Revenues (%)53.3 22.3 24.6 23.5 25.0 26.5 28.0 29.0 30.0 31.0 32.0 33.0

R&D Expenses as % of Revenues

(%)40.5 23.3 30.9 34.7 41.7 40.7 39.7 38.7 37.7 36.7 36.7 36.7

Increase in Net Working Capital

as % of Revenue (%)n/a -27.9 -8.76 -6.96 -15.7 -15.7 -15.7 -15.7 -15.7 -15.7 -15.7 -15.7

Increase in Net Operating Assets

as % of Revenue (%)n/a -6.34 0.54 2.85 4.79 4.79 4.79 4.79 4.87 4.80 4.79 4.79

Capital Expenditures as % of

Revenue (%)32.0 9.51 20.9 7.65 3.45 4.45 5.45 6.45 7.45 8.45 9.45 9.45

Stock Based Compensation % of

Operating Expenses (%)2.34 5.76 63.5 25.9 20.9 15.9 10.9 5.95 2.95 2.95 2.95 2.95

Tax Rate (%) 0.00 28.4 0.59 -31.3 -0.00 -0.00 -0.00 -0.00 -0.00 -0.00 -0.00 30.0

Total Expenses (Mil $) 83.8 120 415 375 259 274 291 306 323 339 382 398

Gross Profit (Mil $) 27.5 172 346 339 277 284 291 299 307 315 324 332



Detailed P&L for the New & Other Gamesbusiness The most important drivers for the New & Other Games business are discussed above, here is the detailed P&L.

New & Other Games: Detailed P&L

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Revenues

New & Other Games revenues (Mil$)

46.0 239 202 599 356 366 385 400 416 428 441 455

Average Monthly Active Users for

New & Other Games (Mil)56.1 125 60.2 187 123 127 134 139 144 149 153 158

Average Revenue Per User for

New & Other Games ($)0.07 0.16 0.28 0.27 0.24 0.24 0.24 0.24 0.24 0.24 0.24 0.24

Total Revenues (Mil $) 46.0 239 202 599 356 366 385 400 416 428 441 455

Expenses

Direct Expenses (Mil $) 21.3 69.8 55.5 159 92.7 96.4 102 107 112 117 121 126


Indirect Expenses (Mil $) 53.9 48.6 120 327 154 164 180 193 206 218 255 267


Revenues (%)53.3 22.3 24.6 23.5 25.0 26.5 28.0 29.0 30.0 31.0 32.0 33.0


(%)40.5 23.3 30.9 34.7 41.7 40.7 39.7 38.7 37.7 36.7 36.7 36.7


as % of Revenue (%)n/a -27.9 -8.76 -6.96 -15.7 -15.7 -15.7 -15.7 -15.7 -15.7 -15.7 -15.7


as % of Revenue (%)n/a -6.34 0.54 2.85 4.79 4.79 4.79 4.79 4.87 4.80 4.79 4.79


Revenue (%)32.0 9.51 20.9 7.65 3.45 4.45 5.45 6.45 7.45 8.45 9.45 9.45



Tax Rate (%) 0.00 28.4 0.59 -31.3 -0.00 -0.00 -0.00 -0.00 -0.00 -0.00 -0.00 30.0

Total Expenses (Mil $) 75.2 118 176 486 246 261 282 300 319 335 377 393

Gross Profit (Mil $) 24.7 169 147 440 263 270 282 293 303 311 320 328



Detailed P&L for the FarmVille business The most important drivers for the FarmVille business are discussed above, here is the detailed P&L.

FarmVille: Detailed P&L

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Revenues

FarmVille Revenues (Mil $) 24.2 114 129 73.7 76.3 79.3 79.3 75.4 71.6 68.0 64.6 64.6

FarmVille's Average Monthly

Active Users (MAU)29.5 59.8 38.5 23.1 26.6 27.9 27.9 26.5 25.2 23.9 22.7 22.7

FarmVille's Average Revenue Per

User (ARPU)0.07 0.16 0.28 0.27 0.24 0.24 0.24 0.24 0.24 0.24 0.24 0.24

Total Revenues (Mil $) 24.2 114 129 73.7 76.3 79.3 79.3 75.4 71.6 68.0 64.6 64.6

Expenses

Direct Expenses (Mil $) 11.2 33.2 35.5 19.6 19.9 20.9 21.1 20.2 19.4 18.6 17.8 18.0


Indirect Expenses (Mil $) 28.4 23.2 77.1 40.3 33.1 35.7 37.2 36.3 35.5 34.6 37.4 38.0


Revenues (%)53.3 22.3 24.6 23.5 25.0 26.5 28.0 29.0 30.0 31.0 32.0 33.0


(%)40.5 23.3 30.9 34.7 41.7 40.7 39.7 38.7 37.7 36.7 36.7 36.7


as % of Revenue (%)n/a -27.9 -8.76 -6.96 -15.7 -15.7 -15.7 -15.7 -15.7 -15.7 -15.7 -15.7


as % of Revenue (%)n/a -6.34 0.54 2.85 4.79 4.79 4.79 4.79 4.87 4.80 4.79 4.79


Revenue (%)32.0 9.51 20.9 7.65 3.45 4.45 5.45 6.45 7.45 8.45 9.45 9.45



Tax Rate (%) 0.00 28.4 0.59 -31.3 -0.00 -0.00 -0.00 -0.00 -0.00 -0.00 -0.00 30.0

Total Expenses (Mil $) 39.6 56.4 112 59.9 53.0 56.5 58.3 56.5 54.9 53.2 55.2 55.9

Gross Profit (Mil $) 13.0 80.9 93.9 54.2 56.5 58.5 58.3 55.2 52.2 49.5 46.8 46.7



Detailed P&L for the CityVille business The most important drivers for the CityVille business are discussed above, here is the detailed P&L.

CityVille: Detailed P&L

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Revenues

CityVille Revenues (Mil $) 0.00 0.00 260 74.2 43.4 34.7 29.5 26.6 23.9 21.5 20.4 20.4

CityVille's Average Monthly

Active Users (MAU)0.00 0.00 77.5 23.2 15.1 12.1 10.3 9.25 8.32 7.49 7.12 7.12

CityVille's Average Revenue Per

User (ARPU)n/a n/a 0.28 0.27 0.24 0.24 0.24 0.24 0.24 0.24 0.24 0.24

Total Revenues (Mil $) 0.00 0.00 260 74.2 43.4 34.7 29.5 26.6 23.9 21.5 20.4 20.4

Expenses



Indirect Expenses (Mil $) 0.00 0.00 155 40.6 18.8 15.6 13.8 12.8 11.9 10.9 11.8 12.0


Revenues (%)53.3 22.3 24.6 23.5 25.0 26.5 28.0 29.0 30.0 31.0 32.0 33.0


(%)40.5 23.3 30.9 34.7 41.7 40.7 39.7 38.7 37.7 36.7 36.7 36.7


as % of Revenue (%)n/a -27.9 -8.76 -6.96 -15.7 -15.7 -15.7 -15.7 -15.7 -15.7 -15.7 -15.7


as % of Revenue (%)n/a -6.34 0.54 2.85 4.79 4.79 4.79 4.79 4.87 4.80 4.79 4.79


Revenue (%)32.0 9.51 20.9 7.65 3.45 4.45 5.45 6.45 7.45 8.45 9.45 9.45



Tax Rate (%) 0.00 28.4 0.59 -31.3 -0.00 -0.00 -0.00 -0.00 -0.00 -0.00 -0.00 30.0

Total Expenses (Mil $) 0.00 0.00 226 60.3 30.1 24.7 21.7 19.9 18.3 16.8 17.5 17.7

Gross Profit (Mil $) 0.00 0.00 189 54.5 32.1 25.6 21.7 19.5 17.5 15.7 14.8 14.8



Detailed P&L for the CastleVille business The most important drivers for the CastleVille business are discussed above, here is the detailed P&L.

CastleVille: Detailed P&L

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Revenues

CastleVille Revenues (Mil $) 0.00 0.00 8.40 47.9 28.0 22.4 19.1 17.1 15.4 13.9 13.2 13.2

CastleVille's Average Monthly

Active Users (MAU)0.00 n/a 2.50 15.0 9.75 7.80 6.63 5.97 5.37 4.83 4.59 4.59

CastleVille's Average Revenue Per

User (ARPU)0.00 n/a 0.28 0.27 0.24 0.24 0.24 0.24 0.24 0.24 0.24 0.24

Total Revenues (Mil $) 0.00 0.00 8.40 47.9 28.0 22.4 19.1 17.1 15.4 13.9 13.2 13.2

Expenses





Revenues (%)53.3 22.3 24.6 23.5 25.0 26.5 28.0 29.0 30.0 31.0 32.0 33.0


(%)40.5 23.3 30.9 34.7 41.7 40.7 39.7 38.7 37.7 36.7 36.7 36.7


as % of Revenue (%)n/a -27.9 -8.76 -6.96 -15.7 -15.7 -15.7 -15.7 -15.7 -15.7 -15.7 -15.7


as % of Revenue (%)n/a -6.34 0.54 2.85 4.79 4.79 4.79 4.79 4.87 4.80 4.79 4.79


Revenue (%)32.0 9.51 20.9 7.65 3.45 4.45 5.45 6.45 7.45 8.45 9.45 9.45



Tax Rate (%) 0.00 28.4 0.59 -31.3 -0.00 -0.00 -0.00 -0.00 -0.00 -0.00 -0.00 30.0

Total Expenses (Mil $) 0.00 0.00 7.31 38.9 19.4 16.0 14.0 12.9 11.8 10.9 11.3 11.4

Gross Profit (Mil $) 0.00 0.00 6.10 35.2 20.7 16.5 14.0 12.6 11.3 10.1 9.56 9.53



Detailed P&L for the Empires & Alliesbusiness The most important drivers for the Empires & Allies business are discussed above, here is the detailed P&L.

Empires & Allies: Detailed P&L

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Revenues

Empires & Allies Revenues (Mil $) 0.00 0.00 62.2 23.6 4.25 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Empires & Allies Average

Monthly Active Users (MAU)n/a n/a 18.5 7.40 1.48 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Empires & Allies Average

Revenue Per User (ARPU)n/a n/a 0.28 0.27 0.24 0.24 0.24 0.24 0.24 0.24 0.24 0.24

Total Revenues (Mil $) 0.00 0.00 62.2 23.6 4.25 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Expenses





Revenues (%)53.3 22.3 24.6 23.5 25.0 26.5 28.0 29.0 30.0 31.0 32.0 33.0


(%)40.5 23.3 30.9 34.7 41.7 40.7 39.7 38.7 37.7 36.7 36.7 36.7


as % of Revenue (%)n/a -27.9 -8.76 -6.96 -15.7 -15.7 -15.7 -15.7 -15.7 -15.7 -15.7 -15.7


as % of Revenue (%)n/a -6.34 0.54 2.85 4.79 4.79 4.79 4.79 4.87 4.80 4.79 4.79


Revenue (%)32.0 9.51 20.9 7.65 3.45 4.45 5.45 6.45 7.45 8.45 9.45 9.45



Tax Rate (%) 0.00 28.4 0.59 -31.3 -0.00 -0.00 -0.00 -0.00 -0.00 -0.00 -0.00 30.0

Total Expenses (Mil $) 0.00 0.00 54.1 19.2 2.95 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Gross Profit (Mil $) 0.00 0.00 45.1 17.4 3.15 0.00 0.00 0.00 0.00 0.00 0.00 0.00



Documents

Zynga Trefis Analysis