Zynga, Facebook’s baby, seems to have lost it’s parent’s halo in the past month. This is merely because those evaluating the company are looking at it all wrong. As I mentioned in I Was Wrong About Suggesting A Tech Bubble, technology allows for unprecedented growth, that box stores cannot match. What bothers me most, is not that the stock price is down, that happens, but rather the masses interpretation of Zynga. I have read multiple articles, tweets, and of course watched CNBC, and I have to say all these people are looking at the gaming giant wrong.
What makes a great company? The answer to this question is simple, a great company is one that sees potential and takes advantage of it. Zynga has this quality and it sees the future in a multiple platform gaming community. The Q&A in the conference call also showed that the smart money is behind this movement as well . What Zynga has is the potential to be more than a Facebook company, they have the willpower and the desire to take over the phone market. Gaming on the smartphone is the future, just like gaming over multiple platforms is the future of gaming. Well who is aligned to profit from this? Zynga. The conference call said one thing loud and clear, that Zynga sees the smartphone market for the taking and they are taking it.
That’s just great isn’t it, but what about making money? A lot of questions surround the monetization of Zynga. Where will Zynga make money? How can a company make money with Facebook? How can a company make money by giving away a free product? All these questions and many more are well founded, the answer is much easier than one initially thinks. We are witnessing advertisements on cell phones and Facebook in their infancy. We are seeing AdWords before it was AdWords. The growth of the smartphone arena is unquestionable, last quarter well over 200 million smartphone were sold. Zynga is selling apps on all of them. The phones they aren’t selling them apps on, they are giving away free apps and profiting from advertisements. As the call suggested the ads are only going to get better as app advertisement goes from its infancy to becoming a toddler. The strongest argument for the future advertisement potential is the companies that are backing Zynga, on the call they mentioned a giant entertainment, Fox. My memory fails me on the other big names, but that fact remains, Zynga has epic advertisement potential and big names see it.
The stock is not institutionally held in high numbers because the company doesn’t have potential. Big money knows the epic growth that the smartphone market is seeing and will see. Zynga’s purchase of OMGPOP shows that they will take any measure to have the top (profiting) games. I like putting my money to work behind companies that are playing to win. Just go listen to the earnings call, it suggests a company with a vision that knows how to implement it. They are across multiple growing platforms and are the gaming giant of the next generation. You can’t fight the trend.