Zynga 2013 Annual Report Download - page 21

Download and view the complete annual report

Please find page 21 of the 2013 Zynga annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 129

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129

Table of Contents
The benefits of an acquisition or investment may also take considerable time to develop, and we cannot be certain that any particular
acquisition or investment will produce the intended benefits, which could adversely affect our business and operating results. Our ability to grow
through future acquisitions will depend on the availability of suitable acquisition and investment candidates at an acceptable cost, our ability to
compete effectively to attract these candidates and the availability of financing to complete larger acquisitions. Acquisitions could result in
potential dilutive issuances of equity securities, use of significant cash balances or incurrence of debt (and increased interest expense), contingent
liabilities or amortization expenses related to intangible assets or write-offs of goodwill and/or intangible assets, which could adversely affect
our results of operations and dilute the economic and voting rights of our stockholders. For example, in the third quarter of 2012, we made the
decision to discontinue the development of certain games associated with technology and other intangible assets previously acquired from
OMGPOP and we recorded an asset impairment charge of $95.5 million. For more information, see Note 5—“Goodwill and Other Intangible
Assets” in the notes to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Our prospects may suffer if our network is unsuccessful.
We aspire to expand our network to leverage our existing and new games to bring the best social playing experiences to our audience,
starting with our Word with Friends players, and further broaden to other games to ultimately create the best experience for play that includes
mobile and web players. If our network fails to engage players or attract advertisers, we may fail to generate sufficient revenue or bookings to
justify our investment in the development and operation of our network. We may also encounter technical and operational challenges operating a
network.
We are subject to the terms of service of third party social networks and platforms such as Facebook, Apple and Google, where our games
are distributed, which may limit our ability to operate or promote our network. For example, under the current terms of service with Facebook,
we are limited in our ability to use a Facebook users friends list and Facebook’s communication channels to promote our network. This may
limit our ability to reach Facebook users from our network and may limit the number of players that use our network. In December 2012,
Facebook amended its standard terms of service to prohibit (i) apps on the Facebook canvas from promoting or linking to game sites other than
Facebook and (ii) the use of emails obtained from Facebook to promote or link to desktop web games on platforms other than Facebook. We
now are prohibited from cross-promoting traffic to games that are offered on platforms other than Facebook from our games on Facebook.
Moreover, we are no longer permitted to use e-mail addresses obtained from Facebook to promote desktop web games that are not on the
Facebook platform, subject to certain limited exceptions. If we are not successful in operating, growing and generating revenue from our
network, we may not be able to maintain or grow our revenue as anticipated and our financial results could be adversely affected.
17
•
in some cases, the need to transition operations and players onto our existing or new platforms and the potential loss of, or harm to,
our relationships with employees, players and other suppliers as a result of integration of new businesses;
•
in certain instances, the ability to exert control of acquired businesses that include earnout provisions in the agreements relating to
such acquisitions or the potential obligation to fund an earnout for a product that has not met expectations;
•
our dependence on the accuracy and completeness of statements and disclosures made or actions taken by the companies we acquire
or their representatives, when conducting due diligence and evaluating the results of such due diligence; and
•
liability for activities of the acquired company before the acquisition, including intellectual property and other litigation claims or
disputes, information security vulnerabilities, violations of laws, rules and regulations, commercial disputes, tax liabilities and other
known and unknown liabilities.