Zynga 2013 Annual Report Download - page 7

Table of Contents
PART I
ITEM 1. BUSINESS
Overview
Zynga Inc. (“Zynga,” “we” or “the Company”)
is a leading provider of social game services. We develop, market and operate social games
as live services played over the Internet, social networking sites and mobile platforms. Our games are accessible on Facebook and other social
networks, mobile platforms and Zynga.com. Generally, all of our games are free to play, and we generate revenue through the in-game sale of
virtual goods, mobile game download fees and advertising services.
We are a pioneer and innovator of social games and a leader in making “play” a core activity on the Internet. We believe our leadership
position in social games is the result of our significant investment in our people, content, brand, technology and infrastructure. Our leadership
position in social games is defined by the following:
On mobile platforms, we have several popular game franchises, including Words With Friends and Zynga Poker . Two mobile games we
released in 2013— Running With Friends , rebranded as Stampede Run, and Solstice Arena —received Apple’s “Editor’s Choice” honors,
demonstrating our commitment to developing high quality mobile social games.
We leverage our scale to increase player engagement, cross-promote our portfolio of games, continually enhance existing games, launch
new games and build the Zynga brand. We believe our scale results in network effects that deliver compelling value to our players, and we are
committed to making significant investments to grow our community of players, their engagement and monetization over time.
Consistent with our free-to-play business model, a small portion of our players have historically been payers. During the three months
ended December 31, 2013, we had approximately 1.3 million MUPs (excluding payers who use certain payment methods for which unique payer
data is not available). Because the opportunity for social interactions increases as the number of players increases, we believe that maintaining
and growing our overall number of players, including the number of players who may not purchase virtual goods, is important to the success of
our business. As a result, we believe that the number of players who choose to purchase virtual goods will continue to constitute a small portion
of our overall players.
Our top three games historically have contributed the majority of our revenue. Our top three games accounted for 54%, 55% and 57% of
our online game revenue in 2013, 2012 and 2011, respectively.
On February 11, 2014, we completed the acquisition of 100% of the equity interests in NaturalMotion pursuant to the share purchase
agreement, dated January 30, 2014, by and among us, Zynga Game International Limited, NaturalMotion, NaturalMotion’s shareholders and
Shareholder Representative Services LLC, as sellers’ representative. NaturalMotion’s shareholders and vested option holders received an
aggregate of $391 million in cash and 39.8 million shares of our Class A common stock.
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•
Engaged and Global Community of Players.
According to AppData, as of December 31, 2013, we had three of the top 10 games on
Facebook based on DAUs. Our players are also highly engaged, with our games being played by 27 million DAUs, worldwide, as of
December 31, 2013.
•
Leading Portfolio of Social Games.
We have many of the most popular and successful online social games, including the
FarmVille,
Words With Friends
and
Zynga Poker
franchises.
•
Scalable Technology and Data.
We process and serve more than 300 terabytes of content for our players every day. We continually
analyze game data to optimize our games. We believe that combining data analytics with creative game design enables us to create a
superior player experience.