Zynga 2014 Annual Report Download - page 26

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 3—“Fair Value Measurements” in the
notes to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Some of our players may make sales or purchases of virtual goods used in our games through unauthorized or fraudulent third
-party
websites, which may reduce our revenue.
Virtual goods in our games have no monetary value outside of our games. Nonetheless, some of our players may make sales and/or
purchases of our virtual goods, such as Zynga Poker Classic and Zynga Poker virtual poker chips, through unauthorized third-party sellers in
exchange for real currency. These unauthorized or fraudulent transactions are usually arranged on third-party websites and the virtual goods
offered may have been obtained through unauthorized means such as exploiting vulnerabilities in our games, from scamming our players with
fake offers or virtual goods or other game benefits, or from credit card fraud. We do not generate any revenue from these transactions. These
unauthorized purchases and sales from third-party sellers could impede our revenue and profit growth by, among other things:
To discourage unauthorized purchases and sales of our virtual goods, we state in our terms of service that the buying or selling of virtual
currency and virtual goods from unauthorized third-party sellers may result in bans from our games or legal action. We have banned players as a
result of such activities. We have also filed lawsuits against third parties attempting to “sell” virtual goods from our games, particularly poker
chips from
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• 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.
•
decreasing revenue from authorized transactions;
•
creating downward pressure on the prices we charge players for our virtual currency and virtual goods;
•
increasing chargebacks from unauthorized credit card transactions;
•
causing us to lose revenue from paying players as our partners increase their credit card fraud prevention efforts;
•
causing us to lose revenue from paying players who stop playing a particular game;
•
increasing costs we incur to develop technological measures to curtail unauthorized transactions;
•
generating legal claims relating to the diminution of value of our virtual goods;
•
resulting in negative publicity or harm our reputation with players and partners; and
•
increasing customer support costs to respond to dissatisfied players.