Zynga 2015 Annual Report Download - page 26

Table of Contents
• 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.
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, Inc. (“OMGPOP”) and we recorded an asset impairment charge of $95.5 million.
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 Hit It Rich! Slots virtual coins 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:
• 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.
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 Zynga Poker , outside of our games. We have
also employed technological measures to help detect unauthorized
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