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Zynga Testing Life Out of Facebook’s Nest

The company will take games straight to consumers


While Groupon has essentially committed IPO suicide, there is another upcoming deal that has been fairly quiet: Zynga.

But this week, the noise level ramped up.

Zynga, which is the leading developer of social games, launched 10 new titles. Some are sequels, such as Mafia Wars II. But there are some interesting new ones like CastleVille and Hidden Chronicles. Zynga is also getting more aggressive with Google’s (Nasdaq:GOOG) Google Plus social network as well as Apple’s (Nasdaq:AAPL) iPad.

Yet perhaps the most interesting initiative was its announcement Tuesday of Project Z. Two years in the making, this is a new online platform that allows for playing games on both desktop PCs and mobile devices. It’s Zynga’s way of weaning itself off of Facebook.

Keep in mind that much of the company’s revenue comes from the ubiquitous social network. And while this has certainly propelled growth, it does have some big risks. Might Facebook tighten its requirements — or even create its own games?

In fact, Electronic Arts (Nasdaq:ERTS) is already making significant inroads on Facebook. Through acquisitions and the leveraging of its own content – such as “The Sims Social” — the company is now No. 2 in social games.

So with Project Z, Zynga will have much more control over its own environment – perhaps creating the gaming social graph. Moreover, it could be a way to avoid having to fork over huge fees to Facebook (the company gets a 30% cut for its credits).

If it works out, it could be a nice boost for the business. But will it be enough to get IPO inventors excited? If anything, it should help allay some of the fears.

In addition, it still looks like investors are hungry for social deals. Just look at the continued strength of LinkedIn (NYSE:LNKD).

We may see a Zynga offering hit the market within a month or so (the company filed for an IPO in July) – especially as stocks regain their footing. And it could turbo-charge the IPO market, which has been dead since August.

Tom Taulli is the author of “All About Short Selling” and “All About Commodities.” You can also find him at Twitter account @ttaulli. He does not own a position in any of the stocks named here.


Article printed from InvestorPlace Media,

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