The discussions are the latest sign of the investor frenzy around a small class of large, fast-growing Web start-ups focused on the consumer market that have yet to go public.
Although valuations of the most successful Internet start-ups are getting pricey [...] part of Zynga's appeal is that it has tapped into a lucrative method of making money online.
Umm does that really stand up? Well the pricey bit certainly does.
Lets think about a company that has got into making money on-line, the sort of company maybe that makes a range of mobile games for iPhone, Android, Blackberry, Windows Mobile, Palm Pre and Symbian and indeed has a history of games on mobile platforms. How about a company that has already got a pretty extensive multi-player online experience and indeed had a (failed) "social" online game and could choose to re-enter the market in a myriad of ways.
So Electronic Arts which according to the open market is worth $6bn, in other words its worth less than the low end estimate on Zynga. So what is the barrier to entry for EA, one of the world's largest games developers to take one of its internationally renowned franchises (e.g. Sim City) and develop a lightweight "social" game ala Zynga for delivery via Facebook. Much, much lower than the barrier the other way around for Zynga to develop the sort of real-time sports and action games that EA specialise in.
Again as before its more than possible I'm calling this one wrong, but its hard to imagine at this stage that EA with its new digital strategy couldn't decide to go head to head and leverage its much greater IP, brand identity and established mobile offerings. Zynga bigger than EA and investors desperate to invest and hassling to get in? What was that EA stock ticker again....