Growth of social network games puts Zynga in front

SAN FRANCISCO - Zynga Game Network's estimated worth has surpassed Electronic Arts' stock market value, a sign of the ascendance of social networking entertainment at the expense of traditional video games.

Zynga, the maker of such games as FarmVille and FrontierVille, is valued at US$5.51 billion ($7.37 billion), according to SharesPost, an exchange for shares of privately held companies.

Electronic Arts, the second-largest game publisher, is worth US$5.22 billion on the Nasdaq stock market.

Started by Mark Pincus almost four years ago, Zynga has become one of the fastest-growing technology companies by using Facebook's social network to distribute games.

It makes money by selling virtual goods, such as vehicles and weapons that help players advance in games.

The company has grabbed a third of that market, which is worth US$1.6 billion this year, according to Inside Network in Palo Alto, California.

"The valuation is not that crazy, given what's going on in the market," said Atul Bagga, an analyst at ThinkEquity in San Francisco, who estimates the virtual goods market may reach US$3.6 billion in three years.

"It's not that terribly expensive, seeing the growth prospects."

Electronic Arts, meanwhile, faces declining retail sales of gaming hardware and software. More consumers would rather play online and social networking games, rather than heading to a store to buy a shrink-wrapped program.

That's forced Electronic Arts to cut jobs and seek acquisitions for growth.

Its shares have dropped 6.3 per cent since March 1. Zynga's estimated value has more than doubled in that period.

Zynga is the largest maker of games on Facebook, with more than 210 million monthly active users, according to AppData.com.

It has raised more than US$350 million in private capital, has made six acquisitions since May and expanded its workforce by a third in the past quarter to 1200 employees.

- BLOOMBERG