Zynga Partners with Hasbro to Make Money from Branded Toys

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Zynga

Zynga (NASDAQ:ZNGA) has announced a new partnership with Hasbro (NASDAQ:HAS), a multinational toy and boardgame maker, to develop toys and games based on Zynga’s top games like FarmVille, CityVille and Mafia Wars. Under the terms of the deal, Hasbro will create toys, games and other merchandise based on Zynga’s social games, and pay Zynga a licensing fee based on the revenue generated from sales. [1] We currently have a $10.20 Trefis price estimate for Zynga, which stands nearly 20% below its market price.

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Zynga is the largest social gaming company in the world with over 230 million monthly active users. It competes primarily with Electronic Arts (NASDAQ:EA), Playdom which was recently acquired by Disney (NYSE:DIS) and other independent social gaming studios. It generates almost all of its revenue by selling virtual goods through its games, or from advertising.

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Selling branded toys and merchandise based on its very popular titles could open up an additional source of revenue, and help Zynga reduce its dependence on Facebook. Rovio, the creator of Angry Birds, has sold millions of toys, board games and other merchandise based on its popular title. Zynga has a much larger player base, with a wider selection of games that target a younger audience. It could sell even more toys than Rovio. Zynga is exploring several options to increase its revenue, including mobile games, online gambling, and now toys and board games.

Zynga will announce its Q4 2011 earnings on February 14. We expect to see significant growth in its revenue in Q4. We also expect to see some announcements about its plan to venture into online gambling and the new deal with Hasbro in the earnings call.

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Notes:
  1. Zynga, Hasbro partner to make toys, games, Reuters []