10 Things You Should Know About Zynga and Its IPO

Zynga, the social gaming company founded by Mark Pincus in 2007, hopes to raise $1 billion in an IPO that follows upon the heels of the LinkedIn and Groupon IPOs of the last few months. Zynga’s IPO is expected to offer 10 percent of its shares to the public at a valuation of $20 billion. Here are ten things you should know about Zynga and its July 1 S-1 filing.

1. Unlike Groupon, Zynga is profitable. The company reported $90.6 million in profit in 2010. In Q1 of 2011, Zynga reported an $11.8 million profit. Zynga’s 2010 revenues were $597.46 million. For the first quarter of 2011, its revenue was $235.42 million.

2. Zynga’s IPO features three categories of shares: Class A, B and C. Class A shares will be issued to public shareholders. Class B and C shares belong to senior executives and investors. CEO Mark Pincus owns all of the Class C shares. Pincus made almost $110 million by selling a percentage of his class B shares back to Zynga last March.

3. Zynga’s investors include Kleiner Perkins Caufield & Byers, Union Square Ventures, DST Global, Institutional Venture Partners (IVP), Foundry Group, Avalon Ventures, Google, Reid Hoffman, Peter Thiel, Andreessen Horowitz, Tiger Global and Kevin Rose. Key investors own the following percentages of Class B Shares: Kleiner Perkins Caufield & Byers owns 11%; IVP, Foundry Ventures and Avalon Ventures each own 6.1%; DST Global owns 5.8% and Union Square Ventures takes claim to 5.5%.

4. Zynga is the biggest developer of Facebook applications such as CityVille, FarmVille, Mafia Wars, Words with Friends and Zynga Poker. The company has 60 million daily active users on Facebook and more daily active users than the next 30 Facebook social game developers combined.

5. Zynga has the top two games in the word category for the Apple App Store for iPhone.

6. Zynga has 2000 employees that serve 148 million unique monthly users in 166 countries. Players create 38,000 virtual entities per second and spend 2 billion minutes a day gaming.

7. “Substantially all” of Zynga’s revenue derives from the Facebook platform. Any decisions made by Facebook that adversely affect Zynga’s gaming operations would have significant repercussions on its revenue stream.

8. Zynga sees its market opportunity in the context of: a) the growth of social networking; b) a culture of the “App Economy” whereby developers have access to social network platforms; and c) A “Free-to-Play” gaming culture that allows users to play games for free, thereby attracting a broader set of users and a richer ecosystem for social interaction within the gaming environment.

9. Zynga cites its cloud based technology infrastructure as one of its core strengths. Zynga uses Amazon’s EC2 platform as a testing stage for its applications before migrating them to its own cloud based infrastructure. The company’s cloud based infrastructure carries with it the ability to provision “tools have enabled us to add up to 1,000 servers in a 24-hour period in response to game demand,” according to its S-1 filing.

10. Notable challenges Zynga foresees include its dependence on Facebook, the small percentage of players that are responsible for company revenue, the challenge of developing quality games for mobile platforms and non-PC platforms more generally, and the difficulty of recruiting and maintaining world class talent.

Verizon’s Terremark Worldwide Pledges to Avoid Vendor Lock-In and Provide Enhanced Security

Just days after Go Daddy announced plans to enter the IaaS space, Verizon revealed its readiness to deploy IaaS and managed services as a result of the consummation of its technological integration with its recent acquisition Terremark. The newly formed entity, Terremark Worldwide, plans to roll-out hosting and cloud infrastructure services by leveraging a network of over 50 data centers located in North America, Europe, the Asia-Pacific and Latin America. Importantly, Terremark Worldwide intends to avoid vendor lock-in by empowering customers to migrate data from one cloud infrastructure to another. Currently, Terremark’s cloud infrastructure services support only the VMWare hypervisor whereas its managed services hosting offering integrates with multiple hypervisors. Kerry Bailey, President of Terremark Worldwide, noted that Terremark plans to integrate with other virtualization platforms as well as develop APIs to help customers avoid lock-in as part of its product roadmap over the next few years. In response to data breaches affecting companies across the U.S., Terremark also plans to provide security risk assessments and vulnerability analyses that leverage Verizon’s expertise in security, risk, and identity and access management services.

Go Daddy Offers IaaS Cloud Computing, With a Twist

Go Daddy’s recent announcement that it plans to enter the IaaS cloud computing market throws yet another twist into the contemporary evolution of the cloud computing space. Although competing directly with Amazon Web Services and Rackspace, the domain registration and web hosting company proposes an IaaS solution called Data Center on Demand that provides fixed server resources for a monthly fee in sharp contrast to the “elasticity” and “pay per use” attributes of IaaS cloud computing. Moreover, the marketing brochure for Go Daddy’s Data Center on Demand offering asks its customers whether they have professional IT staff, noting, “managing Data Center On Demand machines requires technical expertise.” The disclaimer about professional IT staff reveals that Go Daddy has yet to build user friendly management consoles that do not require the use of shell commands. The service does offer load balancing capabilities that “can load balance any volume of traffic among an entire network of machines” and are “amazingly simple to set up.” The twist in the evolution of cloud computing represented by Go Daddy’s cloud computing product concerns its use of fixed pricing for fixed server resources. Data Center on Demand is currently in a limited release version scheduled for full deployment in July. Go Daddy’s entry into IaaS cloud computing marks a strategic move to leverage its ubiquitous brand name and gargantuan customer base to make a dent in the cloud computing revenues of AWS and Rackspace. Expect small businesses with technically savvy resources to lead the charge amongst their initial round of customers. Larger enterprises are likely to continue to stick with Amazon, Rackspace and more user friendly, pay per use models for now.

Open Data Center Alliance Pushes Cloud Inter-Operability with Eight Use Cases

Whereas healthcare IT can boast inter-operability standards in the form of HL7 compliant standards that regulate the transmission of structured, electronic health data, the cloud computing space has yet to finalize analogous protocols for the exchange of data. As a result, the Open Data Center Alliance (ODCA) has become one of several organizations pushing for cloud computing inter-operability standards that promise to enable customers to avoid vendor lock-in or inaccurate transformations of their data resulting from data migration from one vendor to another. Featuring a steering committee composed of representatives from BMW, Capgemini, China Life, China Unicom, Deutsche Bank, JPMorgan Chase, Lockheed Martin, Marriott International, Inc., National Australia Bank, Terremark, The Walt Disney Company and UBS, the Open Data Center Alliance represents enterprise customers whose annual spending on IT totals $100 billion. In an effort to accelerate the adoption of cloud inter-operability standards, on June 7, the ODCA elaborated eight use cases and a vision of inter-operable cloud computing that is intended to spur standards bodies to collaborate with vendors to define a set of standards across the industry. Topics addressed by four of the eight use cases include:

•Cloud Provider Security Assurance and Security Monitoring
•Standardized Units of Measurement for IaaS to enable meaningful comparisons of price and functionality across vendors
•Environmental standards regarding the CO2 footprint of cloud computing products and services
•Technical architecture of virtual machine inter-operability and I/O controls

More generally, the use cases address the topics of secure federation, automation, common management, policy transparency and solution transparency. The Open Data Center Alliance has pledged to share these uses cases with the Cloud Security Association (CSA), The Distributed Management Task Force (DMTF), The Organization for the Advancement of Structured Information Standards (OASIS) and TM Forum’s Enterprise Cloud Leadership Council (ECLC).

Apple’s iCloud takes cloud computing beyond IaaS, PaaS and SaaS trinity

Contemporary discussions about cloud computing typically revolve around the concepts of Infrastructure as a Service (Iaas), Platform as a Service (PaaS) and Software as a Service (SaaS). Amazon Web Services (AWS) constitutes the paradigmatic example of IaaS whereas Microsoft Azure aptly exemplifies PaaS while Salesforce.com illustrates SaaS. Where does Apple’s iCloud stand in relation to the Iaas, PaaS and SaaS trinity? Technically speaking, iCloud constitutes a SaaS application insofar as it represents a software product, delivered over the internet, that empowers users to:

•Synchronize photographs, music and iWork files across multiple devices such as iPads, iPhones and personal computers
•Remotely access iTunes or music files by matching them against iCloud’s online collection.
•Resume working where they left work on one device, upon opening a different one.
•Synchronize user settings such as passwords and browser settings across all devices.
•Enjoy free email, calendars and online storage.
•Leverage pushed updates to applications across all devices.

But taken as a whole, these features amount to a disruptive technology with the power to transform user relationships to personal computers in a way that the SaaS moniker fails to accurately capture. In other words, whereas cloud computing has traditionally acted either as a (1) platform for software development (IaaS or Paas); or (2) a mechanism for software delivery (Saas), iCloud promises to use cloud computing to create an infrastructure for personal productivity across PCs, Macs, iPads and iPhones. As Apple CEO Steve Jobs remarked in his keynote address at the 2011 WWDC conference, “We’re going to demote the PC and Mac to being a device. We’re going to move the digital hub into the cloud.”

Apple’s iCloud features all of the benefits that enterprises obtain from cloud computing in addition to some functionality specific to personal users. For example, just as enterprises often use cloud computing to harmonize updates across an ecosystem of machines, the iCloud serves the same purpose of keeping machines in sync. iCloud transforms the role of the personal computer from a platform for personal productivity to a means of inscribing upon a virtual environment for personal productivity. The personal computer becomes one point of access amongst many to an online space in which all of one’s personal productivity is performed. In other words, the iCloud promises to turn a cloud based, virtual environment into the fundamental plane for accessing music, pictures, writing, spreadsheets and more. Understood in these terms, the iCloud is less SaaS than an online space from which multiple SaaS applications originate and interact with a constellation of machines.

Read more about Apple’s iCloud, in Jobs’s own words, here.

OpenStack’s Fortunes Continue to Soar with Citrix System’s Project Olympus

Citrix System’s May 25 announcement that it intends to use OpenStack, the open source cloud computing infrastructure, as the basis for a new product called Project Olympus underscores how the open source tide is steadily shifting OpenStack’s way. Project Olympus allows customers to create IaaS clouds that leverage the OpenStack operating system code to create public or private clouds. The Project Olympus product contains two components: (1) a version of OpenStack certified by Citrix; and (2) a Citrix XenServer hypervisor optimized for the cloud. Although the product is designed for the XenServer hypervisor, Project Olympus supports the VMware vSphere and the Microsoft Hyper-V hypervisors as well. Customers requiring deployment using other hypervisors will need to use OpenStack. According to Citrix’s press release, the product will begin shipping later this year at a date yet to be specified.

Project Olympus marks the first commercialization of OpenStack in a move that reveals how open source cloud computing is never really open source. Eucalyptus, for example, provides open source APIs for Amazon EC2 that enable customers to migrate data between AWS and Eucalyptus cloud environments. That said, Eucalyptus deploys commercial code for its Eucalyptus Enterprise Edition (E3) features for management, SAN integration and VMWare compatibility purposes. Because OpenStack has yet to deploy this management functionality, we expect Citrix will compensate for this gap in OpenStack’s functionality in its Project Olympus product offering.

Earlier this year, Canonical’s decision to change the cloud computing provider for its Ubuntu Enterprise Cloud offering from Eucalyptus to OpenStack marked a significant affirmation for OpenStack. Version 11.04 of Ubuntu Enterprise Cloud currently uses Eucalyptus but the upcoming version 11.10 will make use of the OpenStack cloud computing architecture created by Rackspace and NASA in the summer of 2010. Version 11.10 is expected to be released in October 2011. The bottom line is that OpenStack’s fortunes are soaring even though Red Hat, which has recently released an open source cloud computing product called CloudForms, announced its revenues intend to cross the $1 billion mark in the upcoming fiscal year.