After beginning its startup trajectory by leveraging Amazon Web Services and then subsequently reverting away from AWS in favor of internally managed datacenters, Zynga is reverting to AWS again. Zynga CEO Mark Pincus explained the decision to re-contract with AWS last Wednesday by noting, “There’s a lot of places that are not strategic for us to have scale and we think not appropriate, like running our own data centers. We’re going to let Amazon do that.” As reported in The Wall Street Journal, Zynga’s decision to shut down its internal data centers represents part of a larger initiative to cut costs by $100M, including an 18% cut in its workforce by the end of the year. Amazon’s price reductions over the last year render it more affordable than ever and underscores the value proposition of cloud computing vendors that can deliver on demand, pay for use computing that can morph in conjunction with the changing needs of its customers. Moreover, the larger operational agility of the cloud will enhance the ability of Zynga to continue tweaking its business model as it aims to restore confidence amongst investors after failing to deliver on the much hyped promise of its 2011 IPO.
On Monday, Nimbula announced a set of professional services that facilitate the transition from a public to a private cloud. Branded the “Nimbula Cloud Migration Service,” the professional services utilize Nimbula Director, Nimbula’s flagship product that determines the operating parameters of an operational cloud with a view toward streamlining deployment of a private or hybrid cloud. Nimbula’s services are geared toward transitioning a customer’s deployment of a pubic cloud such as Amazon EC2 cloud to a private cloud environment that gives them greater control while allowing for a reduction in costs. Zynga represents the paradigmatic example of a company that started on the Amazon EC2 platform but subsequently created a private, “Z” cloud that coexists alongside its EC2 deployment. Zynga uses the Amazon’s EC2 platform as a testing stage for its applications before migrating them to its own cloud based infrastructure. Nimbula’s professional services team provides enterprises and startups alike with a migration plan and technical overview of the planned private cloud environment. Founded by industry veterans that developed the Amazon EC2 platform, Nimbula’s Cloud Migration Service complements its core cloud operating system offering.
Puppet Labs announced the closure of a Series C funding round valued at $8.5 million. As a result of the funding raise, new investors Cisco, Google Ventures and VMware join existing investors Kleiner Perkins Caufield & Byers, True Ventures, and Radar Partners. Since its formation in 2005, the company has now raised a total of $15.75 million. The new round of funding is intended to support a market in which “demand for our products is outstripping our ability to satisfy it through organic growth alone,” according to Puppet’s CEO Luke Kanies. Kanies further noted that VMware, Google and Cisco represented ideal partners to accelerate the adoption of its IT automation and management software because of their deep relationships in the virtualization, cloud computing and IT vendor landscape.
Puppet Labs provides software that enables system administrators to effectively manage increasingly heterogeneous IT environments featuring legacy systems, private clouds, virtual machines and public clouds, all of which collectively serve the needs of multiple constituencies with varying application needs and role-based access privileges. Puppet Enterprise 2.0 delivers a visually intuitive graphical interface that enables system administrators to discover existing resources, benchmark resource utilization against a desired baseline, configure and deploy new resources to increase scale, and launch critical updates, all within a matter of seconds, without adding headcount. Puppet Enterprise 2.0 also features provisioning capability for Amazon EC2 and VMware instances as well as unauthorized access and change of setting tracking for compliance purposes.
The Series C funding raise marks the culmination of a momentous year for the company. Puppet Labs outgrew its open source roots in January with the launch of the first commercial edition of its product, Puppet Enterprise. In September, the company launched Puppet Enterprise 2.0 and now claims over 250 customers including Twitter, Zynga, Oracle/Sun, Match.com and Constant Contact.
Karim Faris, partner at Google Ventures, remarked on the promise of Puppet Labs and its recent investment as follows:
“Global companies need efficient solutions to manage their on-premise and cloud infrastructures. The Puppet Labs team has demonstrated the market traction and leadership to capitalize on this tremendous opportunity, and we’re looking forward to working with them to grow the business.”
The widespread commercial interest in Puppet Labs underscores the need for technology to manage increasingly complex IT environments that feature a combination of traditional and cloud based applications. The success of Puppet Labs over the past year suggests that, alongside cloud security and mobile device management, Puppet’s specialization in technology orchestration and management increasingly ranks as one of the auxiliary technologies likely to mushroom alongside the proliferation of virtualization and cloud computing in contemporary enterprise IT environments.
Head upon the heels of its July 1 IPO announcement, Zynga announced the acquisition of Canadian mobile application development firm, Five Mobile on July 8. Five Mobile specializes in developing mobile applications for the iPhone, Android and Blackberry platforms. The deal marks Zynga’s 15th acquisition in 13 months, and represents an aggressive move to diversify from the Facebook platform and capitalize upon the increasing popularity of mobile platforms for gaming purposes. Zynga noted that “Continue Mobile Growth” constituted a key component of its business strategy in its July 1 S-1 filing as follows:
“Words with Friends is one of the leading social game franchises on mobile platforms. We believe there is a large opportunity to extend our brand and games to mobile platforms such as Apple iOS and Google Android. We will continue to make our games accessible on a large number of mobile and other Internet-connected devices and invest in developing and acquiring mobile development talent, technologies and content. Our DAUs on mobile platforms grew more than ten-fold from November 2010 to June 2011.”
The acquisition of Toronto based Five Mobile gives Zynga access to customers, products, talent and a base for its expansion in Canada. Five Mobile’s founders, Ameet Shah, Jeff Zakrzewski, Oliver Tabay, and Troy Hubman, will all join Zynga as part of the team of the renamed Five Mobile entity called Zynga Toronto. Five Mobile’s Managing Partner Ameet Shah will direct Zynga Toronto and report to David Ko, director of Zynga’s mobile operations. Zynga’s acquisition of Five Mobile promises to change the dynamics of the competition for engineering talent between Toronto and Waterloo. For years, Waterloo served as the hub of the startup community in Ontario due to the presence of companies such as Research in Motion (RIM), maker of the Blackberry product line. RIM brought an estimated 9000 employees to Waterloo and created a ripple effect on related companies and tech startups in the city. Zynga’s acquisition of Five Mobile recognizes the talent based in Toronto and promises to transform the geography of talented technical labor in Ontario, particularly given the recent interest of global companies interested in startups in the mobile and social media space.
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.