Social-gaming powerhouse Zynga  just filed its S-1 to raise up to $1 billion in IPO. It appears virtual farms and online cities have treated the San Francisco-startup well: Zynga pulled in $91 million in profit on sales of $597 million. What's more, revenue is rocketing. The company has brought in $235 million in revenue during the first three months of 2011, more than double what the company pulled in during the same time last year.
But while the numbers are impressive--especially for a service that hawks virtual goods and gifts--it's clear Zynga owes much of their success to Facebook's massive growth and reach. The term "Facebook" is mentioned more than 200 times in the S-1 statement, which contains significant warnings to potential investors of the dependence Zynga has on the world's largest social network.
"Facebook is the primary distribution, marketing, promotion and payment platform for our games," the S-1 reads. "We generate substantially all of our revenue and players through the Facebook platform and expect to continue to do so for the foreseeable future. Any deterioration in our relationship with Facebook would harm our business."
The statement ticks off a slew of ways Facebook could harm its business, including: if Facebook discontinues access to its platform and developers; modifies its terms and serves or other policies related to fees charged; establishes more favorable relationships with competitors, or develops its own competing offering. For example, in 2010, Facebook changed a policy that required apps running on Facebook to accept only Facebook Credits, which meant the company received a greater share of payments from Zynga.
One other interesting detail from the S-1: Zynga says it relies on only a "small percentage of [their] players for nearly all [their] revenue." These players, as you can imagine, are the power users , the ones addicted to the service and spending tons of cash (close to $600 million, actually) on virtual goods, who we profiled in March . "In order to sustain our revenue levels, we must attract new paying players or increase the amount our players pay," the statement reads. In other words, Zynga can't rely on these users forever.
In the meantime, it's clear Zynga is ramping up its research and development efforts. In 2010, Zynga dropped $149 million for R&D; in the first three months of this year alone, it's already spent $71 million, up from $27 million during the same stages last year.
[Image: Flickr user Kyle Kruchok ]