Zynga to Boost Investment in Data Centers
July 8th, 2011 By: John Rath
After talk of numerous data center leases, effective use of Amazon’s clouds and hyper-growth capacity management, social gaming company Zynga has filed a S-1 for its IPO. Hoping to raise $1 billion, the company lists investment into data centers as a priority.
On July 1 Zynga filed for an initial public offering, with expectations of raising $1 billion. In the company’s S-1 document it says that offering shares to the public will allow it boost the back-end for its games by making “big investments in servers, data centers and other infrastructure.”
“During the second half of 2011, we expect to make capital expenditures of approximately $100 million to $150 million as we invest in network infrastructure to support our expected growth and to continue to improve the player experience,” Zynga reported. That figure would represent either a substantial volume of data center leasing, or perhaps an initial move towards building its own facilities.
Using Amazon EC2 and Leased Data Centers
Zynga has a strong cloud-based infrastructure that balances Amazon cloud instances with its own internal cloud infrastructure. With the ability to add as many as 1,000 new servers to accomodate a surge in users in a 24 hour period (according to the S-1) a heavy hosting cost is associated with increased user demand. By building more of its own infrastructure in company-owned data centers, Zynga might be able to reduce that cost.
Zynga currently leases data center space from two wholesale data center providers, DuPont Fabros Technology (DFT) and Digital Realty Trust (DLR). In the wholesale data center model, a tenant leases dedicated, fully-built data center space. Thisapproach offers greater control and security than shared colocation space, and is quicker and cheaper than building an entire data center facility. The tenant pays a significant premium over typical leases for office space, but is spared the capital investment to construct the data center.
Several of Zynga’s leased data centers are adjacent to Facebook data center facilities.
Earlier this year Zynga hired Debra Chrapaty as its CIO. Chrapaty was instrumental in the massive scaling projects at Microsoft Global Foundation Services. In 2009 she left Microsoft for Cisco. With nearly $1 billion cash on hand and a partner in the Facebook Open Compute Project, Zynga could make a major push into building out its own data center and network infrastructure.
Facebook Law of Social Sharing
On Wednesday Mark Zuckerberg spoke at a company press event about the law of social sharing, punctuating that by saying that their users are now publicly sharing around 4 billion things (status updates, images, etc) on Facebook a day. To keep up with this data growth Zuckerberg spoke of building additional data centers to keep pace, saying “we’re definitely on this trend now where it makes sense for us given the scale of usage and the information flowing through the network where we’re probably going to be building our own data centers, rather than leasing.”
The majority of Zynga’s traffic is still derived from Facebook. Zynga sells about 38,000 virtual items every second and was able to reach a $90.6 million profit last year. The company is expected to offer up to 10 percent of its shares at a valuation near or above $20 million.
Silent PartnerPosted July 11th, 2011
“The company is expected to offer up to 10 percent of its shares at a valuation near or above $20 million.”
That should read a valuation of $20 billion not million, right?