As a result of the above two factors alone, their net profit is shrinking fairly dramatically. This is very similar to Groupon (also "profitable" at the time of IPO), and you can see how they're doing for yourself, here: http://www.google.com/finance?q=GRPN (-25% since launch, in case you don't feel like clicking)
Using the 'it's profitable' logic would mean that investing in Beanie Babies Corp while they were making money hand-over-fist would've been the height of financial prudence.
Sure the VCs who have funded the company up to this point are going to make tons of money. But that's their model: stoke interest in a business, take profit, and get out.
I think a lot of these companies are like TV shows, they have a limited "run". Hollywood does not seem to form companies and IPO individual TV shows, so the question is whether Zynga can change games as fast and cost-efficient as a Hollywood studio would change a TV show
I don't think there's a good reason for them to be publicly held, at all.
Due to their well-documented culture problems (I'm in games in SF, and only know one person who went to work there ... he's 24 and wanted to 'get rich' ... everyone else stays far, far away), and resulting inability to grow through acquisition, I'm not sure what they actually need an additional billion+ dollars for. To make new games, I suppose, but outside of Cityville and Words with Friends, they haven't been able to make the Farmville lightning strike at will.
All of these new titles cost money, and more money to market, and they're missing far more often than they're succeeding.
It just doesn't seem sustainable, to me.
I think the IPO is chance for the funds that invested hundreds of millions of dollars in the company to profit-grab, pure and simple.
Profitable, yes. Vulnerability to competitive threats looking to undercut its position in the market, also yes. Zynga is a media company, and as such it's competitive advantage lies in its ability to use the FB graph and continue to pump out games. Will people get tired the constant barrage of new titles in the same way Facebook's users are starting to tire its core product? I would speculate yes, but that remains to be seen.
