The CityVille hometown game in an image courtesy of Zynga.

Credit: Reuters/Handout

NEW YORK (Reuters) - Online game company Zynga Inc filed for an initial public offering hoping to raise up to $1 billion, the latest hot Internet startup to tap investor interest in Internet social media companies.

The company, which makes popular games that people play on the Facebook social network, did not say how many shares it was planning to sell or give an expected price range, according to a U.S. government filing on Friday.

A source previously told Reuters that Zynga's IPO could raise $1.5 billion to $2 billion and could value the company at $15 billion to $20 billion.

"I think it's going to be an exciting IPO," said Sterne Agee analyst Arvind Bhatia. "It's unique. It's one of a kind. The growth is amazing."

Zynga is the company behind FarmVille and Mafia Wars. It is the top game publisher on Facebook. While its games are free, its revenue comes mainly from selling virtual items such as tractors and weapons that people use in the games.

In the three months ended March 31, Zynga's common stockholders broke even on revenue of $235.4 million compared to $101 million for the same quarter in 2010. During the same period, Zynga reported adjusted earnings before interest, taxes, depreciation and amortization of $112.3 million, up 20 percent from the same quarter a year earlier.

"At 232 million monthly actively users and (revenue of) $235 million, that is $1 per monthly active user per quarter, which is impressive," said Wedbush Securities analyst Michael Pachter.

Zynga offers an alternative to investors beyond traditional videogame companies, which have seen their share prices erode in recent years. Zynga's games, which do not require hardware and are played mainly on Facebook, have been eating into the $60.4 billion global video game industry, which consists largely of action or sports games played on consoles and TV sets.

Consider gaming stalwarts Electronic Arts and Activision Blizzard Inc. Sterne Agee analyst Bhatia estimates that EA is trading 11 times its enterprise value to EBITDA during the last four quarters, while Activision is trading at 6 times. Zynga is trading at 34 times an estimated $15 billion valuation.

And yet, Zynga could fall prey to the same factors besetting traditional video game publishers, including pressure to churn out hits to prevent fickle players from moving on to the next trendy game.

Zynga has expanded rapidly through small acquisitions at the rate of about one a month in the last year.

THE FACEBOOK EFFECT

Zynga's dependence on Facebook is seen as a benefit --investors are piling into social media companies such as LinkedIn and Groupon -- and a risk.

The company warned that it generates nearly all of its revenue and players through the world's No. 1 social networking site. "Any deterioration in our relationship with Facebook would harm our business and adversely affect the value of our Class A common stock," according to the filing.

Last year, for example, the gaming company came close to declaring war over a change in Facebook's policy involving credits. Facebook wanted to take a 30 percent cut in transactions involving its credits -- the currency Zynga players use to buy virtual goods.

Bing Gordon, a video game veteran, Zynga board member and partner at Kleiner Perkins Caufield & Buyers, described the standoff during the TechCrunch Disrupt conference in May as a Silicon Valley version of the Cuban Missile crisis where Zynga was at one point prepared to walk away from Facebook.

"Facebook would love to lessen its dependence on Zynga, but it's not going to shoot Zynga," said Wedbush's Pachter. "Zynga is reason to come back to Facebook every day."

The amount of money a company says it plans to raise in its first IPO filings is used to calculate registration fees. The final size of the IPO could be different.

Underwriters are being led by Morgan Stanley and Goldman Sachs.

(Reporting by Clare Baldwin, Jennifer Saba and Liana B. Baker; Editing by Lisa Von Ahn, Gunna Dickson and Robert MacMillan)

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The Google Plus social network.

Credit: Reuters/Google

SAN FRANCISCO (Reuters) - Google Inc is making its boldest move to take on Facebook in the fast-growing social networking market and to maintain its dominance on the Web.

Google, which has been frustrated by a string of failed attempts to crack the social networking market, introduced a full-fledged social network on Tuesday dubbed Google+. It is the company's biggest foray into social networking since co-founder Larry Page took over as chief executive in April.

Page has made social networking a top priority at the world's No. 1 Internet search engine, whose position as the main gateway to online information could be at risk as people spend more time on sites like Facebook and Twitter.

"They had the luxury of making mistakes in the past with their social initiatives. They don't really have that luxury now," said Ray Valdes, an analyst at research firm Gartner, referring to Google.

"Companies that are successful with the social web will get the page views, they'll get the engagement and they'll eventually get the advertising dollars that are so important to Google," he said.

Google+, now available for testing, is structured in remarkably similar fashion to Facebook, with profile pictures and newsfeeds forming a central core. However, a user's friends or contacts are grouped into very specific circles of their choosing, versus the common pool of friends typical on Facebook. ( here )

Enticing consumers to join another social networking service will not be easy, said Rory Maher, an analyst with Hudson Square Research.

"They're going to have an uphill battle due to Facebook's network effects," said Maher, citing the 700 million users that some research firms say are currently on Facebook's service.

"The more users they (Facebook) get, the harder it gets for Google to steal those," he said. But he added that Google's popularity in Web search and email could help it gain a following.

To set its service apart from Facebook, Google is betting on what it says is a better approach to privacy -- a hot-button issue that has burned Facebook, as well as Google, in the past.

Central to Google+ are the "circles" of friends and acquaintances. Users can organize contacts into different customized circles -- family members, coworkers, college friends -- and share photos, videos or other information only within those groups.

"In the online world there's this 'share box' and you type into it and you have no idea who is going to get that, or where it's going to land, or how it's going to embarrass you six months from now," said Google Vice President of Product Management Bradley Horowitz.

"For us, privacy isn't buried six panels deep," he added.

Facebook, which has been criticized for its confusing privacy controls, introduced a feature last year that lets users create smaller groups of friends. Google, without mentioning Facebook by name, said other social networking services' attempts to create groups have been "bolt-on" efforts that do not work as well.

Facebook, in an emailed statement, said "we're in the early days of making the Web more social, and there are opportunities for innovation everywhere."

Google+ started rolling out to a limited number of users on Tuesday in what the company is calling a field trial. Only those invited to join will initially be able to use the service. Google did not say when it would be more widely available.

Google, which generated roughly $29 billion in revenue in 2010, said the new service does not currently feature advertising.

LEARNING FROM BUZZ

Google's stock has been pressured by concerns about rising spending within the company and increasing regulatory scrutiny -- not to mention its struggles with social networking. The U.S. Federal Trade Commission, among others, is currently reviewing its business practices.

Its shares are down almost 20 percent this year after underperforming the market in 2010.

To create Google+, the company went back to the drawing board in the wake of several notable failures, including Google Wave and Google Buzz, a microblogging service whose launch was marred by privacy snafus.

"We learned a lot in Buzz, and one of the things we learned is that there's a real market opportunity for a product that addresses people's concerns around privacy and how their information is shared," said Horowitz.

Google drew more than 1 billion visitors worldwide to its websites in May, more than any other company, according to Web analytics firm comScore. But people are spending more time on Facebook: The average U.S. visitor spent 375 minutes per month on Facebook in May, compared with 231 minutes for Google.

Google+ seems designed to make its online properties a pervasive part of the daily online experience, rather than being spots where Web surfers occasionally check in to search for a website or check email.

As with Facebook's service, Google Plus has a central Web page that displays an ever-updating stream of the comments, photos and links being shared by friends and contacts.

A toolbar across the top of most of Google's sites -- such as its main search page, its Gmail site and its Maps site -- allows users to access their personalized data feed. They can then contribute their own information to the stream.

The company has combined the Facebook and Twitter models of social networking in Google+: A person can have friends in their network with whom they share information and they can also follow certain people, say a movie critic, as occurs on Twitter.

Google+ will also offer a special video chat feature, in which up to 10 people can jump on a conference call. And Google will automatically store photos taken on cell phones on its Internet servers, allowing a Google+ user to access the photos from any computer and share them.

When asked whether he expected people to switch from Facebook to Google+, Google Senior Vice President of Engineering Vic Gundotra said people may decide to use both.

"People today use multiple tools. I think what we're offering here offers some very distinct advantages around some basic needs," he said.

(Reporting by Alexei Oreskovic; Editing by John Wallace, Gerald E. McCormick and Phil Berlowitz)

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A woman uses a computer in the lounge area of the 27th Chaos Communication Congress (27C3) in Berlin in this December 27, 2010 file photo.

Credit: Reuters/Thomas Peter

SINGAPORE (Reuters) - good.food, learnto.salsa, glossy.lipstick -- people and companies will be able to set up a website with almost any address by the end of next year if they have a legitimate claim to the domain name and can pay a hefty fee.

The Internet body that oversees domain names voted on Monday to end restricting them to suffixes like .com or .gov and will receive applications for new names from January 12 next year with the first approvals likely by the end of 2012.

And they can be in any characters -- Cyrillic, Kanji or Devanagari for instance, for users of Russian, Japanese and Hindi.

"It's the biggest change I think we have seen on the Internet," Peter Dengate Thrush, chairman of the Internet Corporation for Assigned Names and Numbers (ICANN), told reporters.

"We have provided a platform for the next generation of creativity and inspiration."

The new gTLD, or generic top-level domain, program was approved by 13 votes to one with two abstentions by the board of ICANN at a meeting in Singapore.

The sole opposition came from a member who felt that more time was needed to hold discussions with government and others parties, ICANN officials said.

The new names could infringe on social and religious sensitivities, for instance if someone wanted to set up a .nazi domain, said Dengate Thrush.

And people who have invested in securing lucrative .com domains will find the value of the holdings diluted by the new rules, he added.

Thrashing out the rules and overcoming objections has taken years, ICANN officials said.

For instance, while the new steep charges of $185,000 to apply for a domain name could deter cyber-squatters, companies with well known trademarks worry that they may have to contend with series of copycat names like coke.paris or google.zambia.

ICANN hopes to weed these out in an intensive approval process that will take months, at the least, and also involve governments and other agencies.

"I think we've crossed the Rubicon," said Antony van Couvering, CEO of Top Level Domain Holdings Ltd.

"We were expecting it to happen some time in 2009," he said, adding that the change was also delayed by governments wanting to handle trademark issues in their own countries. "The process has been so lengthy that some people who wanted to do it are now either broke or disgusted."

COMPANIES

Experts say corporations should be among the first to register, resulting in domain names ending in brands like .toyota, .apple or .coke.

The move is seen as a big opportunity for brands to gain more control over their online presence and send visitors more directly to parts of their sites -- and a danger for those who fail to take advantage.

Japanese electronics giant Canon, for instance, has already said it plans to apply for rights to use domain names ending with .canon.

Besides the $185,000 to apply, individuals or organisations will have to show a legitimate claim to the name they are buying. ICANN is taking on hundreds of consultants to whom it will outsource the job of adjudicating claims.

Today, just 22 gTLDs exist -- .com, .org and .info are a few examples -- plus about 250 country-level domains like .uk or .cn. After the change, several hundred new gTLDs are expected to come into existence.

As well as big brands, organisations such as cities or other communities are expected to apply.

GTLDs such as .nyc, .london or .food could provide opportunities for many smaller businesses to grab names no longer available at the .com level -- like bicycles.london or indian.food.

"It's the next expansion of the Internet, it's the future of the Internet," said Kieren McCarthy, the CEO of .Nxt,Inc, a San Francisco-based company which covers Internet policy and governance issues.

"I think our kids will think that we were crazy to always talk about .coms."

(Additional reporting by Georgina Prodhan in LONDON; Editing by Ron Popeski)

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