'Farmville' Makers Putting Stock In Virtual Goods Zynga is a company that makes money by selling nothing. Or, to be precise, by selling imaginary things — like tractors that plow farms on Facebook. Zynga is America's first "virtual goods" company to file for an initial public offering, but how real is the company's value?
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'Farmville' Makers Putting Stock In Virtual Goods

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'Farmville' Makers Putting Stock In Virtual Goods

'Farmville' Makers Putting Stock In Virtual Goods

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Now for the occupiers, it may be all about the Benjamins, but what happens when you use real money to buy imaginary things? It's happening every day on Facebook. People are paying to buy things for pretend farms and cities, thanks to Zynga, a virtual goods company. This industry took in 9 billion real dollars last year alone from consumers buying tractors and buildings that don't exist.

Now, Zynga's going public with an IPO expected in the next few weeks, and Zynga's trying hard to get ahead of the game by dropping millions of dollars on a few new games including "Castleville." NPR's Aarti Shahani set off to understand the market value of a business built on nothing.

AARTI SHAHANI, BYLINE: We'll start with a tour of Piskorskiville. It's a bustling city full of stores, row houses and red brick condos. A policeman patrols downtown, waving his baton. Northeast, there's a small community garden.

MISIEK PISKORSKI: I forgot to come back to my city, so some of my plants have withered away. And my friends actually have been kind enough to come back and un-wither some of my plants.

SHAHANI: That's Misiek Piskorski, the city's namesake. But city is a slight misnomer. Piskorskiville doesn't really exist, or one could say it totally does -- on his computer screen. Misiek is sitting in his office at Harvard Business School. He's a professor. His job: to play and study popular online games like Cityville by Zynga. Misiek harvests his virtual crop...


SHAHANI: ...and sells to a local grocer. Not for cash, at least, not the green folding type. His money, like his goods, are virtual. But for five percent of Zynga's 200 million monthly users, that's not the case.

PISKORSKI: You can buy a special currency and you can use it in two ways. You can spend it on speeding up certain processes or getting some functionalities that are available to you that are not available to others, but you can also spend the currency on beautifying the city.

SHAHANI: Luxury condos, yachts -- they won't have a use.

PISKORSKI: But they will be just really beautiful to look at.

SHAHANI: Zynga raked in $1 billion in sales this last year. That's 1 billion U.S. dollars, the green folding type, in sales of virtual tractors that plow virtual farms or avatars that make gamers just a bit more beautiful to look at. Nineteen-year-old Tierra Cates sells Zynga currency at a CVS in Washington, D.C. She points to a shelf lined with prepaid cards: Starbucks, Loews Theater, and one with a goofy duck waddling up a pasture. That's for Farmville, Zynga's mega-hit.

TIERRA CATES: I've seen kids come in with their parents and cry for these cards. Or older people, like, between late 30, early 40, a lot of them buy the Farmville cards.


SHAHANI: Why are you laughing? Why is it funny?

CATES: Because my dad does it too. And I think it's like, ridiculous. I think it's - say it's a $20 gift card. When it's gone, you'll be buying another one.

SHAHANI: That's exactly the point. Traditional video games make you pay up front. Zynga inverted the model: play for free, and once you're hooked, pay to get ahead. Zynga officials declined an interview because, they said, they're in a quiet period required by the Securities and Exchange Commission before the IPO. Eric Ries, author of The New York Times bestseller "The Lean Startup," is a Zynga fan, or to be more precise, a critic of the critics. To those who say virtual goods aren't real...

ERIC RIES: I don't think that you're using the word real correctly. What is real?

SHAHANI: Fashionistas spend $2,000 on a Prada handbag. Gamers spend 20 on an imaginary tractor or avatar or sword. Same difference, except...

RIES: Unlike in the physical world, the virtual objects are all tied to the specific environment in which they were developed. So if you have a sword in a game like "World of Warcraft," you can't take that sword with you into the real world, but you also can't take it with you into other games.

SHAHANI: The Zynga IPO is a test of whether this new thing, the virtual good, is durable.

SAM HAMADEH: Maybe just - it's a fad.

SHAHANI: That's Sam Hamadeh, CEO of PrivCo. He sifts through the financial data of private corporations. He estimates Zynga is worth $5 billion. Others say 20 billion. Ironically, it comes down to whether competitors buy into the business model.

HAMADEH: Now that they've shown the way, the question is will traditional gaming companies like Electronic Arts, like Activision, you know, will Disney then start offering games based on its characters in the same model.

SHAHANI: Zynga broke the curse of online businesses. It kicked the addiction to ad revenue, the bane of the Web. The ads it does have enhance the game. American Express sponsors blue virtual windmills that help grow crops. Lady Gaga sexed up the scene by releasing her album "Born This Way" on Gagaville.

Zynga's IPO will now test whether the company's modern-day alchemy - turning virtual goods into real money - is a game changer for the gaming industry. Aarti Shahani, NPR News.

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