Mark Pincus had already launched a number of start-ups before he founded Zynga in May of 2007, but none had proven as successful. Though he had no experience in the gaming industry, Pincus’s company was one of the first to provide games to people on social media (rather than the traditional gaming platform of cartridges for consoles). Zynga’s programmers designed simple, yet addictive games. The company’s first offering was an online poker game that allowed friends to play together on Facebook or MySpace. Soon after, Zynga offered “Farmville,” a game that allowed people to build farms with virtual currency and trade items with neighbors. Zynga’s offerings proved popular with Facebook users – by 2010, Zynga provided the four most popular games on the social networking site.
The popularity of the games attracted the attention of financiers. Pincus was able to line up two rounds of venture capital before taking his company public with an IPO on December 16, 2011.
With such meteoric success, Pincus and his company had attracted a great deal of attention in the press. And yet one of the best sources of information about the company was Zynga’s own 10-K filing to the Securities and Exchange Commission (SEC). Like other public companies, Zynga annually had to file a 10-K, providing an account of its operations and financial circumstances within 90 days of the end of the fiscal year. Given the document’s comprehensiveness, Zynga offered its 10-K as its annual report for 2011 (albeit under a more colorful cover with a brief letter from Pincus before the 10-K document).
The 10-K provides a great deal of information to analysts and potential investors, but the document also could be tedious and repetitive. Companies often cut and paste sections as answers to multiple items and the organization of the document answers more to regulatory requirement than narrative flow. Sometimes companies will tuck important information in obscure passages. In general, observers worried that the 10-Ks were becoming too verbose and complicated.
To help readers navigate the Zynga 2011 10-K, this web site breaks the document into its various items and gives a brief overview of what might be expected in each item (of course if the reader so desires, they can download the entire document from the link provided). The website considers the following parts of the 10-K:
- Part 1 consists of the description of the business, risks to the business, property held by the business, and legal proceedings against the business.
- Part 2 consists of items devoted to stockholder information, the consolidated financial statements, a management discussion of the consolidated statements and the complete, audited financial statements.
- Part 3 deals with directors, executive compensation, related party transactions, and accounting fees.
- Part 4 is the index and the place the directors affix their signatures.