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If you've been following my scribblings lately, you know I'm intrigued by Zynga, the social-game developer that's giving life to Adobe (Nasdaq: ADBE ) by using its Flash technology to create popular Facebook games such as FarmVille, CityVille, and my favorite, Empires & Allies.
Study Zynga for any amount of time, and you'll find yourself facing a wealth of conflicting data. Massive growth meets malevolent management, you might say. Investors can be forgiven for wanting to avoid this IPO. There are too many unknowns.
What we do know is that virtual currency means big money for Zynga, and its most active players have no trouble spending real dollars on fake doodads. Sales are conducted either through Facebook directly, on PayPal, or at more than 12,800 retail stores using what Zynga calls "game cards."
They're like any gift certificate, redeemable for points in any of its portfolio of social games. Get them at 7-Eleven, Best Buy, Walgreen, Target -- just about anywhere. Anywhere except Amazon.com (Nasdaq: AMZN ) . A link on Zynga's own website to buy online takes you to Wal-Mart's (NYSE: WMT ) online store. Confused? Me, too. Amazon is well-known for selling gift cards, so why isn't Zynga on its list? Maybe the business isn't there.
In its S-1 filing, Zynga says that game card sales are classified as other current liabilities until they're redeemed, at which point they become deferred revenue. Zynga had $537.8 million in other current liabilities and deferred revenue on its balance sheet as of March 31. My guess is less than 20% of that was due to game cards, with the remainder fulfilled directly via Facebook.
Amazon may be holding off until Zynga demonstrates there's a reason for it to carry gift cards. Or maybe Facebook's involvement crimps the profit margin too much. (Gift cards can only be redeemed for Facebook credits to be used for in-game purchases.) Either way, it's an odd omission made odder when Amazon sells the wares of Zynga competitors Activision Blizzard (Nasdaq: ATVI ) and Electronic Arts (Nasdaq: ERTS ) , among others.
Does it matter? You tell me. Please vote in the poll below and then leave a comment to tell us your thoughts about Zynga's forthcoming IPO.