Zynga's $1 bln IPO: The Facebook Risk

Game maker Zynga filed for an initial public offering on Friday that could lead to upwards of $1 billion from investors as the social gaming company seeks to expand.

While the SEC filing did not get into details regarding the offering-price or give a range of shares to be offered, it highlight the company's near-dependence on social-network Facebook.

The company noted in its filing that it generates substantially all of its current revenue through the Facebook platform.

Much of this is through the sale of virtual goods using Facebook's credits payment system, of which Facebook retains a 30 percent cut.

In the first quarter this year, in-game transactions made up about 95 percent of total revenues for the period, with the remainder coming from advertising, according to the filing.

Zynga also noted that a majority of its revenue comes from a small percentage of its player base. Zynga games are free to play and only generate revenue through micro-transactions and advertising.

The relationship is working well for Zygna for now.

The maker of FarmVille and CityVille, saw revenues surge nearly 400 percent to $597.5 million in 2010 and reported a net profit of $90.6 million for the year.

Earnings for the first quarter of this year were $11.8 million on revenue of $235.4 million - putting the company on track to surpass the $1 billion mark in revenue this year.

Still this reliance makes for the No. 1 risk factor in the filing.

Facebook has repeatedly changed the terms on its relationships with developers, including Zynga.

Last year, for instance, Facebook brought limited the ability that Zynga could promote through user's friends, leading to a drop in daily users.

The Federal Trade Commission also raised issues with Facebook's requirement for developers to use Facebook Credits as the currency of choice -- a move it says creates a monopoly.

A crack down could negatively impact the company.