Zynga, creator of the -Ville online gaming franchise, filed Friday to raise up to $1 billion in an initial public offering.
Unlike many of its fellow much-buzzed-about Web upstarts, Zynga is solidly profitable. In 2010, the company had a $90.6 million profit on sales of $597 million, according to its SEC filing.
In the first three months of 2011, Zynga earned $11.8 million on sales of $235.4 million.
Zynga said it has 60 million daily active users, who collectively spend 2 billion minutes each day playing its games. Competitors include Electronic Arts (ERTS), Disney-owned (DIS, Fortune 500) Playfish and PopCap Games.
Research firm eMarketer expects overall U.S. social gaming revenue to hit $1.09 billion in 2011, up from $856 billion in 2010.
The underwriters of Zynga's IPO deal are deal are Morgan Stanley, Goldman Sachs, Bank of America, Barclays, JP Morgan and Allen & Co.
How Zynga makes money: Nitsan Hargil, director of research at GreenCrest Capital, told CNNMoney recently that Zynga is "in a completely different category" than most of its unprofitable peers -- thanks to stronger financials and multiple revenue streams.
Zynga gets revenue from its users paying real money for virtual goods, like tractors and animals for their online farms. Zynga noted in its filing that it relies on this "small percentage of our players for nearly all of our revenue," but it didn't break that figure out separately.
The other revenue stream is unique advertising -- like Starbucks (SBUX, Fortune 500) paying to have a virtual coffee shop in CityVille. Users might have to visit that virtual store 10 times in order to build a Starbucks franchise in their own virtual cities.
These business methods are a far cry from Zynga's past, in which it resorted to spammy and scammy tactics to gain new gamers and monetize existing ones.
Facebook users became so frustrated with Zynga notifications clogging up members' newsfeeds and dashboards that Facebook decided to expressly prohibit the practice in early 2010. And existing Zynga users found themselves flooded with offers to try shady third-party "partner services."
Zynga acknowledged the Facebook crackdown in its filing, noting that the change "regarding use of its communication channels" made Zynga's number of Facebook users decline.
Zynga also noted that Facebook is its "primary distribution, marketing, promotion and payment platform," so it could be "unfavorable" if Facebook alters its terms in the future.
Zynga said it has a contract with Facebook in place through 2015 governing its service terms. The deal requires Zynga to use Facebook's own currency, Facebook Credits, as its primary payment system. Facebook keeps 30% of the revenue from those payments, and passes the remaining 70% on to Zynga.
