WIRED:The gaming company behind FarmVille is hoping to hit the high score on the Nasdaq

FOR A company that prides itself on creating simple gaming experiences, it is pretty hard to work out whether Zynga won or lost this week. The company, best known for its runaway Facebook hit FarmVille, went public on the Nasdaq stock market on Friday. These initial public offerings, or IPOs, are traditionally the moment when investors and technologists win big, trading their imaginary shares in the company into something that actually has cash value on the market.

Zynga managed to raise $1 billion in their IPO, which doesn’t sound too bad for a game company. But reports of the IPO seem far more gloomy. Stocks were initially traded at $10, but Zynga did not “pop”, ie rise quickly higher than that initial trade. Indeed, Zynga stock actually fell to around $9.05 on Monday, with dips as low as $8.75.

That’s bad news if you were expecting to turn around a quick profit on Zynga.

It’s also bad for the last rack of investors in the company. In February, 11 mutual funds connected to Morgan Stanley bought 5.3 million pre-IPO shares in the company for $14. Some employees also have stock options priced at this level, so will not profit unless or until the price goes up.

Earlier investors do much better. Kleiner Perkins Caufield Byers, a Silicon Valley venture capital firm, invested $10.4 million in the company for 65 million shares, valued at $570 million even at the stock’s lowest price.

Company founders such as Mark Pincus naturally benefited too – especially Pincus, who sold some of his own shares in March for $110 million before the IPO. When Pincus sold them, they were valued at $13.85, which means that he found someone a little more eager for them than the general market.

You can’t argue that Zynga doesn’t have some value, at least in relation to whether people are willing to pay for its services. The company made $1.2 billion in revenue last year, from deals, game sales and the purchase of in-game “objects”, such as buying livestock in FarmVille. The profits on all that are a little harder to calculate. The New York Times noted that Zynga’s recent profitability emerged from the company deciding that the “virtual goods” they sell within their games have a shorter life than previously, a fascinating exercise in the amortisation of non-existent objects.

But really, imaginary livestock apart, much of Silicon Valley’s valuations seem to be part of an ongoing game themselves. Zynga’s stock price came from how much a small group of investors were willing to pay for slices of the company over the past few years, and those prices were largely determined by the competitive frenzy within those small groups. By bidding hard on small portions, in a closed world, companies like Zynga are able to create large valuations for themselves, which then play out on the larger field of public stock exchanges such as Nasdaq.

In fact, a sign that those valuations are rational would be if the market didn’t pop. The fact that Zynga’s price has roughly hovered around its offering point shows that most of the world agrees with that price – and the company itself has gained most of the value of the shares it sold. If the price had popped, that would effectively mean that the company had hoodwinked itself out of the value of its own shares.

So, on that level, Zynga the organisation won. It got its money’s worth. Barring a radical decline in the stock price, it also means that its initial public investors should be happy. Unfortunately, modern investors on the stock exchange have been trained by earlier decades’ tech stock growth to demand explosive growth, post-IPO. Rather than buy shares simply to receive a regular dividend on profits, they want the stratospheric rise in the stock price to continue through the IPO, and into the future. A pop would be good, but a continuing rise, such as those of Google or Apple, would be even better.

That’s unlikely to happen with Zynga or indeed most tech IPOs these days. There just doesn’t seem that much further to grow. Zynga may expand sideways in the future, but it’s not likely that the exponential take-up of new game players that it experienced in its early Facebook days is going to repeat itself. Zynga is already a big, mature, probably profitable game company whose major growth period is behind it.

I could be wrong: with $1 billion of real money to spend, Zynga’s greatest days could be ahead of it, just as Google, Microsoft, and Apple’s were, following their IPOs. But I wonder if, in company valuations like this, the fun part of the game is really at the beginning, when venture capitalists play among themselves and their invited guests. Sometimes, with offerings like this, you get the impression that those purchasing the shares on the public markets are not players at all. They are just pieces, being played by gamblers far more sophisticated than they, used for stakes to gather winnings that they will never see.