Revenge of the nerd stocks

The lucrative market for free online games

On Dec. 6, Alec Baldwin was booted off an American Airlines flight after he refused to stop playing Words With Friends, an addictive Scrabble-like game from Zynga Inc., which makes free online games. Famous for its Facebook offerings like FarmVille and Mafia Wars, Zynga enjoyed a publicity boost that couldn’t have been better timed: it’s going public this week, in what observers say is the largest initial public offering (IPO) from a U.S. Internet company since Google Inc., in 2004. Zynga isn’t the only free online games maker causing an investor frenzy. Last week, Asian rival Nexon Corp. set the price for its $1.2-billion IPO, said to be Japan’s biggest all year.

These companies might offer their games for free, but both have found ways to get people to spend real money once they’re playing. In Nexon’s popular MapleStory, for example, couples who wish to get “married” have to fork over $25 for the wedding package. (About three-quarters end in divorce and after 10 days players can remarry.) Only three per cent of Zynga’s 227 million monthly users are paying players, chief executive Mark Pincus told potential investors last week. Even so, that didn’t stop its IPO from being worth almost $1 billion.

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