This blog post was also published on Betabeat.

Zynga, the biggest casual gaming company in the nation and the maker of popular games titles such as Farmville, CityVille and Mafia Wars, filed for its IPO today.

To summarize quickly,  Zynga is performing extremely well. They were profitable in 2010 and will continue to be profitable in 2011 (based on 2011 Q1 figures). They are looking to raise $1B through the IPO and have $996.7 in cash on the books.

One of the highlights is that top line revenue is growing quickly, from $19.4M in ’08 to $121.5M in ’09, roughly 600% growth. It jumped another 500% to $597.5M in ’10 and their 2011 revenue run rate is $941.7, roughly 150% growth. Although their run rate is $941.7 for 2011, revenue expectations are closer to $1.5B, which would be 250% growth from 2010.

Zynga has raised over $500M from New York City investors such as Union Square Ventures, who own 5.5%. Based on this IPO, it would be safe to assume that Zynga’s valuation would allow USV to make back their entire fund $125M 2004 vintage fund.

Other investors include Foundry (6.1%), KPCB (11%) , IVP (6.1%), DST (5.8%), Avalon (6.1%), Andreessen Horowitz, Softbank, Google, Tiger Global, Reid Hoffman. The CEO of Zynga, Mark Pincus owns 16%.

While the company is performing very well, there are some significant risks to consider. The main issue is that Zynga continue to be very dependent on Facebook for distribution and monitization. Can Zynga find alternative avenues to lessen the dependency on Facebook?

The other challenge is that casual gaming in still a hits-driven business. Can they continue to produce great titles to retain existing players and entice new users to their games? Another challenge is that casual gaming has a very low barrier to entry. There are a lot of competitors who are developing good casual games: Angry Birds (Rovio Mobile), Crowdstar, Pocket Gems, Papaya Mobile, Disney (Playdom – $763M acquisition), EA (Playfish – $400M acquisition, PopCap, Firemint, Chillingo), DeNA (Ngmoco – $400M acquisition).

The evolution of gaming is mobile, which is not Zynga’s core strength. Zynga needs to become dominate in the mobile gaming market and develop on platforms such as iOS, Android and Windows Phone 7. While mobile games lessen the dependency on Facebook, there are still gate keepers in the mobile space including Apple, Google, Zong and Boku. Lastly Zynga is only four years old, which is still relatively young to be going IPO. If you look at the history of casual gaming, dominant players have come and gone, just look at the ups and downs of Atari, Sega and Capcom to name a few. The point being that remaining a dominant player in the casual gaming world is challenging and maintaining this level of growth, even tougher.

To summarize, Zynga is legitimate company that diminishes the argument of those who proclaim a tech bubble. The company faces many challenges but what is certain is that gaming is a huge market and Zynga has the opportunity to remain dominant.

Data in this story is taken from Zynga’s S-1 filing and acquisition numbers on Crunchbase. This post reflects Shai Goldman’s personal views and are not the views of his employer.