Blog of Intellectual Capital

“Zynga Game Network Inc.’s estimated worth surpassed Electronic Arts Inc.‘s stock-market value, a sign of the ascendance of social-networking entertainment at the expense of traditional video games.

Zynga, the maker of such games as FarmVille and FrontierVille, is valued at $5.51 billion, according to SharesPost Inc., an exchange for shares of privately held companies. Electronic Arts, the second-largest game publisher by sales, is worth $5.22 billion on the Nasdaq Stock Market.

Started by Mark Pincus almost four years ago, Zynga has become one of the fastest-growing technology companies by using Facebook Inc.’s social network to distribute games. It makes money by selling virtual goods, such as vehicles and weapons that help players advance in games. The company has grabbed about a third of that market, which is worth $1.6 billion this year, according to Inside Network in Palo Alto.

“The valuation is not that crazy, given what’s going on in the market,” said Atul Bagga, an analyst at ThinkEquity LLC in San Francisco, who estimates the virtual-goods market may reach $3.6 billion in three years. “It’s not that terribly expensive seeing the growth prospects.”

Electronic Arts, meanwhile, faces declining retail sales of gaming hardware and software. Before Tuesday, its shares had dropped 7.4 percent since March 1. Zynga’s estimated value has more than doubled in that period.

Electronic Arts was the world’s biggest video-game publisher until 2008, when Activision merged with Vivendi SA‘s gaming business to form Activision Blizzard Inc.

Dani Dudeck, a spokeswoman for San Francisco’s Zynga, said the company doesn’t comment on its valuation. SharesPost bases its number on data from trades of private shares, research estimates and venture-financing valuations. Jeff Brown, a spokesman for Redwood City’s Electronic Arts, didn’t immediately respond to a request for comment.

Zynga is the largest maker of games on Facebook, with more than 210 million monthly active users, according to AppData.com, part of Inside Network, a research firm.

Zynga’s value on SharesPost was $2.61 billion in March. That’s when SharesPost introduced a new index for venture-backed companies, including Facebook, Twitter Inc. and LinkedIn Corp.”

Read more here.