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What's Really Behind Zynga's Valuation?

Zynga's IPO is expected to give the company a roughly $10 billion market cap -- an impressive nearly 10 times or so the company's trailing 12 month sales.

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That multiple is particularly high in contrast to its competitors. Video game leader Activision has just about a 3 times multiple while Electronic Arts , which is heavily invested in Zynga's space of social gaming, has a multiple of just about 2 times trailing 12 month revenues.

So why is Zynga's multiple so high?

The company has plenty of risk factors, including high reliance on Facebook's platform.

But despite the risks Facebook could pose to Zynga, Facebook is driving its valuation higher. One major appeal of Zynga is the fact that it offers investors exposure to Facebook and social media in general. There are few other companies that could act as such a good proxy for Facebook's reach and growth. And buying shares of Zynga will offer a lot more scale than relying on platforms like SecondMarket.

But Zynga could also suffer from its proximity to Facebook when the social network eventually goes public next year. Once investors can get their hands on shares of Facebook itself, we could see money move out of Zynga, and other stocks, like Groupon, which give access to the space.

Questions? Comments? MediaMoney@cnbc.com

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  • Working from Los Angeles, Boorstin is CNBC's media and entertainment reporter and editor of CNBC.com's Media Money section.