Zynga Faces Big Hurdles Just to Break Even

[Andy Chalk]

Zynga Faces Big Hurdles Just to Break Even

Zynga's sliding numbers means it will have to add millions of new daily average users every quarter just to break even.

Concerns about the future of casual gaming giant Zynga continue to grow in the wake of its December IPO. Ten percent of its billion-dollar valuation evaporated within days [http://www.escapistmagazine.com/news/view/114880-Zyngas-Share-Price-Heads-South] and future pain seems almost certain unless the company can do something to halt the ongoing and rather dramatic slide of its daily average user [DAU] numbers. And that "something," according to Cowen and Co. analyst Doug Creutz, will have to be big.

Creutz said in his latest report that Zynga's two newest games, Hidden Chronicles and Scramble With Friends, haven't managed to achieve a level of success anywhere near its previous releases. Hidden Chronicles, for instance, hit 750,000 daily average users in 12 days, whereas both CastleVille and Empires & Allies had broken the five million DAU mark over the same period. Scramble With Friends, meanwhile, languishes "well outside" the App Store top 20.

Both games could grow to become big players, but as Creutz explained, that kind of slow, steady climb "has not been the general pattern for Zynga's launches over the past year."

He also pointed out that Zynga games that are at least three months old have suffered an average quarterly loss of daily average users of 18.4 percent over the past two years, which means that tepid responses to its new games could leave the company in a very bad spot. "Assuming Zynga averages a 20 percent quarterly rate of decline for titles beyond their launch windows in 2012, the company must add 9-10 million DAUs per quarter from new games just to keep total DAUs constant," Creutz said.

Zynga stock is currently trading at around $8.78.

Source: Gamasutra [http://www.gamasutra.com/view/news/39701/Analyst_Zynga_needs_significant_number_of_new_users_to_stay_afloat.php]


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[Sylveria]

I don't think this should surprise anyone. Long before their IPO there were many, many analysts in both the financial and entertainment sectors questioning the validity of Zynga's numbers. We now see the truth in all that and, sadly, a lot of people are going to lose a lot of money.

On top of that, this is the behavior of "casual gamers". They find a game, play for a few weeks-months, then move on. With a market that is just bursting at the seems with cheap/free "casual" games, there's a lot for them to move on to.

 

[garacius]

Too true Sylveria. As long as facebook's obscene number of games from farmville to mobwars (and its roughly 15 copies, or was mobwars itself a copy?) that can be played on an ipod such a focus on the 'casual' demographic was doomed too failure. They really should appreciate how long they did manage to survive all things considered.

On a side note, as someone who is too cheap to shell out for Apple's numerous handhelds while I have a fully functional laptop at my disposal which also has the tendency to cause people too not want to sit next too the bewhiskered man with a crew cut and a permanent scowl on the bus, I say good riddance too bad rubbish. Farewell Zynga, I never knew thee.

 

[TsunamiWombat]

This is what an oversaturated market looks like. Smaller companies are doing what Zynga does but better, faster, and cheaper. Far more are doing it shittier and more expensive - leading both to consumer fatigue and creating a greater sense of 'consumer judgement' - ie, the consumer becomes smarter about determining quality.

 

[Azuaron]

News flash: people realizing Zynga games aren't actually games, but OCD addiction simulators.

Break the cycle. If you have a friend with a Zynga problem, talk to them.

The more you know!

 

[fix-the-spade]

So, Zynga's decidedly dodgy accounting and massive, bloated extortion methods are rapidly catching with them?

Brilliant!

I'm still annoyed about March Mayhem a couple of years ago (so much spam...), is it too much to want Mark Pincus to be arrested and jailed for commiting some kind of massive fraud? I just think it would be a fitting indictment of Zynga's business model.

 

[Sylveria]

[sub]muahaha[/sub] -hahaha -Hahahaha! -MUHAHAHAHAA!

[HEADING=2] -MUHAHAHAHAHARR!![/HEADING]

Zynga's tears, they nourish me! And so the great social gaming bubble begins to burst, just so you know i and many many others fucking called it as far back as April. Seriously take a look;

Spoiler

From my blog April of this year-

"The best games aim simply to be the best games they can be with the main intent of many involved being enjoyment of their Audience. Social games, at their worst, are openly exploitative towards the player. Their intention is not to be a good game (or i would argue sometimes not even a game at all) their intention is to provide just enough content to entice the maximum amount of money from the player. Their progression is not based on traditional ideas of mission completion or Exp, their progression is geared towards the maximum investment of capital. They border on a missuse of game mechanics to force as many people as possible to spend the maximum amount possible and users WILL get sick of it in the long run."


From by blog September of this year-


"Take the dot.com boom for example, a lot of clueless investors throw their money behind Internet companies because they seem to be magic money makers. Many of the paper millionaires we saw were just that and the value of most of these companies, and consequently their shares, dropped to a big fat sum of zero. Social and in a slightly different way mobile games have also done this; massive investment in something that is seen as a new, bottomless money spinner. The games journalist is in a sticky situation here; if you go with this line then you risk looking entrenched, embittered and irrelevant. If you go the other route and tout the rise of the social gaming you risk a snap-back from the traditional audience if all goes tits up. No one quite likes shoving your own words in your face like the forum dwellers. I think the main fear is one of looking closed off and insular, from one generation ago there has been an audience explosion in multiple places and at first many reacted with pretty irrational fear. But i think many should be able to see the underlying problems with the social gaming boom.

All it takes is a small shift in usership or advertising confidence and a million dollar prized cow can turn out to be a dog-turd. This isn't even going into mismanagement, small companies that make it big quick have a nasty habit on not being able to deal with it or making terrible decisions. Recently Zynga has decided to hoover up a sum total of 15 companies with its new found (if ethically and creatively dubious) wealth. Fast, forward to today and profits have fallen 90%, news with has been delayed since June due to the "Tough market conditions" leaving me with the tentative feeling that the news has been released over a more favorable range to their original numbers.



The shit will only really hit the fan when said investors get a whiff that their particular horse in this race might be horribly overvalued. When investor pull out in the sector starts i have a feeling it may not stop, speculators (especially when it comes to the fast world of tech) are ruthlessly fickle and jumpy as coked-up Meerkats. Here's hoping that a lot of good people don't get squeezed out of the industry all together as many social games have served as a foot in the door for new talent."

It's hardly bursting, like someone just below my first post said, if Zynga dies, there's a dozen and a half games exactly like their stuff waiting to fill the void. Zynga overexpanded thinking that their growth was infinite, and if the last internet bubble taught us anything, that leads to disaster.

 

[Your Fearless Captain]

I called this in 2009. There games don't have enough substance to hold most peoples attention for very long.

 

[yayforgiveaway]

HOLLY SHIT! They are running out of stupid people. Is that even possible?

 

[Realitycrash]

Weren't these the guys that claimed that they could easily "double their userbase" just a few months ago?

 

[Formica Archonis]

Weren't these the guys that claimed that they could easily "double their userbase" just a few months ago?

Actually, closer to a month and a half ago [http://www.escapistmagazine.com/news/view/114660-Zynga-Can-Totally-Double-Its-User-Base].