Zynga Profits Take a Beating

[Logan Westbrook]

Zynga Profits Take a Beating

Increased overheads and reduced sales have taken their toll on the Zynga's pocket book.

Social gaming giant Zynga saw its year-on-year profits fall from $27.2 million to just 1.3 million, a drop of around 95%. The studio has also seen a decline in the number of people playing Zynga games on a daily basis, as well as a reduction in virtual goods sales.

Zynga has blamed this massive fall in profits on the fact that it did not release any new games in the first half of 2011 until Empires and Allies at the end of May, and on its higher than normal spending on staff and international expansion than it had in the past. It also said that the transitions to the now-mandatory Facebook credits had hurt profits, as Facebook took a 30% cut of all transactions.

The drop in daily users is thought to be the result of a more competitive social gaming market compared to last year, which seems a likely cause of the drop in sales as well. The company's overall revenue continues to grow however, albeit a lot more slowly than previous quarters. The revenue for Zynga's April to June quarter were up 15%, rather than the 24% increase from the January to March quarter.

Obviously, this isn't the best news in the world for Zynga, but it's not necessarily a sign that the company - which many "hardcore" gamers find rather distasteful - is on its last legs. A third party analysis of the company, included as part of its most recent SEC filing, has actually seen its valuation increase from $13.98 billion to $14.05 billion.

Gamasutra [http://www.gamasutra.com/view/news/37416/Zynga_Profits_Users_Decline_Ahead_Of_Proposed_1B_IPO.php]





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[Adam Jensen_v1legacy]

That's because their games suck, and most people realized quickly that they shouldn't be paying for them, or playing them at all.

 

[Ulquiorra4sama]

I always said that every game realesed on facebook was just a fad. I doubt anything will really last in a community like that.

I wonder what their next move will be. Gonna be interesting.

 

[Gunner 51]

The evil swine in me approves of this, it's about time that Zynga's business was taken down a few notches. I guess people have finally had enough of the same cut'n'paste games.

I can only hope that they start making some proper interactive games now.

CAPCHA: A bit rude if you say the first bit quickly...

 

[Mouse_Crouse]

I can't say that I am upset... but I do hate to see people lose jobs and such.

 

[Jonny49]

I have a fear that alot of people will take this as good news when really it isn't.

People are going to start losing jobs because of this, and that is never a good thing. Regardless if you like their games or not.

 

[dantoddd]

I run an investment fund and there is no way on earth a company like Zynga which earns around 25mn a year get valued at 14.5bn. That's just nonsense. To put this is perspective Zynga is valued at more than three times the market cap of AMD and close to two times that of Nvidia

 

[Legit101]

......................

 

[uguito-93]

Yeah, there are only so many farmville carbon copies you can churn out before people get bored and stop playing them altogether.

 

[Chris646]

I hope that Zynga will learn from this and decide to actually start making games and not whatever those things that they've been making are.

 

[FamoFunk]

Maybe they'll make better games now than fucking farming ones.

 

[Sean Strife]

It doesn't surprise me, most of my friends and family who like their games have grown incredibly bored with them as of late.

While it sucks that people will probably lose their jobs, Mark Pincus is getting was he deserves, the scumbag.

 

[manythings]

That's because their games suck, and most people realized quickly that they shouldn't be paying for them, or playing them at all.

HA! You give people a lot of credit. Social gamers can get into the games quickly which is good but they can also jump ship quickly when whatever they are playing is gets old. It didn't make a diffrence before because they were jumping from one Zynga game to another, now they are moving to other indie-ish social games within Facebook. There's like 900 of the fucking things now.

OT: Lets hope it's a sign of Zynga running it's course and dying back.

 

[Baresark]

It was cheap and ultra low content, anyone who was interested played already. The games had no possible life span. They are a good example of bad investment. They expanded their company based on a craze but are ill prepared for when that craze passed. Good luck to them and their employees.

 

[Heart of Darkness]

Gonna get in before the shitstorm--oh, wait, it was pretty much already guaranteed to happen before the first reply.

Anyway, the reasoning why their profits took a hit isn't that surprising, but the drop itself is pretty surprising. I wonder if it is a result of a lack of new products for them or if the entire sector took a massive hit. Might be something to look into.

 

[Atmos Duality]

It's just Zynga hitting the top of their existing growth curve, and forcing expansion by reinvesting their profits. It's actually a pretty common cycle for all new Big Businesses (and lets face it: Zynga isn't one of the Old Guard in the industry).

Their business model is based purely on grind; using Skinner logic and social connections to keep the sheep in the pen, and buying those completely worthless micro-transactions. Given how much success they've had as a digital coke dealer (which they couldn't even design on their own), they're here to stay as long as Facebook thrives.

 

[Avaholic03]

Sounds like they're doing the same stupid crap most companies do. A little bit of success goes to their heads, and they start spending money like there's no tomorrow. Their revenue went up, but their profits fell 95%. That's poor company management no matter who you are.

 

[AstylahAthrys]

They're still profitable, so they will be kicking for awhile. I'm sure they'll cut costs and be around for awhile, which sucks for the bad games in existence, but is good for the people who work there. Programmers and artists are working there, and hopefully it will take them to bigger places in the future.

 

[Esotera]

How is Zynga valued in the billions when it's only making profits in the low millions? This social media craze seems like the dotcom bubble all over again.