Zynga Loses $150 on Every New Paying Customer

Andy Chalk

One Flag, One Fleet, One Cat
Nov 12, 2002
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Zynga Loses $150 on Every New Paying Customer


Zynga could be losing as much as $150 on every new paying customer it picks up.

Generally speaking, customers who want to give you money are the kind of customers you want to have. Money makes the world go 'round, after all, and it also helps keep businesses afloat. But there's a tipping point at which what you do to get those customers outweighs their value and Zynga, in the opinion of Sterne Agee analyst Arvind Bhatia, blew past that point about $60 million ago.

Zynga's marketing budget for the first nine months of 2011 was $120 million, which he said was almost entirely dedicated to acquiring new customers. "We also know that they had 3.4 million unique players in the September quarter, which is up from three million at the end of December 2010," he explained. "In other words, they added 400,000 additional payers and they spent $120 million to acquire them."

That's $300 a head, yet each one spends an average of just $150 over the 12 to 15 months they stay with the company. You don't have to be a rocket surgeon to see a pretty big whole in the equation. "That math won't work for very long," Bhatia said.

The slowdown is affecting the entire social games industry, he added, but Zynga is far and away the biggest player in the game. One of its biggest problems is that its new releases aren't attracting many new players; instead, people are simply moving from one game to another and discovering that the new boss is the same as the old boss. Because of that, the pressure to find "their next FarmVille [http://www.farmville.com/]" and keep investors happy is only going to intensify.

"The fact that there is such a small base of people who actually pay says that your risk is tremendous," he said. "This is spread out over 20 million people. You could say, 'Oh yeah, five percent could get bored.' Although you only have two percent of your people paying, and God forbid if those guys get bored."

Source: GamesIndustry [http://www.gamesindustry.biz/articles/2012-01-20-zynga-losing-USD150-each-on-new-paying-customers]


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Albino Boo

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Jun 14, 2010
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Andy Chalk said:
Zynga's marketing budget for the first nine months of 2011 was $120 million, which he said was almost entirely dedicated to acquiring new customers. "We also know that they had 3.4 million unique players in the September quarter, which is up from three million at the end of December 2010," he explained. "In other words, they added 400,000 additional payers and they spent $120 million to acquire them."

The article has a considerable flaw in its assumptions. They don't know how many new players Zynga added because they don't know how may they lost in the same period. They might have added 1 million new players but lost 600k. Churn rates are the key here.
 

Pebkio

The Purple Mage
Nov 9, 2009
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Bwahaha! Y'know what? It's because they AREN'T really games! Mabinogi is still making oodles amount of money. Free-to-play stuff is working. So why aren't Zynga games? Because nobody wants to spend money on horrible moving-pictures games.

Thpppt.

Seriously, I've seen better games from Newgrounds.
 

imnot

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Apr 23, 2010
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What a shame
As terrible as it is people will lose their jibs, I cant help but think they could just make games that arent crap.
 

Baresark

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Dec 19, 2010
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I love analysts. And here is why, this is what speculation gets us from these people:

These same people came out of the wood works when Zynga was making sick money and declared, "This is the future of gaming! Here is our proof!".....

Idiots. I don't trust this guy either, to be honest.
 

saejox

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Mar 4, 2009
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albino boo said:
Andy Chalk said:
Zynga's marketing budget for the first nine months of 2011 was $120 million, which he said was almost entirely dedicated to acquiring new customers. "We also know that they had 3.4 million unique players in the September quarter, which is up from three million at the end of December 2010," he explained. "In other words, they added 400,000 additional payers and they spent $120 million to acquire them."

The article has a considerable flaw in its assumptions. They don't know how many new players Zynga added because they don't know how may they lost in the same period. They might have added 1 million new players but lost 600k. Churn rates are the key here.
you are right.
zynga is losing money that's true, but they would have lost a lot more if they dint market their current games.

zynga is spending farmville money till they find the next farmville.
we will see what will come first, bankrupt or "OMG this is awesome" game.
 

CM156_v1legacy

Revelation 9:6
Mar 23, 2011
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imnotparanoid said:
What a shame
My farm is augmented

OT: I remember not a year ago that were were told that social games were going to be the future. I think these guys need a new crystal ball.
 

Andronicus

Terror Australis
Mar 25, 2009
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They may have found the near perfect formula in Farmville, but hell, it's probably only right that they learn that even the perfect formula flogged over 20 titles is going to get old very quickly. Even casual players are going to get bored of playing the exact same game with only minor differences in sprites to tell them apart. Making new "ville" games is NOT the answer here; what they need is to shake up the formula entirely. Let's see how quickly Zynga is willing to learn that lesson.
 

Ed130 The Vanguard

(Insert witty quote here)
Sep 10, 2008
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CM156 said:
imnotparanoid said:
What a shame
My farm is augmented

OT: I remember not a year ago that were were told that social games were going to be the future. I think these guys need a new crystal ball.
Ahh how the mighty have fallen. How long will Zynga last? I would bet 6 months give or take a year.
 

Redlin5_v1legacy

Better Red than Dead
Aug 5, 2009
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weirdguy said:
Why don't they just give us the 150 dollars to play their game?
Wouldn't it be nice? While I agree with Daystar about people in the industry losing their jobs, Zynga really should have seen this coming.
 

thedoclc

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Jun 24, 2008
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Huh. The obvious solution is to cut down on the marketing, since it's spread mostly by individuals who are playing drawing in their friends. In essence, they're competing against themselves when they advertise.

Though the way the article is titled is misleading. I thought "new players cost $150" meant the necessary infrastructure and so on for a new player costs $150, which would be shockingly high. In insurance (yes, a completely unrelated industry) and actually quite a few businesses, a new customer costs you a significant amount of money and it takes a long time before you recoup it in costs.

Also, boo to hating the casual games. They're not my cup of tea, but obviously they're fun for a lot of people, and since they're not competing in the same markets as the games most of us want, they're not even hurting "gamer" games.

Sucks for the folks losing their jobs in the short term, but it just puts more talent back into the market to produce something new and exciting.
 

Phlakes

+15 Dagger of Socks
Mar 25, 2010
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This is what happens when you try to build a long term business on short term products. Facebook games are (or maybe were) a fad, the mobile market is taking its place, and Zynga hasn't put enough into it to make the transition.
 

Tiger Sora

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Aug 23, 2008
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I'll be waiting with the rifle, for when Zynga trips and breaks it's leg. Poor horse.

I think Seabiscuit used up the last miracle. I'm highly doubtful they'll be able to create the next big thing before investors abandon ship. I'll give them 2 months, if they haven't fallen before than.



"and end" Ohh how god dammed fitting, lol.