Zynga's Profits Drop Dramatically

According to Neowin, Zynga Inc. reported a 95% drop in revenue to quarterly profits. The report goes on to give us those figures:

“The quarter that ended on June 30, Zynga announced that its profits went down to just $1.3 million, a massive 95 percent drop compared to profits of $27.2 million that the company recorded at the same time period a year ago. The company recorded overall revenues of $279.1 million for the quarter. While that number is double the amount it received at the same time a year ago, it’s also a much lower amount of growth compared to Zynga’s previous financial quarters.”

In another article on the Wall Street Journal, Zynga’s user numbers have dropped:

“Zynga had 59 million average daily active users for the second quarter, down from 62 million in the first quarter but up from 48 million in the fourth quarter of 2010. This number tends to bounce around a lot, tied to the launches of new Zynga games, and the company said it didn’t launch any new big games in the first half of the year.”

Zynga has currently only announced one new title in production Mafia Wars 2, while other current titles have additional content planned. The last major release from Zynga was Empires & Allies on Facebook back in June. Zynga has launched a few of their games on the mobile market with FarmVille, Mafia Wars, Vampires: Bloodlust, Scramble and Drop 7 for the iOS.

Analysis: Earlier this year, Gaming Bus reported on Zynga’s pending IPO. The analysis from Gaming Bus was a cautionary one, bringing to light why this would be too volatile and unstable of a company to trust your financial future to. Today, we have the answer to that analysis, and the results are not positive to say the least.

The bread and butter for this company obviously comes from Facebook, and even though they have some titles in the mobile market now, this has not helped stave off this massive profit drop. What is unclear at this time is if this trend will continue for Zynga or if it’s just a major short term setback for them. What is clear is that Zynga has proven that their current strategy will harm short term investors rather then help them. This will certainly make it more difficult for them to draw in future investors.

Zynga depends on customers that play their games on Facebook to buy items through their store. I know, I was a person who fell into this trap myself, but because the value of these items had no long term benefits in said game I quickly stopped playing Zynga games all together. I think that many customers are realizing, albeit slowly, that the games provided by Zynga are fun to play but not worth putting money into. I believe if Zynga wants to survive, they need to move beyond their current strategy. It will be a long and difficult road, considering so many other companies are in those markets now.

Chris’s assessment of Zynga could not have been more accurate, and only time will tell how my analysis will turn out. What is clear in both of our opinions is that Zynga needs to change and become more stable and more diversified, and until they can make that change you shouldn’t bet the house on them.


About Brandon Mietzner