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Has Zynga lost its zing?

  • Posted by Tony Poulos
  • June 6, 2013 11:21 AM BST
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Seems that when a digital services or content provider needs a revenue boost it turns to mobile as its saviour. Shame Zynga didn’t think of that a bit earlier. Even Facebook cottoned onto that market quicker.

It wasn’t that long ago we were espousing the success and profitable future of the online, multi-player gaming industry. Zynga was one of the bright stars bursting onto the scene in 2007 with the mission to “connect the world through games” and they did a pretty good job with the launch of its most popular game, Farmville, on Facebook back in June 2009.

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According to Wikipedia, it reached 10 million daily active users (DAU) within six weeks, and Zynga provided three of the top five Facebook games and 265 million monthly active users (MAU) by early January 2013. It was estimated that 80 per cent of its revenues emanated from Facebook. By the end of March 2013 Facebook and Zynga amended an agreement that gave the games developer strong access to the social network's one billion users.

 

The ‘official’ reason from Facebook was to bring Zynga in line with other games providers “so that Zynga.com's use of Facebook Platform is governed by the same policies as the rest of the ecosystem." It appears, however, that the rot set in well before this when Forbes reported in December, 2011 that “Zynga’s IPO Goes Splatville!” Forbes had ascertained that “while Zynga has some network effects to leverage, the fact remains that it must keep coming up with compelling new games or it can quickly lose ground to rivals or the next big time-suck to catch consumers’ fancy.”

 

It wasn’t wrong. By June 2012 Readwrite.com was reporting that  “Zynga's biggest risk was always an over-reliance on Facebook, with most of its revenue and users coming from the social network. It's now six months after Zynga's IPO and its stock price has halved, currently sitting at under $5. That's because many of its high profile gaming products are tanking.” It appears that the $1 billion capital raised at the time of the IPO was starting to run out.

 

This week came the news that Zynga is laying off 18 per cent of its workforce — which represents 520 employees — in a bid to reduce costs and more drastically restructure its troubled business toward mobile, according to sources close to the situation. Oh oh, here we go again. Seems that when a digital services or content provider needs a revenue boost it turns to mobile as its saviour. Shame Zynga didn’t think of that a bit earlier. Even Facebook cottoned onto that market quicker.

 

The same report stated that the cuts would affect every part of the San Francisco social gaming company and cut $80 million in staff costs as well the ”closure of offices in New York, Los Angeles and Dallas, as well as the slashing of other major infrastructure costs, adding to a total expense reduction that is likely to be much larger.

 

My quick calculation of the reported savings in staff costs shows an average salary of around $150K! No wonder the company is cutting back! I’m also presuming this does not include the staff in its Indian development centre.

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