Zynga Profits Take a Beating

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Zynga Profits Take a Beating

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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

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

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.

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

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.

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

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

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

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.

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

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.

Adam Jensen:
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.

Good. I want them to hurry up and die. If there's one form of gaming that I never respected, it was Zynga's brand of Facebook casual games. I played Farmville for about 3 days before never playing it again.

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.

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.

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.

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.

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.

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.

You can only make so many themed cows. They need something new to survive. They should make a slots/casino game. I know they have poker but its crap.

I say sell. Sell sell sell, make Billions off selling Zynga. Make a new videogame company, turn out games for PC and Console that arent browserbased and leave the browserbased gaming to the new 900 companies or so on facebook. And Profit.

It's worth 14.050 million bucks, but made just 1.3 million as a profit?
What the heck is wrong with the economy these days? :O

I used to play some of their games and stopped earlier this year as a part of a New Year's revolution. And then I gave up all Facebook games period. You know why? Because they were pointless, boring, and very repetative, and I hated bothering my friends for stuff. So, I figured it was time I stopped with that.

I feel for them because this age is hard on everyone, but at the same time, I don't care.

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.

I wish I could say I care, but I don't. They went in making crappy, money grabbing games and now they're paying the price. They won't go out of business, they're still going to have idiot customers buying a virtual shed for $50 instead of fetching their drowning baby from the bath tub. They've taken a knock to profits but they're still making profits, it's when they don't even break even that I'll care about people and their jobs.

My advice to them would be to change their entire direction and start making more than simple farming games. It would be an interesting change, you can't deny that.

Well its good to know they're not exploding as a company as much as they used to. Maybe in the coming months they'll start to decline. You can only exploit human psychology for so long before people get bored/tired of it and move on.

Reduced sales hit ZYnga harder than Farmvile hit workplace productivity!

My honest reaction when I read this:
... meh.

So have these guys made any actual games or have they just kept stealing real games, removing their titles, and renaming them to x-ville?

That's good news. I don't necessarily have anything against Zynga, I don't like their games, but I always found it very odd that they're so damn big. They deserved to be taken down a notch to allow some competition, and that's what's happened here. Good news.

I started playing Farmville due to an aunt requesting help since she's the furthest thing from a gamer. I think a lot of the reason they aren't doing as well is the reasons their users complain about all over their site.
"We used to be able to get new released items and animals for coins (in-game currency) but now we have to pay farm cash for everything (real money to buy points)!"
Many of the players are saying that they quit or are quitting due to the fun level decreasing severely since their excessive coin hoard can't buy them anything and they need to shell out real money for any new things, and at least the American players are seriously not financially healthy enough to do that- and its my personal opinion that begging for excessive real money from CASUAL GAMERS is not an effective business strategy if implemented 'wrong'.

The Unworthy Gentleman:

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.

I wish I could say I care, but I don't. They went in making crappy, money grabbing games and now they're paying the price. They won't go out of business, they're still going to have idiot customers buying a virtual shed for $50 instead of fetching their drowning baby from the bath tub. They've taken a knock to profits but they're still making profits, it's when they don't even break even that I'll care about people and their jobs.

My advice to them would be to change their entire direction and start making more than simple farming games. It would be an interesting change, you can't deny that.

You do know it's the lower downs that are losing jobs and not the CEOs that chose to make crappy cut and paste games. The people losing their jobs are coders and artists that took any job they could get in a competitive field they're no more evil and deserve a job no less then the workers at a retail outlet.

So can i safely assume these casual games are a Fad?

DTWolfwood:
So can i safely assume these casual games are a Fad?

These particular ones, probably. But I suspect the genre, if it can be considered that, is here to stay. However I think we'll see phone games with a more arcade spin to them become more prominent, while these sim-lite titles become less popular.

kman123:
Good. I want them to hurry up and die. If there's one form of gaming that I never respected, it was Zynga's brand of Facebook casual games. I played Farmville for about 3 days before never playing it again.

3 days? You have loads of patience. I played it for about 30 minutes and realized that if I was going to play a farming game, it was going to be Harvest Moon.

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