If we say Facebook (FB) is facing mobile issues, then we can also say that Zynga (ZNGA) has been facing mobile disaster. The recent performance of Zynga stock price may have given investors a warning.
As a social gaming developer, Zynga had already taken massive marketing strategies, affected by this, Zynga achieved a leading advantage on Facebook on desktop computers. And Zynga was also able to take advantage of this to promote their new games to older gamers. Zynga also carried out a massive IPO (initial public offering) by virtue of the dominance on the desktop computers at the end of last year. However, as more and more Facebook users are shifting from desktops to mobile devices. Zynga has found itself in a more competitive environment. However, in such an environment, Zynga also found that its intention to make money in the mobile space, has become more difficult.
It is not surprising that Zynga’s wealth reduced so quickly. Just this past Thursday, Zynga announced that its 2012 third quarter results will be significantly lower than previously expected, and its profitability will face a major setback.
Zynga’s adjusted EBITDA for the first half of the year was $152 million, however, the data released most recently showed that Zynga’s profit for the second half of the year may fall to zero, even if not, the figure will be minimal.
Hit by the adjustment of guidance for the second half of this year, Zynga stock price was frustrated significantly. As of the market close of last Friday, Zynga stock price reported at $2.48, representing a decrease of 11.90% compared to the prior day’s closing price. Zynga currently has a market cap of approximately $ 2 billion. However, Zynga still has cash of approximately $1.6 billion on the balance sheet. In addition, Zynga also has its own headquarter in San Francisco – which took the company more than $200 million this year.
Zynga CEO Mark Pincus seems to have had some ideas, therefore it is time for Zynga’s personnel adjustments. Zynga had its own method to generate revenues: offering the desktop computer users free access to the games series of “Ville”, which allow players to build farms, cities, and every they like, meanwhile, Zynga can also sell virtual currency to the users with the desire of accelerating the upgrades.
After the slowdown in the development pace of the games, “FarmVille” and “CityVille,” Pincus launched “CastleVille”, “ChefVille”, “The Ville”, and even “FarmVille 2″, but unfortunately, these games have not been able to be as popular as the previous games.
In March of this year, Zynga acquired OMGPOP, the developer of game “draw something” at a price of $183 million, when the game was extremely hot. However, after six months of this purchase, the deal has an impairment of $95 million. Of course, Zynga still has some attractive game products. According to the data released by market research firm AppData, “Zynga Poker” has a huge user group with daily active users of nearly 7 million, almost four times the casino game, “Double Down Casino”, on Facebook.
Pincus hopes to introduce some real cash gambling games in the next year, but it is unclear that how much advantage Zynga has, compared with other existing Internet gambling companies. With Zynga’s game growth rate is diminishing, the company may also start to burn money.
All the shareholders of the company with the hope that Zynga substantially adjusts management and restructures assets may be disappointed. Pincus still holds a 50.1% stake in Zynga and dominates the decisions of the company.
Zynga stock price has slidden $7.52, or 75.2% since its IPO, and the Wall Street’s attention on this social networking game provider has reduced substaintially. Last Friday, analysts cut the price target on Zynga stock by 22% to $2.21, down more than 75% compared to its IPO price of $10 per share. According to data published by Reuters data, in most of the trading session last Friday Zynga stock price were moving below the company’s book value of $2.3 per share.
All in all, Zynga is in the face of predicament in the field of mobile gaming, this momentum will eventually lead to the suffer disaster of investors.