Codebreaker

From our It Was All A Fad, I Tells Ya, A FAD file: Zynga tanks, blames Facebook

John Moe Jul 26, 2012
Codebreaker

From our It Was All A Fad, I Tells Ya, A FAD file: Zynga tanks, blames Facebook

John Moe Jul 26, 2012

Stock in the social gaming company plummeted 37% yesterday amid bad numbers and a bleak forecast.
From Reuters:

“The biggest factor impacting current performance appears to be the way Facebook is surfacing gaming content on its platform,” JP Morgan’s Doug Anmuth wrote in a note to clients.
“Given what we believe could be multi-quarter impact from Facebook and lack of near-term operational catalysts, we’re downgrading Zynga shares,” Anmuth added.
Surfacing refers to how a website showcases content.
Zynga relies on the Facebook for more than 90 percent of its revenue, but a steep drop in players for its core Facebook money-making games prompted the company to slash its 2012 earnings estimates.
Zynga expects 2012 earnings to be between 4 cents and 9 cents a share, down from its prior view of 23 cents to 29 cents a share.


Back when Zynga was riding high with everyone playing Farmville, we warned that the company’s success was only as strong as the quality of its next game. Things like Farmville or Cityville or the one about the Mafia are addictive and virally spread to friends and relatives who are willing to humor you but they wear off. Unless there’s another Zynga game to take their place, you move on and stop spending real money on pretend things (Zynga’s rather rickety business model). Facebook’s changes have reduced awareness of the games, which has hurt as well.
The Globe and Mail says Zynga’s flop puts added pressure on Facebook, due to announce earnings today. Is it really Zynga’s games and Facebook placement that are the problem? Or is it more systemic and people just aren’t that into dinking around on the computer as much as they used to be?

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