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Zynga amends IPO to show falling profits

Rising costs and a dip in revenue growth could delay IPO further

Zynga has issued another amendment to its IPO filing that shows a sharp decrease in the company's profits.

Net income for the second quarter fell to $1.4 million; a 90 per cent year-on-year drop from $14 million, and an even steeper decline from $16.8 million in the first quarter.

Revenue growth has also slowed, with the $279.1 million in revenue for the three months ending June 30 representing a 115 per cent year-on-year increase - versus year-on-year increases of 141 per cent and 251 per cent in the two prior quarters.

However, Zynga revealed that total costs and expenses for the second quarter nearly equalled its total revenue, increasing $149 million year-on-year.

Investment in R&D almost tripled in the first half of the year. This is attributed to a significant increase in staff - from 1483 at the end of 2010, to 2451 at the end of June.

The company's daily active users declined in the second quarter, from 62 million at the end of March to 59 million at the end of June.

Zynga has made a number of high profile hires this year, as well as several studio acquisitions. Zynga has delayed its IPO since filing it in July due to tough market conditions.

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Latest comments (10)

Martyn Brown Managing Director, Insight For Hire5 years ago
Perhaps they need a few neighbours, or a shiny new accountant (click here, only 10 credits). Just don't adorn my newsfeed with another icon, please.

Edited 1 times. Last edit by Martyn Brown on 23rd September 2011 10:09am

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I think by the time they do file for a IPO, a less super hyper inflated market value to truly reflect Zyngas current status.
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Call me vindictive, but I hope they start losing money quickly. They're the biggest threat to the games industry since Atari's ET game.
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Show all comments (10)
Christopher Garratty Associate Counsel, Activision Blizzard5 years ago
Yeah! Sebastian is as Sharpe as his moniker! Down with the likes of Playfish, PopCap and Zynga making gaming in general popular across a broad spectrum. What we need as an industry is for games to appeal to the smallest niche possible and cost millions to develop(!)

EDIT: You should also note that the reason they are reporting lower profits is because they are expanding. Revenues are up year on year, but so are staff numbers and R&D spending.

Edited 1 times. Last edit by Christopher Garratty on 23rd September 2011 5:01pm

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Andrew Clayton QA Weapons Tester, Electronic Arts5 years ago
While I'm no fan of Zynga, it's a bit of a low blow to focus on decreased profits when they've tripled their R&D expenditures. If revenues went down, that would be news. This isn't news.
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Nicholas Lovell Founder, Gamesbrief5 years ago
Revenue was down 90%+, but that was a fall of under $20m in the quarter. I'm not sure that's enough to call the end of the business.
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Dave Wolfe Game Developer, Cosmic Games5 years ago
@Nicholas Revenue was up 115%, it's the net income that is down 90%.
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Brian 'Psychochild' Green MMO Developer 5 years ago
Actually, this is news. Ask yourself, why is R&D increasing? My take is that Zynga is becoming more like a traditional game developer, with production costs increasing and production cycles taking longer. You can see from their more recent headline games that they're spending more time making games look better and have at least a little more depth than they did before.

This is a major transition for them, and I think it's a sign that their big growth and big profits are possibly gone and not to return. Not to say that Zynga will die, but it looking more likely that it will become another EA instead of replacing EA.
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Jaques Smit Lead Game Designer, Gameloft New Zealand5 years ago
Competision drives games to improve. Observe Learn and addapt, the next twist is coming soon ;)
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Andrew Ihegbu Studying Bsc Commercial Music, University of Westminster5 years ago
Their being killed by their greed. I remember the days I played Mafia Wars and all was good. I also remember coming back to their 'new and improved' mafia wars and seeing more money hungry popups per minute than your average adware virus.
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