Torsten Reil, NaturalMotion Games CEO, has spoken out against recent analyst claims that Zynga was losing $150 on every new paying user. In fact, he believes its making $30 on each one.
Sterne Agee analyst Arvind Bhatia stated that each new Zynga customer costs $300 to acquire, but will only spend $150 in their gaming lifespan. But Reil did his own calculations.
"Over a period of nine months, Zynga (like all social games companies) will lose a proportion of paying users through normal attrition," he told Founderware.
He placed the attrition rate at roughly 20 per cent, and suggested that with a base of 3 million users, its a loss of 600,000 for the period.
"However, Zynga finished this same period with 3.4million paying users so taking this attrition rate into account, this means they actually acquired 1M new paying users." That's 2 and half times what the original article proposed.
"With a $120MM marketing spend, this obviously equates to an acquisition cost of $120/new paying user. And with an average revenue per paying user of $150, it means Zynga are actually generating $30 of net revenue per user."
He admits that the calculations are rough, and pointed out just that not all the marketing cash would be spent on attracting new users, not all new users are attracted by marketing.