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Finance

Zynga making $30 per paying user, says Natural Motion CEO

Mon 23 Jan 2012 11:05am GMT / 6:05am EST / 3:05am PST
Finance

Torsten Reil slams recent analyst estimates suggesting social gaming giant is losing $150 per customer

NaturalMotion

NaturalMotion Ltd is a leading games and technology company based in Oxford, London, San Francisco, and...

naturalmotion.com

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.

Zynga has been making a number of headlines this week, after it confirmed its interest in online gambling and with the news that it acquired four mobile developers last year.

4 Comments

Peter Stirling Software Engineer, Firelight Technologies

26 10 0.4
This is modern day balanced reporting: he said, she said. There is no insight to be had here, just another flavour of tabloid journalism.

Posted:2 years ago

#2

Bruce Everiss Marketing Consultant

1,692 594 0.4
Having studied various elements of the Zynga business model and magnetisation methods in some depth it is pretty obvious that they really know what they are doing.
They are treating several million Facebook users as lab rats, using analytics to see deeply inside their collective minds.
When a journalist bothers to do this same analysis it will be very enlightening.

Zynga seem headed towards being the world's biggest game company, by profit and by number of players.
They are now very well funded and already seem to be investing very wisely.
A very formidable commercial organisation.

Posted:2 years ago

#3

Andrew Ihegbu Studying Bsc Commercial Music, University of Westminster

473 187 0.4
The problem is they keep stating we pay x per paying user and get x per paying user. What they need to look at is how many users they get in total and how many don't end up paying users.

Maybe when they start looking at these retention esque statistics they might understand what and why the general consensus is that their games are poor quality. Making a better game leads to more paying customers and thus more money per paying customer (due in the very least to lower marketing spends per customer)

Posted:2 years ago

#4

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