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Zynga loses almost $23 million in Q2, shares plunge 34%

Zynga loses almost $23 million in Q2, shares plunge 34%

Wed 25 Jul 2012 9:05pm GMT / 5:05pm EDT / 2:05pm PDT
Social NetworkFinancial

On the bright side, revenues were up 19 percent for the social giant

Zynga has just announced its second quarter fiscal results, revealing a net loss of $22.8 million for the period ended June 30. Revenues did climb 19 percent to $332 million, but investors were not happy and the social gaming firm's stock fell off a cliff, dropping by 34 percent to just $3.33 in after hours trading. [Update: it's actually closer to 40 percent as the stock dropped to $3.21 at one point]

The company had to lower its earnings estimates for the year, blaming a quicker than expected drop off in several of its games, reduced expectations for Draw Something, and a challenging environment on Facebook overall. Earnings per share for the year are now estimated to fall in the range of $0.04 to $0.09, with bookings projected to be in the range of $1.15 billion to $1.225 billion.

Zynga naturally focused on the positives. Its daily active users (DAUs) increased 23 percent from 59 million in the second quarter of 2011 to 72 million in the second quarter of 2012, while monthly active users (MAUs) increased 34 percent from 228 million in the second quarter of 2011 to 306 million in the second quarter of 2012. And important, Zynga's Monthly Unique Payers (MUPs) increased from 3.5 million in the first quarter of 2012 to 4.1 million in the second quarter of 2012.

"The company achieved some significant milestones in the quarter including the launch of Bubble Safari, which is now the number one arcade game on Facebook, and the launch of The Ville, now the number two game behind Zynga Poker. Our advertising business continued to show strong growth with revenue up 170% year-over-year. Our games reached record audiences, achieving over 300 million monthly active users. We grew our mobile footprint five-fold in the year to 33 million daily active users making Zynga the largest mobile gaming network," said Mark Pincus CEO and Founder, Zynga.

"We also faced new short-term challenges which led to a sequential decline in bookings. Despite this, we're optimistic about the long-term growth prospects on mobile where we have a window of opportunity to drive the same kind of social gaming revolution that we enabled on the web."

Be sure to check out our exclusive interview with Mark Pincus for the CEO's take on the company's strategy, and stay tuned for highlights from the Q2 investors call.

10 Comments

Race to the bottom continues. There are more and more "freemium" products out every day, people are wising up, and will end up spending basically nothing to play games.

Posted:A year ago

#1

Andrew Goodchild
Studying development

1,199 317 0.3
They may focus on the positives, but if they have more customers, and their revenues are up 19%, but they arn't profitable, does that mean their costs are escalating to a ridiculous degree?
Is it the acquisitions that have caused this? If so maybe if they are long-term successes it will be worth it, but general opinion seems to be they paid too much for Draw Something. Maybe if they learn from that and go careful they won't repeat this next quarter.

Posted:A year ago

#2

Bruce Everiss
Marketing Consultant

1,716 598 0.3
The problem that Zynga have is that we have probably reached peak Facebook, especially for games. People's social media usage is fragmenting. At the same time Zynga have suddenly become a big company with a huge capital base and lots of shareholders.
So they are in transition.
They need to rapidly broaden their IP base and then to monetize that IP over a wider range of platforms.
So this is what they are doing.
However it is difficult and it is expensive. So the results come as no surprise.

The simple question to ask yourself is this. Would you rather have your pension invested in Zynga or in EA?

Posted:A year ago

#3

Antony Carter
Senior Programmer

84 47 0.6
@Bruce

If those were my only two options, then EA, they have by far the better catalogue of IP to leverage.

Edited 1 times. Last edit by Antony Carter on 26th July 2012 8:57am

Posted:A year ago

#4
Ea for sure. But why compare just the two?

Posted:A year ago

#5

Peter Ohlmann
Technical Director

22 6 0.3
Some months ago, Mr.Pincus sold a big bunch of his shares. At the latest at this point some investors should have become nervous already. But I am still confident that some day even the dumbest investor will realise that f2p and social gaming are totally overhyped.

Posted:A year ago

#6

Sam Maxted
Journalist / Community / Support

153 62 0.4
I agree with you that f2p social games are overhyped, but I'm not so sure about premium f2p titles. I think there's still plenty to be gained from quality f2p products.

Posted:A year ago

#7

Aleksi Ranta
Product Manager - Hardware

246 96 0.4
@Bruce "The simple question to ask yourself is this. Would you rather have your pension invested in Zynga or in EA?"

Neither really, tech stocks are not in the most stable of industries so if I was really looking to guarantee some steady return id look elsewhere, china, basic industry etc.

Posted:A year ago

#8
Gold and Slver...they are the best

Posted:A year ago

#9

Christian Reshoeft
Senior Development Manager

1 0 0.0
Pincus raised guidance last quarter, then sold a bunch of stock. Negotiated to control 50% of the company and the stock goes from 12 to 3. Good on him but certainly not touching Zynga with my money as that is as sketchy as it gets.

Posted:A year ago

#10

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