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Zynga posts another up-and-down quarter

Frank Gibeau says company turnaround is building momentum, confirms work on games using VR, AR, and wearables

Zynga today reported its results for the quarter ended June 30, and many of the numbers tell similar stories to the company's previous quarters.

Revenues came in at $181.7 million, down 3 percent and 9 percent from the previous quarter and the year-ago quarter, respectively. Daily active users and monthly active users were also down quarter-over-quarter and year-over-year as the company once again posted net losses.

"Having been through turnarounds, you never point to the outfield. You just execute, and then people wake up and they go, 'lo and behold, they turned the company around.'"

However, not all of the indicators are headed south. The aforementioned net loss was $4.4 million, a significant improvement over the nearly $27 million in net losses it posted in both the previous quarter and the year-ago quarter. And while the reported bookings of $174.7 million were down modestly from the previous quarter, they were slightly up year-over-year and beat out the company's previous guidance range.

Speaking with GamesIndustry.biz today, Zynga CEO Frank Gibeau said the company has definitely been making progress in its turnaround.

"We had good momentum ending this first half of our fiscal year, but we have a lot of work still to go. And it's a turnaround so you try and be steady and not declare victory too early," Gibeau said.

Gibeau pointed to strong performances from mobile social casino offerings Zynga Poker and Zynga Slots, saying both were up in terms of bookings and users. Another of the company's long-running stalwarts, Words With Friends, had the strongest second quarter in its history. However, Gibeau noted the second quarter always sees a dropoff for the game, and users were down from the first quarter, just not down as sharply as they had been last year.

The declining user numbers may be seen as a source of concern given Zynga launched four new games during the quarter, but Gibeau cautioned not to read too much into that. For one, the biggest of those games--CSR Racing 2--only launched on the last day of the quarter. He added that softness in legacy games like Empires & Allies, Clumsy Ninja, and Looney Tunes Dash helped offset any bump from the new games. New releases like FarmVille: Tropic Escape (launching this quarter) and Dawn of Titans (launching in the holiday quarter) may help goose users, but Gibeau downplayed the significance of that as well.

"As we get into the business, start driving some new products and start, frankly, exiting some products, you're going to see our audience numbers bounce around.... Last quarter we had a good audience number. This quarter we gave a little bit of it back. I would expect it's going to fluctuate up and down as we go forward, put new releases out, and as we look at some of the businesses that are no longer at the forefront of what we're doing starting to decline in their appeal. It's a priority for us. We definitely want to make sure we can sustainably grow audience in the long term."

Zynga's other numbers may bounce around as well. For the current quarter, Zynga is projecting revenue between $170 million and $180 million, with bookings between $180 million and $190 million. Meanwhile, net losses should come in somewhere between $29 million and $33 million. As for what metric Gibeau would look for to determine when this turnaround story becomes an already-turned-around story, the executive declined to single anything out.

"It's one of those things where you'll know it when you see it," Gibeau said. "Having been through turnarounds, you never point to the outfield. You just execute, and then people wake up and they go, 'lo and behold, they turned the company around.' In my job, you just don't want to get too high or too low at key points in time."

"You always read these stories about how the mobile gaming charts are never going to change, or how augmented reality is still 10 years out. And the following week, Pokemon Go comes out, charts are different, and augmented reality's here."

One thing that would help the company reach that point is a breakthrough hit like Pokemon Go. Gibeau has spoken previously about using the added functionality in mobile devices to deliver better social gaming experiences, and Pokemon Go is a prime example of what he'd been hoping to see.

"I think they nailed it," Gibeau said. "I play with my kids every weekend. We go out and collect them all the time, during dinners and even when we're not supposed to be doing that. We were at the Adele concert on Saturday night and my daughter was trying to catch one... I think the game is spectacular and super inspiring, and it really points to where we're trying to take the company, which is to innovate in mobile and to really create social experiences at its core.

"The response from the market has been overwhelmingly positive because it's so fresh and innovative. It indicates to me there's real hunger for innovation in mobile gaming. And you always read these stories about how the mobile gaming charts are never going to change, or how augmented reality is still 10 years out. And the following week, Pokemon Go comes out, charts are different, and augmented reality's here. That what I love about this business, and that's why it was so exciting for me to come to Zynga and look at the opportunities for our social gaming division."

While Pokemon Go is no doubt prompting many companies to jump into augmented reality development, Gibeau said Zynga has been experimenting with it for a while.

"We look at VR, AR, wearables... There's a whole set of technology I'm interested in that when I joined, we started looking at on an R&D level to see what's possible, how you create social games in those technology suites. So yeah, we've been actively looking at it, and you'll see products from us in the future that deliver on those technologies."

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