Zynga can be saved with advertising, says Pachter

The analyst also details his bearish opinion on the Wii U

Zynga's business has clearly seen better days, as the company recently saw its stock drop to record lows after a disappointing earnings report, and executive talent seems to be hemorrhaging from the company. To analyst Michael Pachter, the solution would be for Zynga to give less of their games out for free.

"I think that Zynga's biggest problem is they started out as a free-to-play company, and so as they grow users they don't necessarily grow revenues," detailed Pachter. "They have to figure out how to monetize every user. The simple way to do that is advertise. Make this commercial supported gaming. If you don't spend money you have to sit through ads and if you spend money you don't. So the Words with Friends model, where you can pay three bucks and opt out of ads, I think that's fine."

"If you got four dollars a year out of each of their 311 million actives, that's more revenue than they're making now. That alone I think would solve their problems"

Michael Pachter

He continued, "I have to say, I actually think the right model for them would be if you pay a dollar, and the dollar goes as a credit in the game so you can spend it on in-game items if you want to, but if you deposit a dollar each quarter, no ads for three months. If you got four dollars a year out of each of their 311 million actives, that's more revenue than they're making now."

Pachter is also on record as being pessimistic about Nintendo's Wii U. Roughly a month from the system's launch, he's not changing his tune.

"I'm not a fan of the console. Essentially I look at the GamePad and the television, the two screens, and I see a DS that's disaggregated."

"When the hardcore fans are satisfied, I think sales are going to drop precipitously because I don't think the thing is priced competitively with what most people think is a comparable console, Xbox 360 or PS3"

Michael Pachter on Wii U

"I'm afraid we're going to have a repeat of the Wii cycle from the publishers' perspective and the developers' perspective, where very few people will support it. Then if it's successful they'll come in, and they'll fail. When they fail, they'll go away again," he added. "It will sell out until the hardcore Nintendo fan base has all their consoles, and I don't know what that number is. They sold 90 million Wiis; it's certainly less than 90 million hardcore fans. I would guess it's between seven and ten million, and it could be 20 million but they don't all have $350. When the hardcore fans are satisfied, I think sales are going to drop precipitously because I don't think the thing is priced competitively with what most people think is a comparable console, Xbox 360 or PS3."

Read the full interview with Pachter on [a]list.

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Latest comments (4)

Daniel Hughes Studying PhD Literary Modernism, Bangor University6 years ago
"Nobody did very well on the DS, and I don't think anybody's going to do very well on the Wii U"

Capcom? Square-Enix? Konami? Majesco? Natsume? Ubisoft, even if they did do well with terrible games? Middle-tier development from Japanese publishers was almost exclusively supported by the DS and PSP during the last 6 years or so. We shouldn't equate Western publishers not doing well on DS (which they barely supported, as has been the historical norm for Western publishers and handhelds, bar some efforts on the PSP) with all publishers and developers not doing well on DS.

Time will tell with his Wii U comments, but I think the price point (in America and Japan at least) is very well judged on Nintendo's part. The fact that this is the first new console in 6 years, with Mario at launch, and a varied line up of games over its first 4 months or so, should see Wii U get off to a very strong start. Beyond that it's difficult to speculate. We don't know how many Nintendo will ship, how well TVii and Miiverse will function, and most importantly, we've no idea what's coming software wise beyond the end of March. It's true of all consoles, but never more so than in their first year on the market: software sells hardware. Sometimes Pachter seems to lack this basic understanding.

My concern with Wii U wouldn't be the effect rival devices have on sales, because Nintendo specialise in offering an experience unlike anything else on the market. My concern would be what software is coming after the launch window? That's the question I ask as a consumer, and that's the question analysts like Pachter should be posing. We can assume critically and commercially 'big' Nintendo titles are in development, and that a couple of their best and biggest will be timed to coincide with the probable launch of rival machines. What about third party exclusives beyond Bayonetta 2, Zombie U, Rayman Legends, Scribblenauts and LEGO City Stories? What about third party partnerships, perhaps Nintendo co-developing a franchise with a major Western developer? What about the big multi-format releases, GTA V, Bioshock Infinite, Tomb Raider? Like I said, the software will dictate how well the hardware sells. Those are the questions Nintendo need to answer once Wii U has hit the market, and those are the questions any analyst deserving of their pay should be asking right now.
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Francisco Javier QA Engineering & Coordination, Saber Interactive Spain6 years ago
"It's very similar to playing a DS game."

STFU mr. Patcher. You can't be more wrong.
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James Prendergast Research Chemist 6 years ago
I think he'll probably be right on one point - many third party devs will struggle to take advantage of the screen in the controller. Though we'll see how good Nintendo's implementations are across the whole range of their games... we might be a bit surprised to find that it isn't universally good either.
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Andy Samson QA Supervisor, Digital Media Exchange6 years ago
"It's very similar to playing a DS game."

The DS was HD? When did this happen? Did it have analog sticks? Motion sensors? Does it have Full fledged console games from other platforms? Is MiiVerse integrated with the DS? The DS doesn't even have 5.1 surround sound and it's a handheld gaming system. I can't take the Wii U on a train. How can the experience be very similar? I can't even use the DS to turn on my TV. Oh look, NFC!

The DS has a tiny touch screen while the Wii U has a wide enough screen that can accomodate most GUI . The Wii U will be excellent for playing MMO's and RTS games. /gg
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