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article imageOp-Ed: Investors hone in on Zynga’s Q3 earnings call

By Angela Atkinson     Oct 24, 2013 in Business
Zynga held its Q3 earnings call on Thursday afternoon, October 24, and investors wanted to know how the struggling ‘FarmVille” studio will turn around its operations.
The San Francisco-based social game publisher has been criticized for focusing exclusively on Facebook as its sole platform for attracting users.
Electronic Arts mobile head Frank Gibeau recently told The New York Times: “Zynga blew it. They're not a mobile business. We're six or seven times their size in mobile. Zynga fell into a hole because they were completely focused on one platform, which is Facebook.”
Critics’ of Zynga’s business strategy contend that future users will play games all the time on mobile, such as smartphones, tablets, and smart watches. That means, social networking sites such as Facebook can’t be the sole platform for game publishers.
“We saw all the Facebook users going to smartphones. You can't play a game on Facebook on a phone,” Gibeau said. “Coupled with that was the fact that customer acquisition costs were on a straight line up.”
For Q3 2013, analysts are predicting a loss of 4 cents per share on revenue of $189 million, according to Forbes. In Q3 2012, Zynga saw a loss of 7 cents per share on revenue of $317 million. The company’s monthly user base has fallen from 177 million a year ago to 131 million.
Zynga is reliant on three games for nearly half of its revenues: Texas HoldEm Poker, Farmville and Farmville 2. Thus, some analysts predict that the company will need to continuously release popular games in order to attract new users. Zynga recently released Hit It Rich Slots which banks on the popularity of slot games with the older demographic, an attempt to diversify its user base, and presumably, reduce its business risks.
Quartz provides a graph of the number of users that Zynga has lost within the past 12 months. Its number of daily active users has dropped to nearly half. Monthly active users have also dropped by nearly 100 million individuals since 2012.
Ratings firms are currently giving Zynga a hold rating, with a price target average of $3.23.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of DigitalJournal.com
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