Zynga Faces Big Hurdles Just to Break Even

Zynga Faces Big Hurdles Just to Break Even

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Zynga's sliding numbers means it will have to add millions of new daily average users every quarter just to break even.

Concerns about the future of casual gaming giant Zynga continue to grow in the wake of its December IPO. Ten percent of its billion-dollar valuation evaporated within days and future pain seems almost certain unless the company can do something to halt the ongoing and rather dramatic slide of its daily average user [DAU] numbers. And that "something," according to Cowen and Co. analyst Doug Creutz, will have to be big.

Creutz said in his latest report that Zynga's two newest games, Hidden Chronicles and Scramble With Friends, haven't managed to achieve a level of success anywhere near its previous releases. Hidden Chronicles, for instance, hit 750,000 daily average users in 12 days, whereas both CastleVille and Empires & Allies had broken the five million DAU mark over the same period. Scramble With Friends, meanwhile, languishes "well outside" the App Store top 20.

Both games could grow to become big players, but as Creutz explained, that kind of slow, steady climb "has not been the general pattern for Zynga's launches over the past year."

He also pointed out that Zynga games that are at least three months old have suffered an average quarterly loss of daily average users of 18.4 percent over the past two years, which means that tepid responses to its new games could leave the company in a very bad spot. "Assuming Zynga averages a 20 percent quarterly rate of decline for titles beyond their launch windows in 2012, the company must add 9-10 million DAUs per quarter from new games just to keep total DAUs constant," Creutz said.

Zynga stock is currently trading at around $8.78.

Source: Gamasutra

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I don't think this should surprise anyone. Long before their IPO there were many, many analysts in both the financial and entertainment sectors questioning the validity of Zynga's numbers. We now see the truth in all that and, sadly, a lot of people are going to lose a lot of money.

On top of that, this is the behavior of "casual gamers". They find a game, play for a few weeks-months, then move on. With a market that is just bursting at the seems with cheap/free "casual" games, there's a lot for them to move on to.

Too true Sylveria. As long as facebook's obscene number of games from farmville to mobwars (and its roughly 15 copies, or was mobwars itself a copy?) that can be played on an ipod such a focus on the 'casual' demographic was doomed too failure. They really should appreciate how long they did manage to survive all things considered.

On a side note, as someone who is too cheap to shell out for Apple's numerous handhelds while I have a fully functional laptop at my disposal which also has the tendency to cause people too not want to sit next too the bewhiskered man with a crew cut and a permanent scowl on the bus, I say good riddance too bad rubbish. Farewell Zynga, I never knew thee.

This is what an oversaturated market looks like. Smaller companies are doing what Zynga does but better, faster, and cheaper. Far more are doing it shittier and more expensive - leading both to consumer fatigue and creating a greater sense of 'consumer judgement' - ie, the consumer becomes smarter about determining quality.

News flash: people realizing Zynga games aren't actually games, but OCD addiction simulators.

Break the cycle. If you have a friend with a Zynga problem, talk to them.

The more you know!

So, Zynga's decidedly dodgy accounting and massive, bloated extortion methods are rapidly catching with them?

Brilliant!

I'm still annoyed about March Mayhem a couple of years ago (so much spam...), is it too much to want Mark Pincus to be arrested and jailed for commiting some kind of massive fraud? I just think it would be a fitting indictment of Zynga's business model.

muahaha -hahaha -Hahahaha! -MUHAHAHAHAA!

-MUHAHAHAHAHARR!!

Zynga's tears, they nourish me! And so the great social gaming bubble begins to burst, just so you know i and many many others fucking called it as far back as April. Seriously take a look;

Scrumpmonkey:
muahaha -hahaha -Hahahaha! -MUHAHAHAHAA!

-MUHAHAHAHAHARR!!

Zynga's tears, they nourish me! And so the great social gaming bubble begins to burst, just so you know i and many many others fucking called it as far back as April. Seriously take a look;

It's hardly bursting, like someone just below my first post said, if Zynga dies, there's a dozen and a half games exactly like their stuff waiting to fill the void. Zynga overexpanded thinking that their growth was infinite, and if the last internet bubble taught us anything, that leads to disaster.

I called this in 2009. There games don't have enough substance to hold most peoples attention for very long.

HOLLY SHIT! They are running out of stupid people. Is that even possible?

Weren't these the guys that claimed that they could easily "double their userbase" just a few months ago?

TsunamiWombat:
This is what an oversaturated market looks like. Smaller companies are doing what Zynga does but better, faster, and cheaper. Far more are doing it shittier and more expensive - leading both to consumer fatigue and creating a greater sense of 'consumer judgement' - ie, the consumer becomes smarter about determining quality.

You are very correct. Infact this is a very concise explination of any market bubble. This story has played its self out over and over again in different sectors of the games industry in one form or another since its inception. You perfectly explain the conditions of the 1983 videogames crash also, its the same picture just in a single gaming sector.

The community on this site and others have been pretty dead-on and have seen this coming for over a year now. Shame it took paid 'analyists' so long to catch on. Remember in the 1st half of 2011 when they were lining up to give the big publishers a spanking over not investing heavily in the market? "You will be out of touch" they said "Social gaming is the future, just look at the numbers!". Then EA dropped a massive money-bollock on playfish and the ensuing bun-fight for the market has got ever more bubble shaped. Could it be that 99% of self procliamed industry 'experts' are worthless, out of touch hacks i wouldn't wipe my arse on? Surely not!

Round and round the industry goes. Learning nothing...

Scrumpmonkey:
muahaha -hahaha -Hahahaha! -MUHAHAHAHAA!

-MUHAHAHAHAHARR!!

Dang... you beat me to the maniacal laughter! I was wanting to come in and laugh up a storm over this...!

Oh well, good news is that this means Zynga's ship hopefully struck an iceberg, and is slowly splitting in half. Except now, its a totally good thing and should be labeled as "Karmic Payback" for a dbag who admitted to conning and ripping people off without punishment.

Realitycrash:
Weren't these the guys that claimed that they could easily "double their userbase" just a few months ago?

Actually, closer to a month and a half ago.

cursedseishi:

Scrumpmonkey:
muahaha -hahaha -Hahahaha! -MUHAHAHAHAA!

-MUHAHAHAHAHARR!!

Dang... you beat me to the maniacal laughter! I was wanting to come in and laugh up a storm over this...!

Oh well, good news is that this means Zynga's ship hopefully struck an iceberg, and is slowly splitting in half. Except now, its a totally good thing and should be labeled as "Karmic Payback" for a dbag who admitted to conning and ripping people off without punishment.

Its sad really, Social gaming had the potential to become something wonderful and help hark back to an age of both old school MMOs, text based gaming and help create a new age where websites, multimedia and gaming could come together to create encapsulating experiences and help them interact meaningfully with other players.[1] But Companies like Zygna had other ideas.

The reality of social gaming is total devoid of ideas, content, creativity and in the case of Zynga basic human decency. They have almost singlehandedly choked the life out of the fledging genre (Much like activision did with music games) and made it a byword for extorsion, shoddy data practices, microstansaction hell, lack of content, copy and paste games and utter utter bullshit. Even the word is enough to send hardened game advocates like myself into a towering Zynga based RAAAAAAGE.

Now Zynga hasn't killed social gaming, not by a long shot, but it and its imitators have irreversibly tarnished its reputation. They have its credibility out behind the bins and beaten it mercylessly with slegehammers into a squidgy, twitching pulp. Social gaming has set back the perception of the potential quality web based games by about 10 years. You can run "The Bastion" in chrome for christs sake, but all people think about when you say "Web based games" is stickman fighting and selling digital cows.

So yes, i applaud your joining in with my laughter at the expense of Zynga. Any damage to them is a boost to the games industry in my book.
Zynga is part of the reason we can't have nice things.

[1] For a small seed of this potential see; Echo Bazzar.

 

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