In the third quarter of 2014, Zynga Inc. (NASDAQ:ZNGA) announced $177 million in revenue showing a 13% yearly decrease along with a consecutive 15% rise. The beyond market expectation revenue was due to significant growth in the use of mobile and bookings which led to a rise in its stock price by 10% during after-hours trade. As a result of continuing business challenges, its stock has declined by 40%.
Zynga’s profits has shown continuous decline because of its investments in strengthening mobile offerings and the launch of new games. Compared to its $14 million adjusted EBITDA (a non-GAAP measure) in the second quarter and $7 million in 2013’s third quarter, it has declined this quarter to $2 million. Margin-associated demands may continue in the future because of R&D expenditure and high marketing. Zynga’s new games did not generate much user interest so its functioning user base also decreased in this period.
The future sees mobile devices percentage in Zynga’s business is expected to rise as a consequence of a decline in the web business. Zynga Inc. (NASDAQ:ZNGA) is trying to bolster sales by improving its fundamental franchises and consorting with top brands for new game unveilings and promotion. Subsequently, Zynga Inc. (NASDAQ:ZNGA) has to strive towards investor confidence by introducing exceptional and thrilling original games to increase user base.
New Games Not Creating Interest
Recently, Zynga Inc. (NASDAQ:ZNGA) launched some games like ‘NFL Showdown’ and a fresh rendering of ‘Zynga Poker’, along with ‘Looney Tunes’ and ‘New Words With Friends’ in specific locations and will launch them in more locations soon. It has also upgraded some of its existing games. ‘Zynga Poker’ was not very welcomed because some users preferred the older format, and it did not work on some of the previous devices.
The new games did not generate better user interest with an annual fall of 16% of Zynga’s monthly active users (MAUs) and consecutively saw a 14% decline to 112 in the third quarter. Subsequently, its monthly unique users (MUUs) decreased by 21% annually and 13% quarterly to 77 million. It is believed that Zynga Inc. (NASDAQ:ZNGA) will see even more disinterest in its user interest till its new games gain market momentum among competition.
Mobile Market is Bolstering
Zynga’s earnings report still look good and its mobile offerings show a notable performance with an annual bookings increase of 11% and 10% consecutively, making up 55% of overall bookings. Mobile share use is the total bookings showed 36% and 50% in 2014’s first quarter. Zynga’s long-standing growth and success depends on these offerings as users move increasingly towards mobile gaming. Though MAUs declined this quarter, mobile MAU’s rose 45% yearly, Steady mobile growth meant annual and consecutive monetization. As its mobile offering continues growing, Zynga Inc. (NASDAQ:ZNGA) plans on investing the development of its mobile business.
In the third quarter, ‘Farmville’, ‘Casino’ and ‘Words With Family’ reported a 30% growth in its annual bookings which increased its total booking by an annual 15%. Zynga Inc’s (NASDAQ:ZNGA) also publicized its marketing contract for its well-liked ‘Hit It Rich’ game with the TV franchise ‘Real Housewives’. ‘Casino’ brought in 12% of its online gaming income. Now, Zynga Inc. (NASDAQ:ZNGA) has to concentrate on introducing enthralling and innovative content rather than just licensing its known content to set it apart from competition.