Zynga Inc (NASDAQ:ZNGA), with its unending struggle, is making investors unhappy. They are now doubting the future prospects of the social game maker. However, Zynga might succeed in reviving its good old days with its turnaround plans, says a report from Fool.com by Adrian Campos.
Zynga from riches to rags
Zynga once was hailed as the most innovative game maker with its Farmville series, and was the darling of Facebook Inc (NASDAQ:FB) gaming platform. During its golden days, Zynga was also one of the most profitable gaming companies in the world.
However, Zynga Inc (NASDAQ:ZNGA) hit the bottom, and hardly anyone remembers the dominance of the company on the Facebook platform. In 2011, Zynga contributed to 12 percent of Facebook’s total revenue. In fiscal 2013, the performance is in sharp contrast as game makers like King.com are on top with addictive game like Candy Crush. Zynga’s revenue dropped from $332 million in the second quarter 2012, to $231 million in the recent quarter. In the last quarter, Zynga posted a loss of $16 million.
Gaming industry holds potential
The gaming Industry, however, holds good prospects for the future, says Adrian. In 2014, the social gaming market will be double what it was in 2011, and by 2015 social gaming in the United States will reach $5 billion. The player base of Facebook is 260 million, which is a huge number.
What is more encouraging is that the market will expand significantly over the next coming years. Out of 1.1 billion users on Facebook, the majority of them spent more time on the site than on any other social networking site. Most of the users are between 18 and 29 years old, which is an apt age from the games selling perspective.
Focusing on long-term strategy
Zynga Inc (NASDAQ:ZNGA) is, however, focusing on its long-term strategy to boost growth, but it may have some short-term impacts that could lead to the continued volatility of the stocks.
Zynga’s turnaround strategy took off in early June when the game maker slashed 18 percent of its employees, and closed its New York, Dallas and LA offices. Further, the company shut down its OMGPOP studio famously known for developing the Draw Something series, only one year after acquiring it for $200 million. Don Mattrick, former Electronic Arts (NASDAQ: EA) studio head, arrived at Zynga to take on the role of CEO. The new CEO, whose thrust is on back to the basics strategy, is the man behind the success of EA’s FIFA series. Zynga has also withdrawn its license from Nevada, which means it will not pursue real money gaming there, and will focus on a few key areas.
From the short-term perspective, Zynga Inc (NASDAQ:ZNGA) is in a messy situation, but management is determined that the turnaround plan of the company will pay off. According to the author, “If Zynga manages to survive, it will look very different from its current version. Its revenue will be more diversified.”