Zynga Inc (NASDAQ:ZNGA) has released some of the most popular social games over the past few years. But the landscape has changed quite drastically. According to AppData, none of its 103 games appear in the top ten in terms of monthly active users. Zynga Inc (NASDAQ:ZNGA)’s key competitor King.com leads the chart. Social gaming is a very volatile industry where a company is as good as its popular games.

Zynga Earnings

Zynga’s woes

Zynga Inc (NASDAQ:ZNGA) faced a big blow when Facebook Inc. (NASDAQ:FB) made its ecosystem and policies equal for all social gaming companies. The San Francisco-based company had long relied on Facebook Inc. (NASDAQ:FB) for most of its revenue. In 2012, 81% of its bookings came from Facebook Inc. (NASDAQ:FB)’s platform. Fierce competition prompted Zynga Inc (NASDAQ:ZNGA) to offer games through its website, which should benefit the company due to flexibility of logins and payments.

The company had earlier planned to foray into real money gambling in the United States, but scrapped that plan later. The U.S. online gambling market is expected to grow to $7.4 billion by 2017. The company has launched two online gambling websites, ZyngaPlusCasino and ZyngaPlusPoker in the UK. Zynga Inc (NASDAQ:ZNGA) may have failed to lobby in the U.S. Whatever the reason, the online gambling market represented a really big opportunity for the company.

Things that favor Zynga

Despite its recent woes and negative earnings, Zynga Inc (NASDAQ:ZNGA) still has a certain amount of space to improve its EPS. Facebook Inc. (NASDAQ:FB)’s revised ad and payment terms mean Zynga Inc (NASDAQ:ZNGA) will have to pay a lower amount to the social networking giant now. According to Equity Flux, the company had paid Facebook Inc. (NASDAQ:FB) $338 million in fees during Q1 2012. It will help improve the company’s EPS.

On the other hand, the company’s restructuring plan announced earlier this year would help it lower costs. That has improved Zynga Inc (NASDAQ:ZNGA)’s EPS position despite falling revenues. Zynga Inc (NASDAQ:ZNGA) is currently focusing on mobile gaming market, which is expected to grow to $1.5 billion by 2015. Today, tablet and smartphone users make up 24% of Zynga Inc (NASDAQ:ZNGA)’s total monthly active users.

Zynga Inc (NASDAQ:ZNGA) recently hired Clive Downie as its chief operating officer. Downie has been responsible for popular Electronic Arts’ games such as Need for Speed and FIFA. He can guide the company to develop high quality and innovative games.

Moreover, the company has about $1.1 billion in cash and a current ratio of 4x. Zynga Inc (NASDAQ:ZNGA)’s healthy financial position can buy the company some time to come up with breakthrough games.

Zynga Inc (NASDAQ:ZNGA) shares rose 1% to $4.09 at 9:36 AM EST.