San Francisco based Zynga Inc (NASDAQ:ZNGA), the popular online game developer, is now betting on the mobile games, and is planning to create a network that connects multiple mobile game players. The company is struggling to find new ways to generate business, as its user base on Facebook Inc (NASDAQ:FB) is shrinking rapidly. During the second quarter this year, the number of users declined 16 percent to 141 million. The decline has been a direct result of the users shifting to mobile devices for playing games.
Ever since its inception in 2008, Zynga Inc (NASDAQ:ZNGA) has been offering free games on Facebook Inc (NASDAQ:FB)’s site, and earns money when users buy virtual goods like cattle and tractors. It grew so virally that Zynga was valued at $20 billion during the IPO. However, recently, Zynga Inc (NASDAQ:ZNGA) reported losses during the second quarter and lowered its full year outlook. The stock prices have plunged 73% from its December IPO price of $10.
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Zynga Inc (NASDAQ:ZNGA) admits that mobile is the future of gaming and said its mobile gaming business is growing three times faster than the web gaming. Facebook users, who are still the biggest contributor to Zynga’s earnings, are also shifting to mobile devices. Today, more than 50 percent of over 900 million Facebook users log in through mobile. Therefore, Facebook Inc (NASDAQ:FB) is also working hard to capitalize on the mobile user base.
Considering all this, Zynga Inc (NASDAQ:ZNGA) is trying to figure out how it can make money from mobile games. The biggest challenge for the company is to connect a large audience of mobile users across a number of platforms. So far, the company has developed 20 mobile games for iPhones and 10 games for Android based phones. Zynga’s Chief Mobile Officer, David Ko, held a meeting last week with the engineers and designers, to discuss if the company should offer mobile games for free or charge users upfront. The meeting concluded without any final decision.
It’s really difficult to make money from the mobile platform, because the mobile phones have smaller screens, so very few advertisements can be placed. Another problem is, Zynga thinks that mobile users are “casual players” who are less likely to pay for the games, compared to the dedicated players on computers.
Zynga Inc (NASDAQ:ZNGA) has also restructured its internal management to boost the mobile gaming strategy.