Zynga’s Farmville was a huge hit and was enjoyed by millions of users worldwide. However, its popularity was relatively brief as better games from rivals, overall slowness in the social gaming space and competition from the video game industry led to a decrease in players. The social gamer has now brought back founder Mark Pincus to try and re-energize the firm.
Not so friendly environment
SuperData Research, a digital gaming analysis firm, revealed that revenue from Zynga’s social gaming apps was $154 million in March. This was a significant decline of 10% from last year’s March revenue. Moreover, the monthly sales in the segment are down 42% from their peak in May 2012. In contrast, the Digital gaming market witnessed sales worth more than $1 billion last month, representing a growth of 2% on a year over year basis.
Making things worse for Zynga, SuperData noted that for the current year it expects a decline of 7% in spending by users on social games, leading to questions about the future of social gaming.
In his 2021 year-end letter, Baupost's Seth Klarman looked at the year in review and how COVID-19 swept through every part of our lives. He blamed much of the ills of the pandemic on those who choose not to get vaccinated while also expressing a dislike for the social division COVID-19 has caused. Q4 2021 Read More
“The market for social gaming is fragmenting and given the numerous interests of advertisers, end-users and Facebook, there may not be much that social game companies can do to improve the current situation,” SuperData founder and CEO Joost van Dreunen told CNBC.
Task already defined for Zynga CEO
According to Dreunen, casual mobile games have now taken over the social games market with more and more social gamers moving towards smartphones and tablets. This, in Dreunen’s view, is the main reason for the challenges faced by Zynga as it was slow to move to the new landscape. In contrast, rivals such as King Digital and Supercell were quick to accept the change, and acted accordingly.
Under outgoing CEO Don Mattrick’s nearly two-year tenure, revenue for Zynga’s top selling franchise “FarmVille” dropped from $9 million a month in 2013 to around $2 million presently, according to SuperData. However, the new CEO Mark Pincus has a better understanding of market dynamics, and what should be his area of focus.
In pre-market trading Friday, Zynga shares were off 0.41% at $2.45, and year to date the stock is down almost 10%.