Zynga Inc (NASDAQ:ZNGA) will come up with its second quarter earnings on July 25 and is expected to post a decline in revenues and monthly active users, says a report from Trefis.
According to the report, the weakness in the gaming titles that was evident in the last quarter might be seen in the second quarter results also. Also, Zynga closed many of its under-performing games, which may also adversely affect the earnings.
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Zynga Inc (ZNGA) performance may further deteriorate
In June, the game maker announced to slash the head count by 18 percent, which is expected to result around $70-$80 million in pre-tax savings for the company. The cut in the workforce will lower Zynga’s headcount below the number it had during the IPO. This action reflects that the growth, which the company expected at the time of IPO, exists no more.
Zynga Inc (NASDAQ:ZNGA) presently is going through a rough financial phase, and performance may further fluctuate as the company attempts to “reorganize its core business and invests in new growth avenues” says the report.
Own gaming ecosystem a long term strategy
Trefis expects Zynga Inc (NASDAQ:ZNGA)’s revenues as well as monthly active users (MAU) to decline owing to weak performance of some its existing games and termination of games like The Ville, Empires & Allies, Dream Zoo and Zynga City on Tencent in the second quarter. For the previous quarter, Zynga Inc (NASDAQ:ZNGA)’s revenue dipped by 18 percent on account of lower MAU and a decline in monetization.
On the other hand, Farmville 2 performed well in the last quarter, and data from appdata.com suggest that it will continue to do so. Currently, Farmville 2 has an average MAU of 26 million, which is higher than the Trefis’s estimate for 2012. Also, the report expects a good performance from Zynga’s own gaming platform that hosts third-party games. The game maker’s long term strategy of “creating its own gaming ecosystem will protect it against the inherent volatility of individual social gaming titles,” believes the report.
Real money gaming a big market with intense competition
Any sort of updates on the real-money games, ZyngaPlusPoker and ZyngaPlusCasino, launched by Zynga Inc (NASDAQ:ZNGA) in the UK last quarter will be interesting to watch. A recent announcement from the company to bring real money games to Facebook Inc (NASDAQ:FB) will provide it an edge over the traditional online gambling companies.
As per the estimate of H2 Gambling Capital, global online gambling market was around 21.73 billion euros or 19 billion pounds in 2012, and is expected to grow by 30 percent over the next three years. Though, the real money gaming is a big market, but, report expects the road will not be easy for Zynga Inc (NASDAQ:ZNGA) owing to intense competition from the existing players.