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Zynga banking on a new winner as game players and dollars disappear

Jenna Wortham (via AFR) | April 25, 2013
The company hopes that a new game,which will be released on Wednesday, will help it regain some of the footing in the gaming industry

Zynga banking on a new winner as game players and dollars disappear
Zynga CEO Mark Pincus walks through the "Time Tunnel" in the lobby of Zynga headquarters in San Francisco, his company needs to come up with a new winner to arrest the declining fortunes of the company AP

Zynga just cannot win.

The company continues to lose money, employees and gamers, who no longer want to play its games. Analysts soberly warn that Zynga desperately needs a series of new mobile hits to improve its profitability and restore some of the luster of its earlier years. Earnings reports in recent quarters have been dismal.

This quarter was no exception. The company reported that its revenue was down 18 per cent from the year-ago quarter, results that prompted shares to slip in after-hours trading. Zynga's number of daily active users, or people who logged into its games once a day, dropped 21 per cent. However, it did report a small profit.

But the company hopes that a new game, which it is releasing Wednesday evening, will be the beginning of a new chapter; one flush with profits and praise from users; that will help it regain some of the footing in the gaming industry that it helped shape.

THE NEXT BIG THING

The new game is a sequel to Draw Something, the popular, turn-based drawing game that has entertained millions of players who sketched images for their friends in a modified, touch-screen version of Pictionary. Last March, Zynga paid $US180 million to buy Draw Something, which was created by a New York start-up, Omgpop.

Then it watched as players lost interest in the once popular game and took their time elsewhere.

Although the company says the game still has millions of users worldwide, it is betting that the new version will bring back former fans who had become bored.

The success of Draw Something 2 is more about salvaging the remains of an expensive acquisition. It is a crucial test to see whether Zynga can spin any of its former traction on the web to mobile; essential if the company wants to remain relevant and continue as a competitive gaming company in the future.

Richard Greenfield, an analyst at BTIG, a global trading firm, said it is normal for players to lose interest, especially when there is no shortage of games across an assortment of consoles, phones, tablets and hand-held devices. None of the top games currently charting in the iTunes App Store are games developed by Zynga, he said, but rather by relatively unknown upstarts.

"Why aren't those Zynga games?" he said. "Why can't they make great hits on mobile? They are saying they are a mobile-first company and, yet, they haven't been able to launch a hit mobile game."

 

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