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Shares of Zynga fell 10 percent this morning and rebounded only slightly throughout the day after the online game developer posted declining first-quarter revenues and warned of an unexpectedly large second-quarter loss. The company saw substantial decreases in both its daily users and active monthly users from the same period last year, and average bookings from daily active users was down 11 percent year-over-year.
Zynga’s biggest problem over the last year has been its inability to tap the booming mobile gaming market. Mobile now accounts for 22 percent of 22 percent of bookings, up from 12 percent a year ago but essentially flat from the previous quarter. Many of Zynga’s titles simply aren’t as compelling on a smartphone as they are on a PC, and some titles that do play well in mobile — Words With Friends, for instance — have been around a while.
Zynga hopes to have a mobile hit with Draw Something 2, which was released this week and is the result of last year’s $180 million acquisition of the developer OMGPop. But OMGPop CEO Dan Porter quietly left Zynga a few weeks ago, as this intriguing New York Magazine piece documents. Which isn’t a good sign for a company desperately in need of a hit.
The acquisition of OMGPop may have been a mistake — the success of the new sequel will go a long way toward determining that — but Zynga clearly has trouble developing compelling new games on its own. And tie-ups with lesser-known studios have yet to pay dividends in any big way. The company will likely have to reach for its wallet once again if it is to successfully buy its way into the space.