Then something happened on the way to rolling over the gaming world – consumers seemed to get bored with their games. According to Appdata they currently sit at around 129 million Monthly Active Users which is down from their peak of 265 million. Unlike Electronic Arts who can put out a new Madden update and have consumers purchase it every year, Zynga does not seem able to keep consumers interested in anything that makes money. People still love playing Words With Friends or Scramble but that isn’t paying the bills. As a result the market has fallen out of love with Zynga as its market value is down to $2.5 billion with almost $1.3 billion of cash on their balance sheet. Therefore the market is really valuing the actual assets of Zynga at $1.2 billion. Nobody should shed any tears for founder Mark Pincus but that is a long way from $11 billion.
This exhibit shows how several of their big titles performed in the period after their launch. Other than poker, the shape of the line is the same for each tittle. There is a big run-up right after launch and then a huge drop in usage. Poker is the one game that has seen steady growth for Zynga. Thus it is no surprise that poker is likely to be core to Zynga’s strategy going forward.
Media reports indicate that Zynga is spending more and more time looking at the cash gaming market overseas and in the US. No, they are not contemplating setting up Scramble for money (although that sounds pretty damn good). Right now they have a huge installed base in poker that they hope they can convert to cash based players. They have talked about joint ventures with the likes of MGM Resorts and Wynn. It will be interesting to see how that works as the cultures of Zynga and traditional casino companies like MGM and Wynn are like oil and water.
In the end, it is going to be difficult for Zynga to succeed. They have several issues that will be difficult to overcome: