After Quarterly Losses, Zynga is Focusing on Social Games

Two weeks ago Zynga announced their plans to move forward with real-money online gambling in the UK, yesterday they announced that they will not pursue online gambling in the US.

“Zynga believes its biggest opportunity is to focus on free to play social games. While the Company continues to evaluate its real money gaming products in the United Kingdom test, Zynga is making the focused choice not to pursue a license for real money gaming in the United States.”

The announcement was made in a press release that reviewed earnings from Q2 and gave projections for Q3. Zynga’s revenue is down 31 percent over the year and it saw a net loss of $16 million this quarter. Zynga CEO Don Mattrick believes that in order to bring Zynga to the top of the online gaming pack, it needs to go back to its roots and focus on social. These next two quarters will be a tightening of the belt as Zynga tries to become more efficient.

ZyngapicThe gambling announcement and the earnings report caused Zynga’s stock to drop 15 percent yesterday as investors had thought the adoption of real-money gambling in the UK would be a stepping stone to American adoption. Not only would online gaming lead to profits, but it would lead to diversification and set Zynga apart from other social gaming companies like EA and King.

Social gaming apps continue to rise in popularity, with companies trying to launch the next Candy Crush Saga, the next Draw Something, or the next Words with Friends. Many people have predicted the downfall of social gaming on third party websites, but Facebook’s technology communications manager Tera Randall believes otherwise. Randall was quoted on Gamasutra comparing games on social media to – ironically – in-store games.

“One developer shifting resources or moving a game does not speak to the health of the ecosystem, the same way a console game maker pulling a game off a store shelf doesn’t mean that the store is having problems.”

This quote came in response to EA’s retirement of multiple Facebook games back in April.

gamespicSpeaking of Facebook, All Things D found that they are testing game ads inside the notifications tab. Facebook will suggest other games to users who are already sucked into Farmville or Candy Crush Saga. They’re targeting the power users, not the occasional bored gamer or light Facebook user.

Facebook doesn’t rely on gaming for most of its revenue; it relies on ads, so while the social network wants people to play games on its site to increase their exposure to advertisements, one company retiring a couple games isn’t cause for alarm. With new ads popping up in the notifications tab, the die-hard users will play more anyway, increasing any ad revenue potentially lost because of EA.

Do you think Zynga’s retooling over the next few months will have any affect on Facebook?

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Amanda Dodge