Wow. This is kind of harsh. Social game maker Zynga’s share price dropped 40% after reporting a dismal second quarter.
The company, which had a roller coaster stock debut managed a net loss of US$22.8-million for the second quarter of 2012 compared to net income of US$1.4-million for the second quarter of 2011.
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While revenue was US$332.5 million for the second quarter of 2012, an increase of 19% compared to the second quarter of 2011, it was lower than analysts were expecting.
Online game revenue was US$291.5-million, down US$1.2-million compared to the first quarter of 2012.
One glimmer of hope was in advertising revenue. Totaling US$40.9 million, it was up 170% from a year ago and 45% compared to the first quarter of 2012.
Things don’t look like they’re about to get any better either. Zynga is lowering its outlook for the rest of 2012 to reflect delays in launching new games, a faster decline in existing web games due in part to a more challenging environment on the Facebook web platform, and reduced expectations for Draw Something.
It can however take solace in the fact that its games are still immensely popular on Facebook:
Its recently launched title Bubble Safari is now the number one arcade game on Facebook, and The Ville is now the number two game behind Zynga Poker.
That said, changes to the way Facebook works, including its app centre, are allowing people to more easily discover games by other publishers. These aren’t all small time players either. Rovio’s decision to launch Angry Birds on Facebook is a case in point.
That means that Zynga can no longer rely on its existing titles but will have to push new releases heavily. Bubble Safari and The Ville may have been released too late to show a noticable difference this quarter.
The company claims its mobile footprint “grew five-fold in the year to 33-million daily active users making Zynga the largest mobile gaming network,” said Mark Pincus CEO and Founder, Zynga. “We also faced new short-term challenges which led to a sequential decline in bookings. Despite this, we’re optimistic about the long-term growth prospects on mobile where we have a window of opportunity to drive the same kind of social gaming revolution that we enabled on the web.”
According to TechCrunch, the company could also be introducing real money gaming by the first half of 2013.
“What we’ve said, and what we have to announce today, is that we have our first products in development and that we intend to release them in markets that are regulated and open, subject to our getting licensing,” said Pincus.
Given that Zynga’s never really played in this field before, it could be a serious well…gamble.
