Zynga's Profits Down by 95%
Disclaimer: I was previously a Zynga employee and I am presently a holder of Zynga stock. I have no knowledge of Zynga's current internal state - the following is entirely speculation.<p>=================================<p>There are many forces at work here that need to be brought to light.<p>* Macro Trend #1 - Facebook's web traffic is in decline[1].  These users are shifting to mobile as their primary consumption channel for Facebook.  No facebook app developer has presence on the mobile app.<p>* Macro Trend #2 - Zynga's game launches are smaller than ever.  For many reasons, it's getting harder to launch a 5M+ DAU game.<p>Zynga is responding to these trends in several ways.<p>*  Leverage their warchest[2] to make acquisitions.  This lets them launch a higher volume of games and help them get a foothold in mobile.  Zynga has made a LOT of acquisitions this year[3].<p>* Further monetize their existing base.  They've been pushing partner deals really hard recently, doing deals with Lady Gaga[4], Amex[5], and Capital One[6]<p>Zynga's games are more high quality than ever.  Gone are the days of "fuck innovation", two of Zynga's most recent releases are the best they've ever built.  The issue is that the market for FB games is in decline - the next big wave is mobile.  If Zynga can become a player by launching a hit or acquiring a large chunk of the space, they'll be doing better than ever.  But so far, Zynga's mobile releases have flopped.<p>TL;DR - Zynga's profits are a sign that they have doubled down on acquisitions to counter-balance a market shift from web to mobile.  Their future prospects lie in their ability to generate hits on the iPhone.<p>=====<p>[1] - <a href="http://www.insidefacebook.com/2011/06/12/facebook-sees-big-traffic-drops-in-us-and-canada-as-it-nears-700-million-users-worldwide/" rel="nofollow">http://www.insidefacebook.com/2011/06/12/facebook-sees-big-t...</a><p>[2] - <a href="http://www.insidemobileapps.com/2011/08/11/zynga-credit-1-billion-acquisitions/" rel="nofollow">http://www.insidemobileapps.com/2011/08/11/zynga-credit-1-bi...</a><p>[3] - <a href="http://mashable.com/2011/05/18/zynga-dna-games/" rel="nofollow">http://mashable.com/2011/05/18/zynga-dna-games/</a><p>[4] - <a href="http://mashable.com/2011/05/10/zynga-gaga-gagaville/" rel="nofollow">http://mashable.com/2011/05/10/zynga-gaga-gagaville/</a><p>[5] - <a href="http://www.zynga.com/about/article.php?a=20101130" rel="nofollow">http://www.zynga.com/about/article.php?a=20101130</a><p>[6] - <a href="http://blog.games.com/2011/09/19/farmville-cityville-pioneer-trail-capital-one/" rel="nofollow">http://blog.games.com/2011/09/19/farmville-cityville-pioneer...</a>