There is bad news for Zynga this month, as they are seeing serious repercussions from their abandoned attempt to enter online gambling. They decided not to pursue real cash gambling earlier in the year, leaving that to professionals such as the Golden Cherry Casino online which are already established, and chose instead to take the opportunity to focus solely on their social gaming platforms such as Zynga Poker. While social gambling is starting to bring in serious cash for many developers, they are struggling to compete against a new wave of games which are starting to steal that social gaming crown which they held for a few years.
Not only are they laying off another five per cent of their workforce thanks to dismal quarter profits, but they are also shutting down Boston Studios in order to save on expenses and try to cut their losses. They have also proposed the closure of their studios in Japan and the UK over the coming year if things do not shape up, and part of the restructuring has also had them waving goodbye to a grand total of thirteen older games. They have even reduced their investment in the Ville games which made their name on the scene when they first became the leading social casino game developers. This follows a similar move of restructuring back in June, which saw them reducing their work force by eighteen per cent across all of their functions. This allowed them to reduce their expenses in the previous quarter by twenty one per cent, which was quite a significant amount; clearly that figure was not enough, and they now intend to cut down even further in an effort to ensure that profit is maximised instead of paying out expenses which cut into their revenue figures.
The top line is continuing to go down, but they did manage to reduce their losses from $15.81 million in the second quarter to $68,000 in the third quarter. The expenses for the fourth quarter have already totalled $150 million, with legal bills having inflated those expenses in a patent lawsuit which was ruled in their favour. They do seem to have managed around a twenty three per cent reduction in expenses this time around, which is sure to bring some cheer, but the decline in daily active players across their games still continues to drop and drop. This is a bad sign for the company as they rely on active users sharing their posts from the game in order to bring in new players and to ensure that interest remains high; indeed, most of their social games are based on a model wherein progress can only be made with the help of friends who are also playing the games. The users who are not fully invested in the games are no longer making purchases of virtual goods, and this means that only the most loyal customers are contributing to the revenue that Zynga are making.
Published by John Sullivan of Online Casino Club.