Zynga makes loss despite mobile-driven revenue rise
Mobile growth rapidly gaining momentum with daily active users almost doubling quarter-on-quarter " CEO denies company will pursue an acquisition strategy.
Zynga has reported a loss of US$85.4m in its results for the three months ending 31 March 2012 despite a 32% rise in revenues for the quarter, driven mainly by strong mobile growth.
Chief executive Mark Pincus (pictured), however denied reports the company is set to go on an acquisition spree following the purchase of development studio OMGPOP for $180m in March.
Revenues for the quarter rose 32% from $242.9m to $321m aided by strong growth in monthly active users (MAU), which climbed from 236m to 292m, a 6% year-on-year increase. This growth was driven by the release of a number of new games, including Hidden Chronicles, Zynga Slingo and Scramble with Friends, and OMGPOP’s Draw Something, as well as growth in mobile and browser-based gaming. However, the results only include 10 days of Draw Something so the game had little impact on revenue and player growth.
Commenting on the results, Pincus said he was “pleased with the progress” Zynga has made in the first quarter growing its audience reach 25% year over year and nearly 20% quarter over quarter. “Our team did a great job launching five new games across mobile and web including new hits like Hidden Chronicles, Slingo and Scramble with Friends,” he added.
The company attributed an increase in average daily bookings (player spend) per average daily active user (DAU) “ up 8% to $0.055 “ to the growth in mobile and browser gaming. This was aided by the launch of Zynga’s proprietary dot.com platform, which has been designed with a view to moving the social operator away from the Facebook and Google+ platforms, and Zynga Platform Partners, a programme allowing developers to publish social games through Zynga.
Mobile operations also developed impressively, with games including Scramble with Friends, Dream PetHouse, Dream Heights, and Draw Something released during the period. In the company’s investor call, Pincus revealed that Zynga was the largest mobile gaming network in terms of player numbers, with DAU rising 83% from 12m to 22m quarter-on-quarter, while Zynga Poker has become the highest-grossing game on Android and iOS platforms, according to COO John Schappert.
Despite seeing strong growth in revenue, player numbers and player spend, the company posted a loss of $85.4m, compared to net income of $16.8m in the same period in 2011, after $133.9m of stock-based expense was included in the net loss. This compared to $14.5m in the same period last year. The drop in net income saw EBITDA decline 23%, down from $112.3m to $86.8m. This follows a net income loss of $404.3m in its full-year results for 2011 after which Schappert admitted the losses could push the company towards launching real-money gambling products.
Speculation that Zynga was in talks with Wynn Resorts followed not long afterwards after Pincus name-checked the land-based operator at the Morgan Stanley Technology, Media & Telecom Conference in March, during which he described real-money gambling as “the perfect fit with virtual goods and social games.”
Despite widespread speculation that Zynga is close to acquiring further rival social gaming studios, Pincus claimed in an analyst call late yesterday that the company would instead focus on in-house development: “The way we’ve built this business has been about organic development and growth of products that have helped develop a network that we have further leveraged to bring more successful games to market. That’s what you should expect to continue to drive growth.
“Draw Something was the second major product line that we went out and acquired, so it was a rare instance for us. We believed it was not just accretive financially, but we were excited about its growth and what this game meant for mobile-social gaming. [“¦] But it does not mean any change of strategy,” he explained.