Zynga shares volatile after massive year-end loss

Social game maker's revenues rise 91 percent in 2011 to $1.14 billion, but investors waffle over $404 million loss.

Today, Zynga issued its first earnings report since its underwhelming initial public offering in December, and the results appear to have sent investors into a tizzy of confusion.

Zynga's earnings beat expectations, but it still appears to be in investors' doghouse.

Revenues for the 12-month period ended December 31, 2011, came in at $1.14 billion, up 91 percent over the same period in 2010. The company reported a net loss of $404 million. However, that figure is heavily distorted due to Zynga's IPO, which saw the company's bottom line take a $510 million hit due to stock-based compensation expenses.

After ending trading today up nearly 7 percent to $14.35, Zynga has shed 2.5 percent of its value in after-hours trading. Currently, the company's stock is hovering around $14 a share.

During Zynga's October-December quarter, the company saw double-digit growth in daily and monthly active users. Daily users rose 13 percent to 54 million during the period, while monthly users were up 23 percent to 240 million.

The company also saw a significant increase in bookings, which is a complicated financial measurement that reconciles purchasing virtual currency with real currency. Zynga said its average daily bookings during the fourth quarter rose 11 percent to $0.061. People spending money on the company's slate of free-to-play games also rose to 2.9 million during the period.

Games produced by Zynga are the most popular on social networking platform Facebook. According to AppData, Zynga's CityVille, Texas HoldEm Poker, Hidden Chronicles, CastleVille, and FarmVille are currently the most-played games on Facebook.

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Discussion

33 comments
SicklySunStorm
SicklySunStorm

HA! I sold so many of these in the IPO to some stooopid investors... they yummed them up, despite our warnings.

ash162
ash162

@tseng i didnt mean just for zynga but the industry as a whole. Sure zynga is a whale among casual game devs but a lot of games that people play casually these days have miniscule budgets arent from zynga and sell just as well. There is no one dying to play a zynga game and the concept of casual games is so simple that anybody can create different versions for a different platform. There r tons of companies who have made poker or angry bird iterations and they do just as well as the original!

supertom221
supertom221

@ash162 Truest words on this article. This idustry is just not for them. It's like making a low-budget movie but hiring Hollywood staff and stars. Your movie can be a hit, but the expenses you'll have to compensate for will still drag you down.

Rottenwood
Rottenwood

Maybe they need to build more sheep or something. (Sorry; I've never played FarmVille and I don't know how it works.)

SauhlGood
SauhlGood

oh gawd zynga games are a perennial fart in the video gaming world, itl peak eventually, if not already, and then itl be gone to make room for people who make games, instead of a virtual mall with a game on the side

Tseng
Tseng

@Ash162: In Zynga's case, a two or three person operation won't cut it. They release new content for all their active games once or twice a week. My sister is an artist that works on Farmville. Not only is she putting in 9, 10, 11 hour days, she comes in on the weekends and works from home. And she is one of half a dozen people working just on the art for one game. I'll agree that they need to do something new to stay on top, but for the amount of content they churn out every day there is no way they could go with a small operation. Also, everyone note that they were down $404 million, but they had to spend $510 million so they could go IPO. According to basic math that means they would have made a profit of $106 million had they stayed a private company. Not to mention their client base has risen. Oh, and their stock has risen nearly 60% since it hit the market. Not sure why everyone read that article as so negative.

ash162
ash162

The big company model won't work in the casual games market. These games can be created by a few people on a small budget depending on microtransactions and dont really inspire much customer loyalty. Thousands of people play angry birds but i doubt many know who 'Rovio' is....

GuilhermeHQ
GuilhermeHQ

Keep launching games with no quality Zynga, next year we won't be bothered anymore on facebook :D

jamyskis
jamyskis

Somehow "I told you so" just doesn't cut it.

ProMethUse
ProMethUse

that's what you get Zynga for just releasing games one after the other without putting much thought into them

MJ12-Conspiracy
MJ12-Conspiracy

In a decently run universe Zynga and Activision would be out of business..... Let's hope one of these two goes down in flames soon......

EPaul
EPaul

Lol i knew it happened should of cash in when the going was good

megakick
megakick

Good Im' glad they aren't doing so well. Better to invest in a great game then to make a load of crappy rip offs.

Sgthombre
Sgthombre

New buys into these guys would be a bad move. This is just like the internet bubble that burst in the 90's. Profits just aren't high enough to warrant a stock price like that.

chibi-acer
chibi-acer

@killa32130 That's not what net loss means. Net loss is the opposite of profit. If they had revenue of $1.14 billion, but a net loss of $404 million, it means they spent over $1.5 billion last year. Back in January, Gamespot posted an article where an analyst checked their numbers and found that Zynga was spending $150 for every subscriber they brought in. Apparently a ton of their money is going into marketing/advertising. http://www.gamespot.com/news/zynga-losing-150-on-every-paid-customer-analyst-6348951

Solace427
Solace427

@nurnberg Even if the games cost little to make, it takes more to host their games through Facebook, etc. as well as managing and keeping them running. Also the games are based off of micro-transactions. Zynga released a bulk of games all based off of such a system. Now multiple that times millions of users. That is a lot to maintain. Also the micro-stores aren't always successful. As posted in a previous article they are losing more money per player. Zynga needs few games that make more of an impact at this point or they will go downhill

killa32130
killa32130

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nurnberg
nurnberg

I don't get it. How can they lose 400 millions? Their games have a budget of like 5000$.

AntiH3ro97
AntiH3ro97

Well their word games are fun, I like their scramble (not scrabble) game, but there is absolutely 0 chance in hell that I would EVER buy tokens to spend on that game.

alexLmx6
alexLmx6

@XboxGuy1537 - Because it's what all the cool kids are doing. Fun has nothing to do with it, it's the "My self worth is completely based on what others think of me, so I had better do whatever is popular RIGHT NOW and pretend I loved Whitney Houston" crowd these games appeal to.

XboxGuy1537
XboxGuy1537

Why do people find those Words with-whatever-the-hell-it-is-no-one-cares games fun.

ampthos
ampthos

i remember hearing somewhere that zynga was a bad investment because although it has a tonne of customers it spends $300 on marketing per customer, whilst only making $150 per customer

Freezezzy
Freezezzy

@Death_Blade_182 I think the main reason for that is that most (or all) of their games are extremely shallow, and offer the option to buy everything instantly, which cheapens the experience and defeats the purpose of even playing.

Death_Blade_182
Death_Blade_182

That's the problem with casual games, people will play them for a couple months at most, then never go back to it. It's only a matter of time before Zynga burns to the ground.

ziproy
ziproy

So they made more money than ever but still lost money??

cachinscythe
cachinscythe

@bibliomaniac15 Sure, just like video games in general blew up and then totally died off. Or not. I'm guessing freee-to-play games like Zynga's will continue growing in profitability for the time being, but we'll have to wait and see.

Subterranean500
Subterranean500

So they lost $404 million? Let's hope that doesn't get anyworse... or maybe we should. Getting sick of all these freakin' FarmVille and CastleVille requests

phil315
phil315

[This message was deleted at the request of the original poster]

phil315
phil315

[This message was deleted at the request of the original poster]

phil315
phil315

[This message was deleted at the request of the original poster]

bibliomaniac15
bibliomaniac15

As anyone could have predicted. Blows up at first, then rots from the core.