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Analysts and game industry reeling from Zynga’s shocking earnings report, stock down 39 percent | VentureBeat

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Ben Schachter, an analyst at Macquarie Research, said the results were “shocking” and guidance of revenues raised “our worst fears about the stability of the business model and competitive positioning.” He lowered his price target from $7 to $3.50 a share. Zynga said its revenues are expected to be $1.15 billion to $1.225 billion for the year, compared with Wall Street’s previous expectations of $1.44 billion.

He wrote in a research note, “Our key long-term concern remains this: What is Zynga’s sustainable competitive advantage? On Facebook, it executed well against its first-mover status, but with changes from Facebook, this advantage is wearing thin and users seem less willing to pay.”

He added, “On mobile, thus far, Zynga looks little different to us than a myriad of other casual game companies. It has acquired some hit mobile titles that monetize reasonably well through advertising, but without first-mover advantage and a platform on which to scale, it has not yet been able to leverage mobile hits into significant successes for its other games.”

With the uncertainty, Schachter said, “We have little faith in our, or the company’s ability, to model revenue in either the near or long term. Additionally, while real-money gaming remains a potential positive catalyst, it is extremely difficult to quantify at this early stage and we prefer to see management at least begin to execute against the opportunity before giving them any credit. The bottom line is that Zynga over promised and significantly under delivered.”


He's asking these questions NOW?!

These uncertainties have been there all along.

His being shocked is a poor reflection on him.

I played Zynga games and was spending enjoyment money to the tune of $5-$10/month on things when they completely changed the nature of the games by retro-actively re-negotiating the implicit contract between what a user had earned and what Zynga allowed you to keep. They went back and destroyed the value of things that I had put so much effort, thought, and creativity into--even stuff I had spent real money on. The second thing they did was to completely ruin the social experience. Before there was a nice logical progression and sense of accomplishment. When you got stuck by not having enough dedicated friends, you could always buy a few items here and there to keep the enjoyment going. They completely devastated that whole model and went completely to a social acquisition model altogether.

I'm reminded of when I interviewed for the CTO spot in LA. After accidentally stepping on a landmine of an issue where the developers wanted to throw out the old flash engine and build a completely new one, I told them that Farmville and Frontierville were cash cows and they shouldn't disrupt their users having fun on those platforms for anything. That went over very poorly. They also said my 37+ years of game playing didn't qualify me to really understand how Zynga games work as they were truly different.

I guess they can go be different in the swamp of their own making.

I think you just hit upon the source of the unhappiness of the users of Zynga's games.

If Zynga keeps changing the rules, their users will keep leaving.

Rule #1 in games: Don't invalidate all the hard work a user puts into the game.

Now that they have the reputation, users who have been hurt will NEVER come back to Zynga.

I stopped using Words with Friends and Draw Something the day Zynga bought them, for that very reason.

I'll never go back to their facebook games. Though, I still play words with friends, but that even went away when they started automatically forfeiting my games because I didn't respond for 2-3 days. My whole group of friends stopped playing because Zynga didn't think we were playing fast enough--so all the hard thought and words you had created just magically went away in a loss because you didn't launch their app within their expected window of user behavior.

I'd use drawsomething more if I had any friends who would play it, but I don't see how they make money on that. Even that is infuriating. You'll get a picture sometimes that you can't figure out. You find out later that the answer is completely unspellable with the letter tiles they gave you. It looks like a pretty major software bug. I would probably try to fix it if I were them. Again, that was one of my interview questions. If you had a really bad bug that only effects .001% of your users, but it was so bad that you would lose that user forever and for all other games, would you spend the engineering time to fix it. I said yes, they said no they couldn't be bothered as it was just one user. Strike two. They see their games as being socially influenced, but their negative sentiment as not? You can' make this stuff up.

You're right, you cannot make this up.

Zynga has shown over and over that it calls the shots.

If that's the way Zynga plays, then I say Game Over.

The comments on the mashable article are insightful:

Thanks for that link. I summarize the comments simply:


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