Casual juggernaut Zynga has reportedly suffered its first dip in profits since inception – with year-on-year profits falling by 95%.
As Zynga delays its Initial Public Offering (valued at the $1 billion mark), Gamasutra reports that the comany has, for the first time, seen a drop in profits on its year-on-year figures. Although the group continues to turn a sizeable profit, it has seen a major slowdown in growth, plunging from $27.2 million to $1.3 million, a 95% decline.
Across the board, although Zynga remains a healthy, profitable institution, the rate of expansion is gradually slowing – although overall revenue has still grown by 15% to $279.1 million this quarter, it’s a slower rate than the previous quarter, which saw 24% growth in its March quarter. This by no means signifies that Zynga is running into trouble, but it may soon begin to reconsider its aggressive approach to expansion, as the past year’s record of acquisitions made clear.
Further troubles have arisen in Zynga’s user base, as Daily Active User numbers (DAU’s), dropped by 4%, from 62 million to 59 million, which Zynga attributes to a lean quarter for releases, but may also have something to do with the increasingly competitive market that Zynga continues to operate in. Despite having some major creative, technical and financial resources at their command, Zynga is gradually discovering the outer limits of the casual gaming/Free-To-Play market, and their IPO may suffer for it – it’s not always an attractive prospect to invest in a company with no more room for growth.
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“Casual juggernaut Zynga…”
I like the idea of someone being a juggernaut on a casual basis.
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Lewis Denby (September 26th, 2011)
Ha, I noticed the name Zynga and thought I’d check out the post. Yeah this is none too surprising as they seemed to have been expanding left and right, or that’s what it seemed like. Just seems now that it’s probably going to even out a bit. I think Zynga still has a long way to do with the social gaming market, though they do seem to have some good competitors. I also just got an email that they have another game to check out (if I’m remembering correctly).
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Tren (September 27th, 2011)