Zynga CEO Says Company May Soon be Profitable

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Monday, May 22nd, 2017 | Written by Shane Larson

Zynga, the American company that develops and distributes video games, such as the Zynga Poker mobile app, is undoubtedly one of the biggest names in the social gaming industry; however, despite having success with its poker app and being the mastermind behind the ever-popular Words With Friends app, the company has struggled to turn a profit. According to an interview with its new CEO, Frank Gibeau, however, the days of Zynga operating in the red may soon be over.

Q1 Revenue Up 5% to $194.3M

During the first quarter of 2017, Zynga saw a net loss of $9.5 million, and while those numbers may seem distressing, when you dive into the data shared on the company’s quarterly earnings call, there were actually some bright spots during the first three months of 2017. For instance, there was a total revenue increase of 5 percent to $194.3 million, with bookings also increasing by 9 percent to $207.4 million. Plus, Zynga had the highest mobile game revenue in the history of the company, which reached a 19 percent year over year increase.

Mobile Now Paying Off

Partly explaining Zynga’s lack of profitability was its decision to shift its business model from one that was almost solely reliant on Facebook as the platform for its mobile games. During the early years of the company, this was a smart strategy, but as other social media platforms emerged, Zynga found it difficult to continue attracting and retaining players. As a result, the company shifted its focus to mobile development, and turning its popular games into iPhone and Android apps. The costly process meant setting back profits, but now that mobile revenue is increasing at a satisfying pace, it seems possible that Zynga’s move might finally pay off.

Poker Leading the Way

Many online poker sites have been struggling with revenue, but Zynga Poker is thriving, and during the aforementioned interview, CEO Gibeau said that the game is one of the cornerstones of the company. Even after 10 years on the market, Zynga Poker continues to attract players, with the vertical soaring by 63% year-on-year in Q1, and accounting for 23% of all the company’s online game revenue. Furthermore, game’s bookings are up by 76 percent this year, with the audience size growing by 78 percent. Unlike other poker games, Zynga Poker does not involve playing for money, and consequently is available in areas where individuals cannot play online poker legally. The social sharing aspect of Zynga Poker has also made it appealing to millennials, a demographic that other poker games have found it difficult to attract.

Looking Ahead

Gibeau has made it clear that Zynga Poker will continue to play a huge role in the future success of Zynga. He also expressed his belief that the recently released game, Dawn of Titans, will prove profitable for his company, stating:

“I’m very bullish on Dawn of Titans long-term. One of the cool things about the mobile market versus console or PC is the fact that a game can find its way into the charts over a couple of years, and you can build on it. While Dawn of Titans is out, it’s doing well, it still hasn’t reached its full potential.”

While the company has no intention of halting its mobile app development and marketing, Gibeau shared that Zynga is revisiting Facebook games as an area for potential growth. It seems that the company’s strategy is to develop a robust portfolio of both web and mobile games. Only time will tell if it will prove a recipe for success. Elaborating further, Gibeau explained:

“It doesn’t mean that you shouldn’t invest in new titles, but it’s just a lot harder. And it can take longer periods of time to find its market. That’s why when you look at a lot of businesses on console and PC, by Thursday you have your call with GameStop and you know if it’s a success or not. In mobile, it can take a year or a couple years for a game to break into the top of the charts.. [with mobile] you want to make sure you’re in position to really leverage, as opposed to spending too long in development before you get out live.”