The surprising second-quarter stumble of Zynga has created questions about the company’s prospects with the social networking site, Facebook that actually makes up a major portion of revenue through gaming. Posting a plunge of $22.8 million for the quarter Wednesday, there have been concerns whether the gaming business can sustain or not. Zynga has seen a decline in the player engagement and enthusiasm for its games in recent months.
Zynga’s shares opened at $3.06 in Thursday trading from a previous close of $5.08 that is far below its Initial Price Offering (IPO) of $10. The company has failed to demonstrate reasonable earnings on the horizon that has left all investors wishing for another game to play.
In an earnings call Wednesday, the Farmville-maker said that delays in the launch of some games mark the reason behind the company’s loss. Zynga, a social gaming giant also admitted that its high-profile acquisition of OMGPop and its “Draw Something” game has yet to pay off. Shortly after release, the game was a number-one but slipped out of the highest downloads lists on Apple’s iTunes and Google’s Play stores.
The company blamed the changes to Facebook’s Web platform for the lost interest as this platform has been directing users to newer games from other publishers.
But analysts have said that Zynga’s recent performance shows that consumers aren’t sold on the idea of buying virtual goods— a trend that could send ripples across the technology industry.
Facebook’s shares also swung into loss due to the drop in Zynga’s shares, with wary investors likely recalling that, at last count, Zynga itself accounted for 12 percent of Facebook’s total revenue.
Facebook posts its first earnings report as a public company Thursday amid concerns that it will also struggle to prove it knows how to make money off its 900 million users — who give their personal information to the site but use its services for free.
With earnings coming after the closing bell, Facebook shares opened at $27.75, down from a previous close of $29.34.