The message from Zynga’s disastrous second quarter, which sent its stock diving 40 per cent, is simple: Fewer people are playing Facebook games.Zynga was once one of the hottest IPOs of 2011. But it has faded from the top as gamers move to mobile devices and spend less and less time playing Facebook games — and now it’s trading at around $3 from a high of $14.61 earlier this year.
Take a look at a few metrics from Zynga’s earnings review:
- Zynga reported 72 million daily active users, which declined as the quarter progressed. AppData now reports that Zynga has around 55 million Facebook-connected daily users.
- Of those players, 33 million of them are playing mobile games. If you adjust for the sequential decline over the quarter of its overall DAUs with the same proportion, Zynga has around 25 million mobile DAUs. That’s still nearly half of Zynga’s current players.
- Zynga’s average bookings per player also declined 10 per cent year over year. That’s because Zynga’s current mobile games, predominantly the With Friends series, do not monetise as well as traditional RPGs like CastleVille and CityVille.
- When Zynga bought Draw Something, considered the hottest game in the world, its DAUs spiked by nearly 15 million. It was very clear that Draw Something, a very powerful mobile game, was a huge hit.
You can see this trend in the chart below. FarmVille, considered the most successful Facebook game of all time, peaked out at more than 30 million DAUs. Today, games struggle to break the 6 million mark, a drop-off of more then 80 per cent.
Photo: Sterne Agee and AppData
If you look at the top Facebook-connected apps in terms of DAUs today, only four of them are games: Zynga Poker, Words With Friends, The Ville and Bubble Safari.
The top apps in terms of daily users are utility apps: Instagram and Microsoft Live, an app that connects Facebook to Windows Live accounts. After Zynga Poker and The Ville, it’s Spotify, a music app.
Gamers are leaving Facebook for mobile, and Zynga is hardly the only company dealing with the shift.
King.com, the second-largest Facebook game maker, doesn’t have a Facebook game that has more than 5 million daily players. Its top game, Bubble Witch Saga (which Zynga cloned into Bubble Safari), hit 6.6 million DAUs in May and hasn’t broken that number in July.
Electronic Arts also went all-in with Facebook games, but its newest Facebook game, Sim City Social (which it spent years developing) is a dud with 1.4 million DAUs a month after launch. The Sims Social hit about 11.5 million DAUs in September, but has since fallen to 3.2 million DAUs.
Social games on Facebook simply do not have the same peaks they had even less than a year ago with the breakout hits of CityVille and The Sims Social thanks to drastic shifts to mobile.
There’s one small hope for Facebook games, which Pincus alluded to on the conference call to discuss Zynga’s Q2 earnings. “We see opportunities to grow bookings in male-oriented games,” Pincus said on the call.
Pincus is referring to hardcore gamers, which companies like Kixeye and Kabam target because they have a higher bookings return per player. For example, War Commander, a Kixeye game, looks more like a classic hardcore PC game like Command and Conquer than a light-hearted game like FarmVille.
While these companies have nowhere near the mammoth reach of Zynga’s games — Kixeye, for example, has around 1 million DAUs and its top game has 420,000 DAUs — their player base is much more fanatic and play games much more often.
As a result, niche social gaming companies do extremely well for themselves by catering to a smaller segment of Facebook players, and are able to more easily identify and monetise high-paying whales.Zynga already does a good job of pampering its whales, but its highest-monetizing games are those RPGs like FarmVille and CastleVille — which are shedding users quickly due to the shift to mobile gaming.
Zynga still obviously sees a future in Facebook games and web games. It’s putting a lot of resources into FarmVille 2, a 3D sequel of its most popular game, and is developing an online gaming portal independent of Facebook.
Kixeye is also working on its own independent portal for games. And like Kixeye and other hardcore game developers, Zynga’s portal will probably be limited to the niche player segment that feels very deeply connected to those games — which isn’t a bad thing, if Zynga plays its cards right.
But it does now seem that the heyday of developing stripped-down, highly addictive cow-clickers on Facebook has finally come to an end. Nowadays, players prefer to spend their time drawing crappy versions of Lady GaGa in a game of Pictionary.
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