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Zynga warned Wall Street this afternoon that its third-quarter results, expected to be formally announced October 24, will be a lot worse than expected.In an email to employees, CEO Mark Pincus got into more detail on what happened and why. Zynga posted his note on the company’s blog.
The problem lies in games like FarmVille and CityVille, which Zynga calls its “invest and express” category—that is, players invest time and money to earn in-game objects which they then put on display, like cows, plants, or buildings. Players are getting tired of that whole genre.
It’s also taking longer to launch new games, and since those are coming out later than expected, that will hurt results.
So Zynga is starting to focus more on other game categories, like casino and PVP, or “player versus player,” as well as mobile.
Here’s the memo:
Today we announced preliminary Q3 financial results and revised our forecast for the rest of the year. I want to add more colour to the announcement and our future opportunity.
The challenges we faced in our web business in Q2 continued in Q3 and while many of our games achieved plan, we still experienced overall weakness in the invest and express category. To address this we’re further investing in other genres like casino where we already lead with Zynga Poker and blue PVP, a category we pioneered with Mafia Wars, and now have the opportunity to reinvent with the industry’s best talent here at Zynga.
While we’re disappointed with these financial results, we’re proud of the progress that our teams made on many fronts. We continue to see the power of our player network, launching three games, each achieving top 10 status with more than 6 million daily players. Within its first six weeks, ChefVille has become a mainstay for 45 million monthly players and FarmVille 2 introduced stunning 3-D farming for the first time in a web browser becoming the most popular social game within three days of network launch.
So why are we lowering 2012 guidance? There are a few factors contributing to a weaker than expected outlook for Q4. The reduced performance of some of our live web games is continuing to impact results and we have several new games which are at risk of launching later than expected.
We’re addressing these near-term challenges by targeted cost reductions and focusing our new game pipeline to reflect our strategic priorities. At the same time, we are continuing to invest in our mobile business where we have one of the strongest positions in the industry. These actions support our strategy to transition from being a first-party web game developer to a multi-platform game network.
Let’s not lose sight of the bigger picture. The world is playing games, and is increasingly choosing social games. Zynga has become synonymous with social gaming serving 311 million monthly active users, the largest player network on web and mobile. When we offer our players highly engaging content they respond. FarmVille 2 has been our most successful launch since CastleVille. Our With Friends franchise is defining social play on mobile where Zynga represents 3 of the top 5 most popular mobile games in terms of time spent in the U.S. according to Nielsen. While we’re encouraged by our strong starting position on mobile, developing this new growth market to the scale of our web business will take time.
Over the past few weeks, we’ve been meeting with you all to check-in and answer your questions. It’s exciting to hear how much passion you have to innovate on new ideas. We have an amazing opportunity to channel this into breakthrough new products that surprise and delight, excite and ignite our players.
Please join me and your fellow Zyngites today to discuss Q4 OKRs and our next steps.Thanks for all your hard work to pioneer social gaming. I look forward to working together to deliver on our mission of truly connecting the world through our games.