Zynga Is A Flawed Company In Desperate Need Of A Breakout Hit

zynga omgpop

[credit provider=”Data from AppData”]

Zynga’s decision to pay $210 million for Draw Something, and the game’s subsequent rise and fall, appear to expose a fundamental flaw in the social gaming company that should frighten investors, and be setting off alarm bells in the company’s headquarters.As you can see in the chart on the right, Zynga’s daily user count spiked to almost 70 million users, up from ~58 million users, after acquiring Draw Something developer OMGPOP.

However, the buzz for Draw Something has worn off, and now Zynga’s total daily Facebook-connected users are back to around 58 million.

If you back out Draw Something’s Facebook connected users, which is about 9 million according to AppData, then Zynga’s daily user count is under 50 million.

This is bad for Zynga.

Zynga had 62 million daily players on average in the first quarter last year, and 59 million daily users on average in the second quarter last year.

It’s looking at a drop of about 18 per cent year-over-year without the help of Draw Something, which is still losing users.

Zynga needs to figure out how to trigger sustainable, organic growth. Buying the next Draw Something doesn’t appear to be a long-term viable solution for Zynga.

The question is: can Zynga still deliver hits on the scale of FarmVille or Zynga Poker anymore?

zynga draw something daus

[credit provider=”AppData”]

The last break out hit Zynga built from the ground up was CityVille, which still sits atop the leader boards on AppData. That game now has 6 million daily Facebook-connected players.Since then, it’s launched games like Zynga Slingo, CastleVille, and Scramble With Friends — all of which haven’t captured the same juice CityVille, or even Zynga Poker, had.

Part of the problem for Zynga is that Facebook cut back on some of the viral channels Zynga used to promote its games on Facebook. Zynga used to be able to jam up your news feed with requests and invitations from Zynga games like Farmville.

Zynga started working on a separate platform where it can host its own games and publish third-party games using Facebook Connect to reduce its dependence on Facebook’s homepage and open a new source of revenue. This is a big risk. It assumes Zynga users are willing to leave Facebook to play its games. It also assumes that developers want to work on Zynga’s platform.

Zynga’s shares have already fallen from a high of nearly $16 to less than $8, and there doesn’t seem to be a long-term value proposition.

What is Zynga going to do? 

Well, there are a few options:

  • Zynga’s most successful games appear to be mobile games right now. Words With Friends and Draw Something both boast huge numbers. It has to develop better iPhone and Android games.
  • Pray, or lobby, for online gambling to become legal. If Zynga Poker was such a runaway success, it’s possible that Zynga can duplicate the magic and attract a whole new breed of players.
  • Go back to its roots. Zynga should just crank out small game after small game. Right now, Zynga is trying to produce blockbusters like CastleVille, and it doesn’t appear to be working. Blockbusters have longer development times than some of the earlier, shoddier Zynga games. FarmVille is a skeleton compared to CityVille and CastleVille — but it’s still more popular than most of Zynga’s games. Some of the most successful games — Draw Something included — were rapidly-developed hail-Mary passes. Draw Something hit runaway success when OMGPOP was literally at death’s door.

Whatever it is, Zynga needs to find more ways to get a Facebook users’ attention. Both its own games and the games it buys aren’t doing enough of a job to hold onto users.

We reached out to Zynga for comment, but had not heard back at time of publishing.