Zynga's stock plunges nearly 40 percent after it misses earnings targets

[Newsjock]

Source: San Jose Mercury News

Zynga had bad news for investors Wednesday: It reported worse-than-expected second-quarter results and lowered its outlook for the rest of the year. Investors responded by dumping the stock in after-hours trading, sending it down nearly 40 percent.

Company officials blamed the bad tidings on weak showings for Zynga's existing games, delays in launching new ones and a significant drop-off in users of its newly acquired "Draw Something" game.

... Zynga has largely built its business around so-called free-to-play Facebook games. The company generally makes money by charging customers small amounts for virtual goods that can be used in its games.

But the company's business model could prove challenging going forward, said Joe Spiegel, a portfolio manager at Dalek Capital who covers the video game industry. The reliance on microtransactions is bad for consumers, who are constantly being pestered to pay for more things, and bad for the company because the revenue it will get from those transactions can be hard to forecast, he said.

Read more: http://business-news.thestreet.com/mercury-news/story/zyngas-stock-plunges-nearly-40-percent-after-missing-earnings-targets-lowering-forecast-0/1

[Starry Messenger]

1. People hardly have money for the real economy.

No surprise that spending in the fake economy is also doing poorly.

[unblock]

2. i play a number of their games. fun. addicting. free. can't imagine paying for game goodies.

the basic structure is this -- you can play for free, build your army or mob or kingdom or whatever.
but those who pay real money can build up their army or mob or kingdom or whatever faster, or with special weapons and such to which "free" players don't have access.

so you can do well with patience, skill, and longevity, but you can buy your way to victory if you're inclined to pay more.

but what kind of fun is that?

i suppose if you're a millionaire and you like beating up on the poor people it might be fun, but otherwise it's just silly. all you're proving is that you can spend more money than the other guy.

in most games, paying money to get an in-game edge is called "cheating".

at zynga, it's called "our business model".

[pa28]

3. They had a peak market cap of around $13b

Some got rich. Others will go to the grave mumbling about their investment in virtual farm products.

[MH1]

4. I know a lot of people (myself included) played a couple of their games for awhile, then got bored.

It becomes too much of a time suck and after awhile they can't make it interesting enough. For some of us, anyway.

The only way I could see going back to playing those games is if I were bedridden and it was all I could do to pass the time. Even then I'd probably read and watch movies instead.

[chloes1]

5. Exactly!

It can be an enormous time sink as well as incredibly boring to "play".