Home Zynga’s Success Depends On Play

Zynga’s Success Depends On Play

Today Zynga announced its fourth quarter earnings and 2011 financial results. Zynga now makes the top five games played on Facebook. Its non-GAAP earnings per share were five cents, or $37.1 million for the quarter. But even though it had a 59% gain in sales, it posted a loss for the period.

If Zynga is going to succeed, FarmVille has to lose its super uncool factor. And “play” must become a completely mainstream behavior that’s as acceptable as buying $30 t-shirts at Urban Outfitters.

“We see [play as] a popular large-scale behavior, but we’d like to see play reach a level of search, shop and share, and we think the monetization opportunity will follow that,” said Zynga CEO Mark Pincus. If Zynga is to succeed, it will be because the users make play as much a part of their daily routine as checking Facebook.

For the fourth quarter ending on December 31, Zynga reported a net loss of $435 million, or $1.22 per share. It also incurred a huge expense in the fourth quarter amounting to $510 million, which was related to stock-based compensation from the IPO.

And daily average users (DAU) are not really on the rise.

Zynga had 54 million DAUs, which is up 13% from a year prior. But that number did not change in the third quarter; it was down from 59% in the second quarter and 62% in the first quarter.

Zynga launched 12 games in 2011, including four web-based games and eight mobile. In its S-1, Facebook revealed that Zynga games accounted for 12% of its revenues.

Its first hidden objects game Hidden Chronicles is currently at number two on Facebook. Dream Heights, one of its newer games, is expected to perform at rates comparable to a Web game.

Zynga is also working on diversifying its monetization strategies, introducing coins and “power-ups” to games like Scramble With Friends. CityVille was a top performer in Q4, and continues to do well on Facebook. Zynga Poker is also has one of the world’s largest online poker games, and one of the top six games on Facebook. Zynga’s mobile space is growing fast as well, with 15 million users.

Zynga also recently announced a real-world component to all those virtual goods. Last week, AllThingsD reported that Zynga signed a deal with Hasbro to develop toys and games based on popular Facebook games and characters. Finally, a link from the virtual world to the real world.

But everything on the Web depends on you, the user.

Zynga CEO Mark Pincus says that “play” is the new TV. The reason TV got so popular? “It was free and accessible to everyone…and play is following a similar trend, only faster.” Is it?

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