This week, Zynga Poker became the number one game on Facebook, displacing another Zynga title, Cityville. CityVille has essentially ruled the roost since 2011, making the poker app’s triumph that much more impressive. Then again, a closer look at the numbers compiled by AppData indicates that Zynga Poker’s coronation had less to do with its growing popularity – it actually lost 300k daily and monthly active users over the past week – and more to do with Cityville’s waning fan base. In fact, Zynga games as a whole saw an 8.2% slump in daily active users in May.
That slump likely precipitated the swan dive performed by Zynga’s share price this week. Trading was automatically halted Tuesday morning after the stock plunged 10%, triggering a Nasdaq “circuit breaker” designed to impose a time-out on catastrophic share drops. Combined with Monday’s 7% drop, Zynga shares hit an historic low of $4.78 before rallying somewhat to close at $5.05 on Wednesday. Either number is a far cry from Zynga’s $10 IPO price or its $14.69 peak in March following the announcement of its Zynga.com standalone site and CEO Mark Pincus’ public statements about entering the real-money gambling arena.
Of course, things went south shortly after the clusterfuckian Facebook IPO, and Zynga has yet to recover. Analysts say the company needs to decrease its dependence on Facebook and increase its emphasis on mobile games. Cowen & Co. analysts believe interest in Facebook games has reached a “negative inflection point” due to player migration to mobile platforms. Reuters quoted Sterne Agee analyst Arvin Bhatia saying the “novelty factor” of Facebook games was wearing off. “We see social gaming being around for a while, but the days of high growth are perhaps behind us.”
Others aren’t quite ready to blow Taps over social gaming’s lifeless form, with some analysts suggesting that the new ‘half-off’ share price finally makes buying Zynga stock a reasonable proposition. Lazard’s Atul Bagga suggested mobile “could be monetized at the same if not a higher level than that of web games.” But even though Evercore Partners lifted its ‘sell’ call on Zynga, Ken Sena expressed “fundamental concerns” with the company’s long-term growth sustainability.
Two dates to watch out for: June 26th, when Zynga’s latest ‘event’ goes down at its San Francisco HQ, a typical stage for debuting those all-important new releases; and mid-August, when another 200m shares held by employees will be ‘unlocked’ from their post-IPO stasis. Anybody up for a game of Devalued Stocks With Friends?