BUSINESS

Zynga shares plummet as outlook is cut

TAGs: cityville, draw something, Facebook, Farmville, Social Gambling, Zynga

Zynga, Not a Gambling CompanySocial gaming firm Zynga has cut its outlook for the remainder of the year and sent shares crashing as a result. The company blamed poor performance of live Internet games and they fact they had to write-off some $182million spent on Draw Something creator OMGPOP.

Mark Pincus sent a memo to workers, which said: “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.”

One of their main measures of future business is “bookings”, or the amount of money they expect to collect from users in the coming months. Statista’s chart of the day, which can be found here, shows the level of bookings was at its lowest level since Q4 2010 as it hit just $250million. The number rose to a high of around $325m as recently as the first quarter of this year, has dropped like a stone since and shows no sign of slowing.

Even more worringly for those working for the firm or owning the company’s shares is that Pincus has seemingly run out of things to say to big up the price of shares. At close of play yesterday, shares were down 22 percent to $2.19 and with no encouraging words from Pincus it seems like they will stay there. Bad news for anyone that invested in social stocks is that when confidence goes at Zynga others feel the pinch. This was the case with the company that uses most of the company’s content, Facebook, where shares were down 1.8 percent to $21.56. That was despite the site finally reaching 1 billion users yesterday.

All eyes are still on how Zynga handles their move into the world of real-money gambling and whether they can turn virtual monopoly money into real-world money. Anyone that’s played the game will tell you impossible that is and Zynga’s task, although a lot easier than the famous board game, will be a very difficult one.

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