BUSINESS

Zynga’s social casino franchise rescues Q2 numbers but user exodus continues

TAGs: Mark Pincus, social gaming, spooky cool labs, Zynga

zynga-pincus-willy-wonkaZynga’s social casino products helped beat analysts’ forecasts in Q2 but the company continues to hemorrhage users.

Revenue in the three months ending June 30 rose 30% to $199.9m and Zynga even narrowed its net loss to a mere $26.9m, down from $62.5m in the same period last year. Advertising and other revenue hit $38m, up 7% sequentially and a hefty 70% year-on-year.

Bookings, the sale of virtual goods within games, were roughly flat year-on-year at $174.5m, but this was far better than the $157m analysts had forecast. Even better, mobile bookings rose 30% to $115m, now representing two-thirds of all bookings. However, web bookings fell 31% year-on-year to $59m.

Average daily bookings per daily average user rose 29% to 9.1¢, but average monthly unique payers dropped over 28% to 1m and player conversion fell 17% to 1.6%. (Compare that to current industry leader Caesars Interactive Entertainment, which recently boasted a 4.4% conversion rate and earned 31¢ from each user.)

Worse, Zynga continues to bleed users, with active monthly players falling to 83m, down 32% year-on-year and 18% sequentially. Daily actives were 21m, down 23% year-on-year and 15% sequentially.

Zynga’s stock fell nearly 8% after its numbers came out but has since rebounded. Much of the original dismay came from the company’s Q3 bookings forecast of between $155m and $170m, below the $180m analysts expected. The company expects to post a net loss of between $23m and $31m in Q3.

SOCIAL CASINO TO THE RESCUE
Much of the credit for the Q2 success goes to Zynga’s social casino franchise, which includes the popular Zynga Poker and new slots titles. Poker accounted for 18% of Zynga’s total game revenue, with Hit It Rich! Slots and Wizard of Oz Slots adding 16% and 10%, respectively. All told, social casino titles recorded a 47% year-on-year bookings gain, with total slots bookings up 274% year-on-year and 32% sequentially.

Zynga hopes to expand on this growth by launching a new slots title sometime later this year. The company also announced a new multi-year licensing deal for Warner Bros. Interactive Entertainment’s Willy Wonka and the Chocolate Factory brand. Zynga’s first Willy Wonka slot is expected to debut on mobile and web sometime next year.

In an interview with VentureBeat, Zynga CEO Mark Pincus (pictured) said that the company’s slots success was down to the 2013 acquisition of game studio Spooky Cool Labs. It’s taken a while for that acquisition to pay off, but Pincus said the experience has taught him that “overnight success takes two to three years to get to.”

Continuing to refresh Zynga’s slots franchise will be a prime focus going forward, as Pincus believes the leading social casino companies “have multiple machines on the floor.” Players want variety and Zynga plans to “update new reels every two weeks and introduce whole new product lines.” Crediting the Spooky Cool team, Pincus said there is “huge value to getting a winning engine.”

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