Social gamers Zynga reported a steep decline in earnings and profit in the third quarter along with weakness in its social slots segment and ‘challenges’ facing the venerable Zynga Poker.
On Wednesday, Zynga reported revenue of $233.2m in the three months ending September 30, up 4% from the same period last year, while bookings, the sale of virtual goods within games, rose 17% to $249m. But adjusted earnings slipped 15% to $38m and net income tumbled 44% to $10.2m.
Advertising revenue had a notable quarter, rising 41% year-on-year to a record $65.4m, pushing advertising’s share of overall revenue up seven points to 28%. The company credited the rise to increased player engagement and advertising network optimization.
Zynga’s average daily active users (DAU) were up 8% year-on-year to 22m in Q3, and its average daily bookings per average (DAU) was also up 8% to $0.121. However, its player-to-payer conversion rate fell from 2.4% in Q3 2017 to 2% in the most recent quarter.
Having begun life as a desktop-dominant product, Zynga took pains to hail its mobile performance. Mobile’s share of Q3’s overall revenue rose four points to 91%, while mobile’s share of bookings gained five points to 92%. Mobile advertising also had its best quarter ever, rising 45% from Q3 2017.
Zynga’s reliable Words With Friends game rode this mobile wave, pushing revenue up 42% and bookings up 53%. The CSR2 racing game reported flat mobile revenue while bookings improved 7%.
The social slots portfolio missed the mobile memo, as its revenue fell 9% year-on-year while bookings were down 4%. Slots’ share of online game revenue dipped one point to 25% while its share of game bookings was down three points to 23%.
Zynga hopes its new product licensing deal with HBO will help reinvigorate its slots segment. Land-based casinos have had good success with slots based on HBO’s Game of Thrones fantasy series and Zynga’s first GoT-themed release will be a mobile slots title arriving sometime in H2 2019.
Zynga Poker reported its mobile revenue falling 3% year-on-year and bookings were flat. Poker’s share of online game revenue slipped two points to 20% while its share of game bookings fell five points to 19%.
Zynga said its poker product was still recovering from the platform changes imposed by Facebook in Q2 but Zynga has high hopes that its new partnership with the World Poker Tour will increase player engagement.
However, the company said it expects “some softness” in Zynga Poker to persist through Q4, projecting overall revenue of $235m, bookings of $250m, adjusted earnings of $32m and a net loss of $2m. Investors were initially unimpressed, pushing the stock down in mid-day trading but it closed out the day down less than 1%.