Social game developers Zynga have reportedly slammed the coffin lid on OMGPOP, the company behind the briefly popular Draw Something game that Zynga acquired last year for $180m. Ali Nicolas, former OMGPOP VP, tweeted that she’d learned that she was out of a job via Facebook, prompting her to thank Zynga “for again reminding me how not to operate a business.”
OMGPOP’s demise was part of the latest massive restructuring Zynga’s management has embarked upon to help right their sinking ship. Seven months ago, Zynga laid off 150 workers, which then represented 5% of its total workforce. On Monday, Zynga announced it was laying off 520 employees – 18% of its total workforce – and shutting offices/studios in New York (where OMGPOP was based), Los Angeles, Dallas and Austin. The news caused Zynga’s stock to plunge from $3.41 to $2.96 before closing out the day around $3, about where the stock has remained on Tuesday.
Zynga is hoping the cuts will save $70m to $80m in annual expenses, but in the short term, the restructuring charges will amount to around $25m in Q2 and another $2m to $5m in Q3. Zynga also warned that Q2 bookings – the sum Zynga earns from in-game sales of virtual goods – would come in at the lower end of the $180m to $190m range they predicted during their Q1 earnings report in April. Zynga has been struggling to make the transition from a primarily web-based platform to mobile as players ditch once-popular Zynga games for newer, more innovative titles from other developers.
Zynga Poker, one of the few Zynga titles that still retains a significant user base, has nonetheless seen monthly active users decline from its September 2012 peak of 138.5k to May’s 122.5k. Daily active users have fallen from August 2012’s 5.9k to May’s 5.2k. So far, neither Zynga nor Bwin.party digital entertainment have offered any guidance on how their UK-facing real-money gambling team-up has been faring since its April 3 launch.
Zynga’s latest restructuring is intended to help the company weather the storm until it can solve the mobile riddle and/or the US federal government somehow manages to pass online poker regulation, which would dramatically boost Zynga’s potential to monetize its massive free-play poker player database. Zynga has filed for a preliminary finding of suitability from Nevada gaming regulators in the hope that someday their federal legislative ship will come in. The question remains: given Zynga’s demonstrated inability to create new hit game titles, will the social gaming outfit still be around when that online poker ship finally docks?
