Zynga Can Make Money But They Need To Change
It has been a very bad couple of weeks for Zynga (ZNGA) and investors who believed in them. Between the bad 2Q numbers, downgrading the future earnings and all the lawsuits for various issues, including stock fraud, they have had their hands full and investors let them know it.
The stock has seen a major drop from its high of $15.91 back in March and now is hovering around the $3 dollar mark.
Can Zynga recover? Absolutely, but only if they change the way they do business and start listening to their players to bring back the fun to their games. Right now they have major issues with their players who are tired of all the spamming of friends, game issues, content overload that makes it more of a job to play than a game.
I outlined a number of major issues Zynga has in my blog and these are issues that everyone, investors and players alike, agree need to be addressed.
The main thing investors want to know is if Zynga can make money going forward. I believe they can and will but not as much as Zynga hopes or what experts believe they should. Zynga has to change the way it does business and their public perception in order to do so.
They need to stop being so metrics driven and realize that while yes that model works for a regular gaming company, they are not a regular gaming company, they are a social gaming company. There is a big difference between the two and unfortunately conventional business models wont work, as this is still relatively new territory and the book hasn’t been fully written yet.
Social games are not metrics run alone you need to factor in the people factor to the model and once Zynga does that they will see change and profit. Most players of social games wouldn’t play them if it wasn’t for the social engagement and new friends they make along the way.
While yes they are tied to heavily to Facebook (FB) right now they can actually use that to their advantage. Facebook uses Sponsored Ads & Stories to make money and get engagement and Zynga can do the same but in a way to get new users to play and recommend more to play.
Zynga does make money and a lot of it, $332 million alone per their 2Q statement. So they showed they can make money but they need to fix game issues, and other issues for the players to come back and open their wallets again. Players will spend money on a game if it is fun and works properly and Zynga has seen that before they went public.
While Zynga will take a hit on their other issues and believe me it will hurt their bottom line in legal fees. They will make money if they change to more of a user friendly company and listen to its current players more to fix current game issues.
They also need to come up with exciting NEW games that will catch the public interest. That is also a key to their future.
Their mobile platform is great but if games don’t work properly it wont work. Having their own gaming platform is great but that will still have to be tied to Facebook as the users they have now, who are spending the money, are not willing to start a game all over after the years of building the one they play now.
Yes there are big challenges are ahead of them but if they do it right they will succeed and make money. Change is everything and Zynga must be willing to do it or they will be no more.