Revenues seem to be still growing in a healthy way.
Why are the profits going down
(e.g.: large acquisitions, exploding personnel cost,
higher marketing cost to acquire a new user) ?
Here, direct from the S1, is the figure that matters more.
Operating income in the most recent quarter declined
year over year from $13.4 million to $13 million
- not the big 95% drop reported in the news.
In general, other income can fluctuate because of foreign exchange losses
and other factors.
Other income of course affects net income,
but not operating income.
Net income did decline 95% because of the effect of other income.
Journalists, smelling a sensational headline,
promoted that number,
despite that fact that it is not really the most accurate representation
of the economics of the underlying business.
The bigger question is why operating income isn't wildly up,
given that revenue has more than doubled.
R&D expenses as a % of revenue have gone from 23% of revenue to 34%, a big change.
G&A has gone from 12% of revenue to 19% of revenue.
If revenue was higher, these things wouldn't have happened.
So the real question is why aren't revenues higher?
Some pieces of the puzzle:
The number of daily active users has actually declined year over year from 60 million to 59 million
They haven't launched enough good new games recently.
They've been required to use Facebook Credits
and Facebook takes a 30% cut of all purchases.
The only reason revenues rose at all was that bookings per user
rose significantly from 3.6 cents to 5.1 cents year over year.
3 quarters ago it was 4.9 cents.
Admittedly Facebook Credits affects these numbers as the transition
to Facebook Credits began in July 2010 and ended in April 2011.
The figure is an average daily booking per active daily user.
Revenue growth is higher than bookings growth
because bookings are recognized over several quarters.
Zynga has not been growing its user base significantly
Zynga has not been growing its bookings per user significantly
A significant portion of its revenue growth is driven by accounting
That raises some broader issues about growth and attractiveness of the category.
It's harder to launch games and apps on Facebook now.
The entertainment business is hit-driven and difficult to predict
They recently launched one new game and they have several strong existing games.
They recently launched a game called Empires and Allies
which has been well received, with 27 million monthly active users (MAU).
This can be compared to their most popular game Cityville
which has 69 million monthly active users
now and 61 million monthly active users 50 days after its launch.
The next most popular games are Farmville with 37 million and Poker with 35 million.
Less popular games include Frontier-ville (11 million),
Mafia wars (8 million), and Words with Friends.
最近出したのはEmpires and Alliesで、好評だ。
Revenues in the most recent quarter were $275 million and profit margins could certainly rise.
The most recent valuation for Zynga was about $14 billion.
This suggests that investors believe that future earnings will be
materially higher than the earnings that were reported in the most recent quarter.
Here are some more news articles below talk
about the issues affecting financial results in the most recent quarter:
Here's a news release with Zynga's explanation:
Zynga attributes its decline in profits to several major factors:
the lack of any new game launches in the first half of 2011
prior to Empires and Allies on March 31;
a higher than normal spend on hiring,
acquisitions and international growth; and Facebook's requirement this summer
that all game developers adopt its own Facebook Credits payment system,
which takes a 30% cut of revenue.
Zynga's total revenues for the quarter were up by 15%,
though this was slower growth than the previous quarter,
which jumped up by 24%.
However, the company's virtual goods sales and ad revenues were down
by 4% on the previous quarter,
and daily active users across all Zynga games
also dropped by around 4% from 62 million to 59 million.
This drop is attributed to a more competitive market than in prior quarters --
perhaps in part due to the launch of Google+ Games
and its less intrusive approach to the notorious "game spam"
that social games tend to generate.
According to the company,
they feel they saw such a big dip in profit because of two major reasons:
They did not release a major game until the end of their first quarter of this year,
and they spent more money than ever
before in order to hire new employees and spread further internationally.
The studio has also seen a decline in the number of people
playing Zynga games on a daily basis,
as well as a reduction in virtual goods sales.