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Zynga’s Earnings Preview – ‘Draw Something’ Like a Huge Write Off – 100 Workers Fired and Given Two Hours to Clear Out

Another rough week in ZyngaVille

zynga, social games, dailydealmedia.comIt’s getting to the point where I am beginning to feel sorry for Zynga, Incorporated (ticker: ZNGA) if not certainly for the many game developers that work there. What should have and could have been an extremely fun and invigorating place to work is turning into one seemingly filled with malcontent. With every business, it’s the managerial decisions that can make or break a business, and this social gamer certainly fits the mold.

The recent example of a purchase gone awry has to be that of the $200 million acquisition of Draw Something. In the month following the acquisition, Draw Something lost nearly five million daily active users, dropping from 15 million to 10 million. Today, it has closer to two million users. Let’s take a look at a study done by Flurry.com, an industry leading application analytics company.

Diminishing engagement

Based on a sample of apps used 1.7 billion times each week, Flurry determined that social games are played about 7.9 times a week on average. That happens to be over twice the frequency of those that check the weather. However, while the weather frequency remains fairly constant week in and week out, social gaming loyalty diminishes fairly quickly. The Flurry data showed that after 30 days, 47 percent of players are still engaged; after 60 days, 34 percent are still engaged; and after 90 days, 29 percent are still engaged.

Of all companies that have gone public recently and one that certainly is dependent on social gamers, Zynga should not have been in the least surprised by this typical trend. Common sense would suggest that Draw Something would suffer similar losses in engagement as did FarmVille, FrontierVille, and others. The company is expected to report earnings (most likely a lack of) tomorrow, October 24th, 2012. Apparently Zynga plans to write down about half of the $200 million investment this year.

The Numbers

Shares of ZNGA have touched an all-time low today of $2.20. The stock is currently trading down $ .12 (5.17%) on volume of 13.3 million shares (about 25% below average daily volume). As of this writing, there is still thirty minutes left in a very dismal trading session on Wall Street. I don’t anticipate any major upturn in shares. Depending on how bad the numbers are and what contingency plan management spins, the stock could easily drift to or below the $2.00 or should all the bad news be built into the share pricing, there could easily be a snap back rally to the $2.40 level. Either way, I’d expect the volume to increase on Wednesday and Thursday.

There are unconfirmed rumors that game developer Ian Miles Cheong just tweeted: “Zynga just fired over a hundred people, giving them two hours to clear out their desks. They did it during the Apple keynote to avoid press.”

Feel free to contact us at Daily Deal Media or me directly to confirm or deny this report.

All Things D

Don Young

Don Young, Jr. is a beat writer for Daily Deal Media, the number one resource for the Daily Deal Industry. Don has spent over a decade as a stock broker / advisor focusing on fundamental and technical analysis. Prior to that he was the sole proprietor of The Tile Guy , based in Portland,Or. completing multitudes of both residential and commercial projects in the Pacific Northwest. Don enjoys researching new businesses , market forecasting, traveling, cooking, volleyball , golf and relaxing with family and friends.
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