Social games star Zynga in the red, but optimistic (Update)

April 26, 2012 by Glenn Chapman
Online social games star Zynga on Thursday beat Wall Street earnings expectations with quarterly results showing it gained users and pumped up revenue.

Online social games star Zynga stayed in the red in its second quarter as a publicly traded company but on Thursday promised better days ahead with the help of play on smartphones and tablet computers.

Zynga posted a loss of $85.35 million on revenue that climbed to nearly $321 million from the $242.9 million seen in the first three months of last year.

Not counting "special items" such as stock awarded to compensate employees or as part of an acquisition, Zynga said its net income was $47.05 million.

The company said it was winning new players as it invested heavily in developing new games.

"We're pleased with the progress that Zynga has made in the first quarter, growing our audience reach 25 percent year-over-year and nearly 20 percent quarter-over-quarter," said Zynga founder and chief executive Mark Pincus.

"Our team did a great job launching five new games across mobile and Web including new hits like Hidden Chronicles, Slingo and Scramble with Friends."

Zynga reported that sales of virtual goods, referred to as "bookings," reached an all-time high of $329 million.

Pincus said that the surge in play on mobile gadgets was "explosive" and boded well for the company in a world in love with smartphones and tablets.

"We believe we are in the middle of a secular shift in all gaming to free, open and accessible," Pincus said in an earnings call with analysts.

Zynga expected its bottom line to get a lift from its recent purchase of the startup behind fiercely popular smartphone game Draw Something.

Pincus said the company has played off the popularity of games such as Words With Friends to win people over to spin-off titles such as Hanging With Friends and is confident it could build on Draw Something with variations to the theme.

"We are excited about the future prospects as we build a bigger, more powerful network and have opportunities to do brand extensions that leverage engagement and drive play to other games," Pincus said.

Zynga's stock price sank nearly two percent to $9.25 a share in trading that followed release of the earnings figures.

Zynga ended last year with a net loss of $404.3 million, which included more than a half-billion dollars in stock compensation workers earned instead of cash at the startup.

The Internet company jumped into the stock market with a billion-dollar listing in December.

Offering 100 million shares -- one-seventh of the company's total -- at $10 a pop, the maker of FarmVille and Zynga Poker was valued at a whopping $7 billion.

Despite concerns by some analysts that new Internet stars are being precariously overvalued, Zynga's stock was snapped up quickly.

Zynga games are free to play but the company makes money by selling virtual in-game goods to players and serving up advertising.

The games developer boasts around 236 million players per month in 175 countries, dwarfing its social gaming competitors.

Founded in 2007, the San Francisco-based software company makes notoriously addictive games which run on top of social networking site Facebook.

Zynga last month opened an online playground where users can enjoy hit titles without having to visit the world's top social network. launched with CastleVille, Words With Friends, CityVille, Hidden Chronicles and Zynga Poker, along with a promise of more social games by the firm and outside developers.

"We've invested heavily to build a network and infrastructure tuned for delivering social gaming at scale," Pincus said at the launch. is connected to the Facebook "social graph" so game play and the actions of friends involved will follow users between the online venues.

Explore further: Zynga posts 4Q net loss on IPO-related stock costs

Related Stories

Zynga posts 4Q net loss on IPO-related stock costs

February 14, 2012

(AP) -- Online game maker Zynga Inc. reported a net loss in the last three months of 2011, weighed by hefty stock-compensation expenses and other costs in its first quarter as a public company.

Qualcomm 3Q results beat Wall Street estimates

July 20, 2011

(AP) -- Wireless chip-maker Qualcomm Inc.'s results for the latest quarter beat Wall Street's expectations, and its projections for the current quarter are also above analysts' estimates.

Game sales strong for EA but outlook hurts shares

May 11, 2010

(AP) -- Video game publisher Electronic Arts Inc. said Tuesday that strong sales of games such as "Battlefield: Bad Company" and "Mass Effect 2" gave the company a quarterly profit above expectations. But its outlook fell ...

Activision 3Q earnings soar, 2011 outlook raised

November 8, 2011

(AP) -- Activision Blizzard Inc. said Tuesday that its third-quarter net income nearly tripled thanks to strong demand for its video games. The company also raised its full-year outlook on the heels of Tuesday's launch of ...

CenturyLink 3Q net income falls as expenses rise

November 2, 2011

(AP) -- Phone company CenturyLink Inc. says its third-quarter net income fell as rising operating expenses related to its April acquisition of larger phone company Qwest overshadowed increased revenue.

Recommended for you

Coffee-based colloids for direct solar absorption

March 22, 2019

Solar energy is one of the most promising resources to help reduce fossil fuel consumption and mitigate greenhouse gas emissions to power a sustainable future. Devices presently in use to convert solar energy into thermal ...

EPA adviser is promoting harmful ideas, scientists say

March 22, 2019

The Trump administration's reliance on industry-funded environmental specialists is again coming under fire, this time by researchers who say that Louis Anthony "Tony" Cox Jr., who leads a key Environmental Protection Agency ...

1 comment

Adjust slider to filter visible comments by rank

Display comments: newest first

not rated yet Apr 26, 2012
It would be more accurate to say "Zygna reported a net loss for Q1 because management took a bunch of money, otherwise the profits were reasonable"

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.