If you have never heard of Zynga, there's still a good chance you have played one of their games. The company has created many of the Facebook hits responsible for sapping evening hours or wasting work time, from Cityville and the ridiculously popular Chefville, to Words with Friends and Bubble Safari. They are the easy games, the click-and-share games, those where you sign up to play and find yourself wondering why you just spent two hours on FacebookÂ—or on your phoneÂ—or hunched over your iPad.
Many thought the continued success of the company was a sure thing; after all, Facebook just hit a billion users and continues to grow on an international level. But now Zynga Inc. has announced it will cut its previous revenue expectations for 2012... for the second time in a row. The last half of 2012 is looking bad for the company as about $40 to $90 million in expected earnings vanished (numbers are a little vague in the forecasting world).
Where did the latest expected revenueÂ—and the forecasted revenue before itÂ—vanish to? Research shows that online casual gamers are leaving its popular games in droves. Subscriptions are plummeting, and all those little purchases that the company depended on for revenue are drying up.
The change underlines old risks: The social media game business is built on sand. Every game has to keep players returning, willing to spend more on digital currency, upgrades, and items. But social media users are a savvy bunch, and eventually ask themselves, "Is paying money to 'buy' a digital kitchen upgrade worth my dollars? Because I need gas today."
The result? Gamers leave, and profits fall. In the best case scenarios, people still play the social games but stop buying upgrades. For free-to-play games (all social media games), the result is the same.
Zynga is a warning call. Online social game companies need to change the way they do business, or find better ways of hanging onto customers. Maybe ways that don't involve wasted work hours.
Photo: ftchris | flickr