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Zynga Exits China amid Huge Losses
On February 12， social gaming giant Zynga Inc. announced that it would shut down Zynga China studio that brought FarmVille to China， laying off all 71 employees in the Beijingbased studio， or 4% of its global staff.
The San Francisco-based online game social-game developer attributed its move out of China to the lackluster sales of FarmVille in the market.
The company expected that it would terminate the operation of its Beijing-based studio by July， into which a total of 3.1 million dollars will be accounted as pre-tax spending， including 2.5 million dollars for redundancy pay and staff spending.
It is no surprise to see the erstwhile gaming powerhouse become a hasbeen， withdrawing the Chinese market， in view of its poor performance amid fierce competition with mobile game developers over the past two years.
According to the company’s finance report for the fourth quarter of the fiscal year 2014 released two days later after the announcement， Zynga reaped 193 million dollars in revenue in the fourth quarter， up 9% from the same period a year earlier， trailing an average forecast from analysts of 201.1 million dollars.
The social game provider reported a net loss of 45.1 million dollars over the period， expanding from 25.2 million dollars a year earlier.
Previous Glories
In April 2007， Zynga was founded by Mark Pincus， Michael Luxton， Eric Schiermeyer， Justin Waldron， Andrew Trader and Steve Schoettler. Originally named Presidio Media， the San Francisco-based start-up gets the current name from its founder and former CEO and Mark Pincus’s late pet Zinga， an American bulldog.
The start-up develops social games that work stand-alone on mobile phone operation systems such as Apple’s iOS， Google’s Android， and Microsoft’s Windows Phone， as well as on the Internet through its website， Zynga.com. Besides， its games are also available on social networking websites such as Facebook， Google+， and Tencent QQ.
With the explosive development of the social networks such as Facebook and MySpace， social games are also entering into a golden age for growth.
Zynga’s biggest claim to fame is FarmVille， which is also considered as its best-known game. According to research firm AppData.com， within only six weeks after FarmVille was launched on the Facebook platform on June 19， 2009， the number of daily active users reached 10 million. It is no exaggeration to say that the online game was all the rage at that time.
In addition to FarmVille， Zynga also developed other hot games， including Treasure Isle， Texas Hold’em （now also known as Zynga Poker）， Gang Wars and Dope Wars. According to data， Zynga games had over 265 million monthly active users by early January 2013.
In its heyday， six out of the top ten Facebook games in terms of monthly active users were Zynga-branded. To be specific， the number of active users attracted by Farmville， Cafe World， Texas Hold’em， Mafia Wars， Fishville and Petville reached 83 million， 31 million， 27 million， 25 million， 24 million and 19 million， respectively.
With its self-developed games successfully getting millions of players caught up in the moblile phone game craze， Zynga established itself as a leader in the leisure game market.
Meanwhile， as Facebook’s biggest game provider， Zynga had been on a roll in the capital market， On December 16， 2011， the company went public， issuing 100 million stocks at the IPO price of 10 dollars on NASDAQ under the ticker ZNGA. In March 2012， the stock price reached 14.50 dollars.
From Powerhouse to Has-been
However， the glories did not last for a long time， with the stock price plummeting to 3 dollars only three months after reaching the peak. The sudden dive in Zynga’s stock price was due to its disappointing earnings report for the second quarter of 2012.
“People see Zynga as a mature company， now that it’s public， but it’s still a really young company， not quite six years old. Young companies have fits and starts. It’s still really a startup. It had a dramatic rise， scaled up very quickly. Like at Cisco， it’s retrenching，” said Debra Chrapaty， former CIO of Zynga when leaving the company to become the CEO of Nirvanix， a well-funded enterprise startup backed by Square investor Khosla Ventures.
Obviously， Zynga’s efforts to retrench its business failed to reverse the downward trend of Zynga’s stocks. Besides， the seven above-mentioned founders of Zynga also leaved the company in successive.
In 2014， Zynga was still down on its luck， with the latest data showing that its annual revenue reduced by 21% to 690 million dollars. Besides， the company saw its online game revenue plummet 29% to 537 million dollars and an-nual bookings drop 3% to 694 million dollars last year.
Zynga suffered a net loss of 226 million dollars over the past year， with annual adjusted earnings before interest and tax profit down 14% to 40 million dollars. Besides， the online social game developer’s monthly active users totaled 108 million in the fourth quarter， down from 112 million a year ago， while the monthly unique users totaled 71 million， down from 80 million a year earlier， with the number of the monthly actively paying players reducing from 1.3 million to 1.1million.
In addition， the average daily revenue from daily active users was 0.079 dollar in the fourth quarter， up 31% from 0.06 dollar a year earlier.
When it came to the reason behind the game giant’s fall from grace， analysts pointed out that 80% of Zynga’s revenue came from Facebook users， but its relationship with the world’s largest social network， which boasted a monthly active user base of over 2.2 billion， ended March 31， 2013.
In August 2014， Don Mattrick， Zynga’s new CEO， said that the company was making an adjustment. However， it seemed that the adjustment did very little for changing the status quo.
Decision-making Mistakes
Analysts said Zynga’s decision to shut down Zynga China studio was also out of consideration for a further retrenching. In fact， it is not the first time for the social game provider to terminate its overseas branches. In 2013， the company closed its branch in Japan.
Zynga China studio was founded in 2010， following the game developer’s acquisition of Beijing-based social gaming developer XPD Media. In June 2012， Zynga made an alliance with Sina Weibo to launch the Chinese version of Pictionary-like mobile game Draw Something， which was a runaway success. Later， the studio released the free online social building game CityVille， also known as Zyngaville， through QQ Space and Tencent Weibo.
However， those outstanding achievements did not change the plan of Zynga’s new decision-makers to retrench its overseas branches， which was views as another big mistake in decision making.
“Once U.S. publicly-traded companies face financial pressures， their first reaction is to retrench employees， which definitely begins with what they think is non-core business line. It is a typical mode for decision makers of U.S. publicly-traded companies to cut costs. In such a way， they can show Wall Street that their companies are still able to make a profit，” said Tian Xingzhi， former general manager of Zynga China.
Dave Dopson， Zynga’s former principal engineer， also pointed out that the whole company was very short-term minded and a lot of people internally at the company were jaded. Dopson now works at another major Silicon Valley company.
Ars that the company spent money on trivial things like lavish food and drink but also on a top-heavy bureaucracy that made some developers working on future titles feel over-managed.
After the company announced to shut down the China studio， Zynga’s shares plummeted sharplyreflecting investors’ pessimism of its future after abandoning the studio.
Though Zynga aimed at delivering a rosier earnings report to investors， it seemed that investors did not buy it.
On February 12， social gaming giant Zynga Inc. announced that it would shut down Zynga China studio that brought FarmVille to China， laying off all 71 employees in the Beijingbased studio， or 4% of its global staff.
The San Francisco-based online game social-game developer attributed its move out of China to the lackluster sales of FarmVille in the market.
The company expected that it would terminate the operation of its Beijing-based studio by July， into which a total of 3.1 million dollars will be accounted as pre-tax spending， including 2.5 million dollars for redundancy pay and staff spending.
It is no surprise to see the erstwhile gaming powerhouse become a hasbeen， withdrawing the Chinese market， in view of its poor performance amid fierce competition with mobile game developers over the past two years.
According to the company’s finance report for the fourth quarter of the fiscal year 2014 released two days later after the announcement， Zynga reaped 193 million dollars in revenue in the fourth quarter， up 9% from the same period a year earlier， trailing an average forecast from analysts of 201.1 million dollars.
The social game provider reported a net loss of 45.1 million dollars over the period， expanding from 25.2 million dollars a year earlier.
Previous Glories
In April 2007， Zynga was founded by Mark Pincus， Michael Luxton， Eric Schiermeyer， Justin Waldron， Andrew Trader and Steve Schoettler. Originally named Presidio Media， the San Francisco-based start-up gets the current name from its founder and former CEO and Mark Pincus’s late pet Zinga， an American bulldog.
The start-up develops social games that work stand-alone on mobile phone operation systems such as Apple’s iOS， Google’s Android， and Microsoft’s Windows Phone， as well as on the Internet through its website， Zynga.com. Besides， its games are also available on social networking websites such as Facebook， Google+， and Tencent QQ.
With the explosive development of the social networks such as Facebook and MySpace， social games are also entering into a golden age for growth.
Zynga’s biggest claim to fame is FarmVille， which is also considered as its best-known game. According to research firm AppData.com， within only six weeks after FarmVille was launched on the Facebook platform on June 19， 2009， the number of daily active users reached 10 million. It is no exaggeration to say that the online game was all the rage at that time.
In addition to FarmVille， Zynga also developed other hot games， including Treasure Isle， Texas Hold’em （now also known as Zynga Poker）， Gang Wars and Dope Wars. According to data， Zynga games had over 265 million monthly active users by early January 2013.
In its heyday， six out of the top ten Facebook games in terms of monthly active users were Zynga-branded. To be specific， the number of active users attracted by Farmville， Cafe World， Texas Hold’em， Mafia Wars， Fishville and Petville reached 83 million， 31 million， 27 million， 25 million， 24 million and 19 million， respectively.
With its self-developed games successfully getting millions of players caught up in the moblile phone game craze， Zynga established itself as a leader in the leisure game market.
Meanwhile， as Facebook’s biggest game provider， Zynga had been on a roll in the capital market， On December 16， 2011， the company went public， issuing 100 million stocks at the IPO price of 10 dollars on NASDAQ under the ticker ZNGA. In March 2012， the stock price reached 14.50 dollars.
From Powerhouse to Has-been
However， the glories did not last for a long time， with the stock price plummeting to 3 dollars only three months after reaching the peak. The sudden dive in Zynga’s stock price was due to its disappointing earnings report for the second quarter of 2012.
“People see Zynga as a mature company， now that it’s public， but it’s still a really young company， not quite six years old. Young companies have fits and starts. It’s still really a startup. It had a dramatic rise， scaled up very quickly. Like at Cisco， it’s retrenching，” said Debra Chrapaty， former CIO of Zynga when leaving the company to become the CEO of Nirvanix， a well-funded enterprise startup backed by Square investor Khosla Ventures.
Obviously， Zynga’s efforts to retrench its business failed to reverse the downward trend of Zynga’s stocks. Besides， the seven above-mentioned founders of Zynga also leaved the company in successive.
In 2014， Zynga was still down on its luck， with the latest data showing that its annual revenue reduced by 21% to 690 million dollars. Besides， the company saw its online game revenue plummet 29% to 537 million dollars and an-nual bookings drop 3% to 694 million dollars last year.
Zynga suffered a net loss of 226 million dollars over the past year， with annual adjusted earnings before interest and tax profit down 14% to 40 million dollars. Besides， the online social game developer’s monthly active users totaled 108 million in the fourth quarter， down from 112 million a year ago， while the monthly unique users totaled 71 million， down from 80 million a year earlier， with the number of the monthly actively paying players reducing from 1.3 million to 1.1million.
In addition， the average daily revenue from daily active users was 0.079 dollar in the fourth quarter， up 31% from 0.06 dollar a year earlier.
When it came to the reason behind the game giant’s fall from grace， analysts pointed out that 80% of Zynga’s revenue came from Facebook users， but its relationship with the world’s largest social network， which boasted a monthly active user base of over 2.2 billion， ended March 31， 2013.
In August 2014， Don Mattrick， Zynga’s new CEO， said that the company was making an adjustment. However， it seemed that the adjustment did very little for changing the status quo.
Decision-making Mistakes
Analysts said Zynga’s decision to shut down Zynga China studio was also out of consideration for a further retrenching. In fact， it is not the first time for the social game provider to terminate its overseas branches. In 2013， the company closed its branch in Japan.
Zynga China studio was founded in 2010， following the game developer’s acquisition of Beijing-based social gaming developer XPD Media. In June 2012， Zynga made an alliance with Sina Weibo to launch the Chinese version of Pictionary-like mobile game Draw Something， which was a runaway success. Later， the studio released the free online social building game CityVille， also known as Zyngaville， through QQ Space and Tencent Weibo.
However， those outstanding achievements did not change the plan of Zynga’s new decision-makers to retrench its overseas branches， which was views as another big mistake in decision making.
“Once U.S. publicly-traded companies face financial pressures， their first reaction is to retrench employees， which definitely begins with what they think is non-core business line. It is a typical mode for decision makers of U.S. publicly-traded companies to cut costs. In such a way， they can show Wall Street that their companies are still able to make a profit，” said Tian Xingzhi， former general manager of Zynga China.
Dave Dopson， Zynga’s former principal engineer， also pointed out that the whole company was very short-term minded and a lot of people internally at the company were jaded. Dopson now works at another major Silicon Valley company.
Ars that the company spent money on trivial things like lavish food and drink but also on a top-heavy bureaucracy that made some developers working on future titles feel over-managed.
After the company announced to shut down the China studio， Zynga’s shares plummeted sharplyreflecting investors’ pessimism of its future after abandoning the studio.
Though Zynga aimed at delivering a rosier earnings report to investors， it seemed that investors did not buy it.