Game over for Zynga? Firm loses 25 percent of daily active users in one quarter

Startup also says it will abandon plans to bring real-money gaming to US.

Cyrus Farivar – Jul 25, 2013 7:25 pm | 87

2013 was a rough year for Zynga, when the company relegated founder Mark Pincus to being chairman of the board. Credit: Fortune Live Media

In its latest earnings statement filed Thursday with the Securities and Exchange Commission, Zynga reported the number of daily average users (DAU) dropped to 39 million in the second quarter of 2013—the lowest ever since the company began keeping track. Last quarter, the DAU fell to the then-lowest record, 52 million users. The fall to 39 million means that 25 percent of its daily user base stopped using Zynga products in just one quarter.

Not surprisingly, Zynga’s bottom line fell too. The company sustained a net loss of $15.8 million in Q2 2013. (Last quarter, the gaming firm profited just $4.1 million.) The market wasn’t too thrilled with these numbers: in after-hours trading, Zynga’s stock price plummeted by nearly 15 percent.

The once top-dog has gone through a bit of a rough patch during the last year. In the summer of 2012, the company quickly lost a bunch of executives and managers. That October, the company announced that it had overpaid for OMGPOP (maker of Draw Something). More recently, Mark Pincus, the company’s founder, was ousted as CEO in early July 2013. Then Zynga suddenly shut down OMGPOP last month as well.

The new earnings report had one more notable tidbit. Remember how Zynga was going to bring “real-money gaming” (aka, gambling) to the United States? Yeah, that ain’t happening anymore—many believed this strategy was the company’s last chance to regain rapidly falling ground.

“Zynga believes its biggest opportunity is to focus on free to play social games,” the company wrote in its 8-K filing. “While the company continues to evaluate its real money gaming products in the United Kingdom test, Zynga is making the focused choice not to pursue a license for real money gaming in the United States. Zynga will continue to evaluate all of its priorities against the growing market opportunity in free, social gaming, including social casino offerings.”

Despite all the bad news, at least one analyst believes that Zynga still has a future.

“Zynga’s terrible performance isn’t unexpected,” Brian Blau, an analyst at Gartner Research, told Ars. “They are clearly in a transition, one that will last well into 2014 as they revamp their business and try to salvage what they can. Zynga does have talent, resources, and a real chance, but they first must refocus on their core capabilities, make the transition to mobile, and build out their platform before we start to see improvement in their bottom line. Game companies have resilience, they can regain game players but they first must build that platform and launch new games.”

(Ars is currently researching a long feature on Zynga, analyzing what has gone wrong at the company—if you’re a former or current Zynga employee and would like to speak to us, please get in touch.)