Zynga Restructuring Creates Consternation

ZyngaAlthough Zynga’s active users rose from 27 million in the last quarter to 28 million this quarter, it is safe to say that the company has lost a significant amount of users. The business had 53 million active users at this time last year. Zynga has reported a loss of 36 percent from last year’s profits, creating consternation within the company and investors. Mark Pincus, formerly known as the founder and CEO of Zynga, has become a victim of a restructuring by Zynga in the wake of its decreasing profit.  He will be giving up his role of Chief Production Officer and will stop maintaining any operational duties, but he will remain on board as a non-executive chairman in charge of no crucial tasks.

Pincus’ obligations would include being on site one day a week while zero employees report to him, and he would have no management opportunities. Don Mattrick, an established Microsoft executive who was also behind their Xbox operations, had already been named CEO last year by Zynga. Mattrick also revealed that Alex Garden will be taking over as Zynga’s new president, Henry LaBounta will ascend to the role of chief visual officer, and Jennifer Nuckles would move into the company’s new chief marketing officer position. It is hoped that the newbies to their positions will help alleviate the company’s difficulties.

While Zynga has no special place in the world like Twitter or Facebook, and although it has restructured itself and may have what amounts to a billion dollars with which to remake itself, it does not own the social network sites that their players use to play their games, which creates consternation with investors. Monthly active users, or MACs, are less than what they were a year ago – 123 million today in contrast to the 253 million that were playing last year. Although the company’s numbers have increased, they are becoming more and more dependent on a negligent number of games, like Zynga Poker. Zynga stock is susceptible to slowing down or petering out if users stop playing any specific game, which could cause the value of the company to dip profoundly into the bottom line. This problem results when users become devoted to only a handful of games. It also demonstrates the company’s need to expand into the mobile market, in which they hold a small footing.

Zynga has been floundering between positive and negative resources for several quarters. However, in quarter one of this year, probably due to restructuring, Zynga defeated Wall Street assumptions of $161 million with returns of $168 million, reducing consternation for the future of the company and amounting to a one percent casualty per share. Although the company has been seeing an increase in its bottom line, the current CEO has his work cut out for him. He has to create an exciting atmosphere to entice former users back to Zynga’s games and encourage new active users to join the ranks. This means they need to come up with some really hard-hitting games that people want to play and will keep coming back to enjoy. What Zynga has to discover is how to make a certain amount of users pay for better services, while letting the bulk of gamers play for free. With Don Mattrick’s constant success with Microsoft’s Interactive Entertainment Business division, this could be a real possibility for Zynga.

By Korrey Laderoute

Sources:
TechCrunch
CNET
InvestorPlace
Forbes
ars technica

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