Zynga Down 74% Since IPO, But Could Have Things Been Different?
Zynga (NASDAQ: ZNGA) is the world’s largest social gaming company, but nothing much of that title counts towards its valuation. In fact, Zynga is now viewed as one of the riskiest stocks in the market. The company has lost too much value since going public via a $10 per share IPO, which was preceded by massive hype following the company’s social gaming promise.
However, as it turns out, Zynga has failed to live up to expectations and now, trades at a paltry $2.60 per share, down from $10 per share just over three years ago. Illustratively, Zynga is down about 74% from its IPO valuation and even after the exit of founder Mark Pincus, the former Microsoft (NASDAQ: MSFT) executive Don Mattrick has yet to find a solution to the ailing social gaming giant.
Could have things been different?
Zynga is the undisputed champion in the social gaming industry, but the company has failed to make the most of its massive user-base in the online gaming market. The biggest challenge has been monetization and the shift to mobile platforms.
The company has a list of franchises that drive its engagements on various platforms including Facebook and various mobile apps. It is ranked as the number 1 online poker site by ESPN in terms of users, but the impact of that relates to casual online porker. If it were online poker, then the company would be one leading the marks in the game.
However, as the moment, there are several other online slots including starburst slots that actually are doing much better in the online poker business. For instance, slot machines like this, have the luxury of enjoying real money online gambling, something Zynga continues to dream of.
To put the whole concept into perspective, when Zynga went public in 2011, the company had nearly 30 million active online poker players, albeit non real money. The average ARPU for its users stood at about $0.75, compared to $160 ARPU for real money poker. Business Insider estimated the opportunity in pursuing real money poker at $1 billion then, which by now could be a multi-billion dollar venture.
Many thought that Zynga was actually going to hit the real money online gambling market rolling, but as it turns out, it is not as easy as initially expected. The process of acquiring real money online gambling licenses is tedious, time consuming and expensive. Additionally, the U.S, Zynga’s leading source of its massive user-base has stringent regulatory framework on online gambling.
As such, Zynga has found it hard to get going in the real money gambling market. Nonetheless, with genuine flexibility levels, there is a huge international market (ex-US) that Zynga could still exploit for its real money gaming ambitions.
Conclusion
The bottom line is that Zynga had an opportunity to go out guns blazing some years back, but then it seems that the company was shy of stretching its wings abroad where such opportunity would have been much easier to pursue given the stringent U.S regulation on real money gaming.
The regulation in the U.S has since eased with various states already offering avenues for gaming companies to launch real money gambling sites. Nonetheless, it is pretty clear that things would have been a little different had Zynga approached the market more boldly especially following a robust IPO.
The material appearing on this article is based on data and information from sources I believe to be accurate and reliable. However, the material is not guaranteed as to accuracy nor does it ...
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I think that Zynga could have captured the market better it just needed better management. What I would have done as CEO would have been different.
1.) First Zynga should have created different types of games - meaning generate rpgs, shooters, maybe branched out risk a little by having a variety. all of their games were the same thing collect coins and stars and build stuff. maybe they should have branched out more
2.) Second is the same as above. Use the cash they raised on the stock market to hire a good dev team to create multiple top selling games that are different than their first popular ones.
3.) Real money gambling is stringent in the U.S. but should have done more to target out other territories where it isn't.
4.) A lot of the money transactions for the games was how to advance faster. Maybe they should have added like cosmetic items as well where someone would be willing to spend something to make their avatar/character unique in some way compared to others.
Those are a few things I would have done different as CEO of Zynga. So you are right Zynga had the opportunity for a different future. Now it has to live with what is has created.