Why Zynga Will Still Never Be Great Again

Paul SakumaSocial gaming giant Zynga (ZNGA) has a problem.

The company behind Mafia Wars 2 and Draw Something tried to impress the market on Tuesday by unveiling its arsenal of upcoming games during an event that it brazenly called Zynga Unleashed. The online game developer didn't really wow the watchers. The stock moved lower on the day, and it's pretty easy to see why.

Game on

ChefVille? Really? Zynga already has FarmVille, CastleVille, and CityVille. The master plan of slapping a noun in front of the "Ville" suffix and creating a virtual world where users will spend time and virtual coins to build up their realms and annoy their friends on Facebook (FB) with viral requests is tired. It's so 2011. Dolling up this franchise with a cooking theme is less al dente and more overcooked. Can one suggest CloneVille or FuneralVille next?

Ruby Blast? Zynga plans to expand this game -- a kissing cousin to Bejeweled -- to more platforms. This would normally be good news, but a quick check on Facebook shows that the game is attracting fewer than 70,000 monthly users on the site. Zynga's biggest games peaked with tens of millions of average monthly gamers. There's a reason for this, naturally. The game has only been out for roughly a week. It takes time to cultivate a following. However, the game should be doing better organically before it's expanded across devices.

Matching With Friends? So, what board game is Zynga going to rip off now after swiping from Scrabble and Boggle? Well, this is more of a puzzle game. Players need to line up three or more jelly blocks to make a match. Wow. This has been done before. A lot.

Zynga Elite Slots? Zynga's broadening its casino games. The allure of online poker, and perhaps even bingo or slots, makes sense. However, there are no barriers to entry here. Why will Zynga fare any better than the countless other international companies that have been specializing in this niche for ages?

The Ville? You know, this is probably a lot like CityVille -- only newer. Is it too late to get Cadillac or 101 Dalmatians' Cruella for a sponsorship deal?

Share Prices Can Sink Faster Than Popularity

It's been four months since my original "Why Zynga Will Never Be Great Again" article. The stock was trading for $12 at the time; the company has gone on to shed roughly half of its value.

What's wrong with Zynga? On the surface, it seems to be doing everything right. Since going public at $10 six months ago, Zynga has delivered back-to-back quarters of better-than-expected profitability. Investors usually eat that up, but they're just not comfortable with Zynga's valuation and its model.

After all, the very reason Zynga is pushing out all of these new games and trying to expand across several platforms is that folks are tiring of games a lot faster than they used to. There may be nearly 16 million monthly Facebook players for its item-searching Hidden Chronicles game, but there probably won't be that many a year from now.

Social games have become pop songs. One may be sticky for a moment, but each quickly falls out of rotation when something catchier comes along.

Future Value Relies on a Model's Future

Zynga is no longer outrageously priced on an earnings basis. The stock is fetching 21 times this year's projected profitability and a mere 16 times next year's bottom-line results. The problem here is that there's a fair deal of skepticism when it comes to Zynga actually hitting its future earnings targets.

The shift from desktop to mobile -- and more folks are turning to smartphones to play Zynga games these days -- finds the company not only fighting with hundreds of thousands of apps vying for attention but also struggling with the shortcomings of monetization. Mobile display ads just don't pay as well as desktop advertisements.

Zynga was big man on the Facebook campus, commanding 15% of the social networking giant's revenue during the first three months of this year. It's going to be a much smaller fish in the big smartphone ocean.

The push to perpetually reinvent itself at a quickening pace to stay relevant won't be easy. It probably won't be fun, either.

Longtime Motley Fool contributor Rick Munarriz does not own shares in any stocks in this article. The Motley Fool owns shares of Facebook.

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Deanne M

I've played several of the Zynga games on Facebook - for awhile, before quitting. Here's why. First, the games I've played require you have "neighbors" to play. In order to get items to complete a mission, quest, or whatever it's called in the different games, you have to ask your neighbors for items. Players are limited to asking each neighbor for an item once every 24 hours. Many of these missions require many, many items to complete, to the point that it becomes impossible to complete most missions without adding numerous neighbors, most of whom are found on the Zynga forums. Who wants a bunch of strangers as friends on their Facebook page? Some, maybe, but not me. Secondly - these games also require you post requests on your Facebook page to ask for other items to complete quests thus spamming your own page, not to mention the pages of your neighbors. I don't like that, even with the new Timeline on Facebook and the ability to control who sees the posts. I see it and don't like it on my own page. Third - all off the Zynga games I've played have constant technical problems of one sort or another such as requests not going through to the neighbors you sent them to, requests that did go through to your neighbors that don't show up as so in the game, games not loading properly, or sometimes not loading at all. Fourth - because of all of these problems and difficulty playing the games, player stop playing. Those who continue to play then have to find new strangers, er.. neighbors to play the games with in order to be able to continue the game. Those are just a few of the reasons I don't like to play most of Zynga's games. Maybe they should make the games more user-friendly, less spammy, fix the technical issues before releasing the games... oh, but those things would make the games more fun and that's not really Zynga's goal, is it?

August 05 2012 at 1:20 AM Report abuse rate up rate down Reply

The CEO sounded like a bumbling school boy on CNBC.

June 27 2012 at 3:05 PM Report abuse rate up rate down Reply

No way you could get me to invest in Zynga. I work in the industry and they're not doing everything right. They got lucky in the first place, but they think it was them that did it. Just like a pop song, they had one huge hit and it carried them far. But also like pop songs they've been cashing out on this hit like crazy and releasing new nearly identical ones like it. I think their business is exactly like pop songs, the comparison was great.

Unless I see something new, original, and creative coming from THEM they're perpetually going to be like a band caught up in being the hit thing and then fading away. They need to take a page from the bands that last, reinventing their art and staying relevant to the times. They should cut the shady copycat business too, gamers are hearing about it and they don't care about the bottom line.

June 27 2012 at 2:56 PM Report abuse rate up rate down Reply

Any company who relies on Facebook for profits will soon cease to exist, along with facebook.

June 27 2012 at 1:36 PM Report abuse rate up rate down Reply