The social gaming company, Zynga, is facing serious financial difficulties. Yesterday, the company reported losses in the second quarter of 2012 and the subsequent stock devaluation saw shares drop by 39% to just $3.09. These figures indicate a decrease of almost 70% from Zynga's initial public offering in December.
Additionally, roughly 15% of Facebook's revenue is attributed to Zynga's offerings on the social network. As WebiMax CEO Ken Wisnefski predicted yesterday on Bloomberg Television, Facebook also saw its stock values drop yesterday. While Facebook is likely to rebound by the end of 2012, Zynga may not be so fortunate. The two companies have vastly different business models, but Facebook is decidedly more versatile and adaptable. Rumored upcoming features such as the "Want" button indicate that Facebook may be investigating E-Commerce as a potential future revenue stream. Should such efforts prove successful, they could diminish or even eliminate the need for Zynga's games as a major source of income. Although Zynga is developing new games outside of Facebook, the company's potential for alternative revenue is much more limited and there may be difficulty entering new markets.
Despite the stock decline and disadvantages, there is still hope for Zynga. The company should utilize its own substantial social media presence to better promote and market its newer titles. If Zynga is able to achieve the previous success of older titles such as FarmVille by capitalizing on its social user base, the company could foreseeably become more profitable on a long-term basis.
Currently, Zynga is on a challenging road to financial recovery. However, the implementation of proven Internet marketing strategies may be the answer the brand is undoubtedly looking for.