) demise is fast approaching as investors abandon the creator of
FarmVille, CityVille and other social media games. Built almost
exclusively with the help of Facebook (NASDAQ:
) and its impeccable number of users, Zynga was once believed to
be the next big company in the online gaming industry. The
company has repeatedly topped the charts of
, an independent application metrics and trends company that
focuses on social media firms, and as of this writing, AppData
shows that Zynga still holds more than 336 million monthly active
While these "users" may log in frequently to play with their
farms (or restaurants, as indicated by the 45 million people
playing ChefVille), they do not appear to be spending any money.
That is one of the biggest problems of the free-to-play business
model; no one can figure out how to make a profit. Advertising
revenue is not enough, and most consumers don't want to spend
money acquiring virtual items. That strategy may work in
countries where consumers are not able to buy higher-quality
games, but is much less effective in the online gaming industry's
most prolific regions -- North America, Europe and Japan.
Zynga does not expect to post redeeming numbers any time soon.
Consequently, investors are on the move. As of this morning,
Zynga shares have dropped as much as 20 percent. Shares continue
to hover down 18 percent since market open.
The slight rebound in shares might be positive news for
analysts like Jefferies & Company that currently have a
on the stock, but it cannot be good for the investor who believed
in the vision of Zynga CEO Marc Pincus, who set out to copy
every game he could get his hands on
. He once said that he did
every horrible thing in the book
just to turn a profit. Investors who bought into that philosophy
might feel a bit scorned today.
Nonetheless, Zynga lives on. The company could feasibly live
on for several more years as a dying entity. An example of such
an entity is THQ (NASDAQ:
), which has been the loser of the gaming industry (on the public
market, at least) for more than 12 months.
Earlier this year, the company announced that it planned to
cease development of games based on licensed properties,
including those that promoted Disney (NYSE:
) films and Nickelodeon TV shows. THQ once made a fortune from
those licenses and now that sales have dwindled, the company let
them go and canceled development of numerous other projects.
Like Zynga, however, THQ is still standing.
Zynga may not be so lucky. While it is possible the firm may
continue for a while, it may also plummet much faster than any of
its peers. Unlike THQ, Zynga has yet to produce an original hit.
The firm's copycat ways finally caught the attention of
Electronic Arts (NASDAQ:
), which promptly sued Zynga over copyright infringement.
Slowly but surely, Zynga's poor decisions are catching up with
the company. Soon, there might not be much of a company left to
Despite Zynga's lackluster performance, CEO and co-founder of
Zynga Mark Pincus is far from destitute. Recently, Pincus parted
with 16 million to purchase a
(c) 2012 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.