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Zynga struggles with declining user base as 2012 losses narrow to $209 million

Zynga struggles with declining user base as 2012 losses narrow to $209 million
US social gaming giant Zynga (NASDAQ:ZNGA) has announced its financials for the 12 months ending 31 December 2012.

GAAP revenue was $1.28 billion, up 12 percent year-on-year.

However, the company made a full year loss of $209 million.

This included $282 million in stock-based expenses and $49.9 million of income tax expenses.

Still, the total was down from the $404 million loss it posted in 2011.

Hard quarter

In terms of the October-December period, Zynga had sales of $311 million, flat compared to 12 months ago.

Its net loss in Q4 was $48.5 million, compared to a massive loss of $435 million 12 months ago.

Alongside the aforementioned expenses, the company pointed to increased investment in R&D, datacenters and infrastructure as one reason for its situation.

It generated $195.8 million in cash flow from operating during 2012, down from $389 million in 2011, demonstrating both the squeeze on its profitability and the impact of increased investment in terms of overall losses.

Still, thanks to its IPO, Zynga has $1.65 billion in cash, cash equivalents and marketable securities.

Big beast

And despite its losses, Zynga remains keen to stress the sheer scale of its player network.

During Q4, its games had 56 million daily active users, although this was down from 60 million DAUs in Q3.

In terms of monthly active users, these were up from 240 million a year ago to 298 million Again, though, Q4's MAUs were down from the 311 million recorded in Q3 2012.

It has 72 million MAUs players on mobile.

Yet, more structural bad news came as Zynga revealed its average daily bookings per DAU (revenue generated per player) was $0.051, down from $0.061 in Q4 2011.

Better times ahead

During Q4, Zynga released four web/Facebook games as well as Bubble Safari and Ruby Blast on mobile.

It also released eight web games and four mobile games through its third party publishing channels.

And mobile and tablets remain a key focus for the company in 2013.

According to comScore research, Zynga claimed its "mobile game players in the US spent more time in Zynga games than the next five game companies combined", although that seems very hard to believe given the absence of Zynga titles in the top grossing charts.

"2013 will be a pivotal transition year and we are focused on achieving three strategic objectives: growing our franchises on mobile and web, expanding our network, and maintaining profitability on an adjusted EBITDA basis," said COO David Ko.

"With 298 million monthly average users, including 72 million on mobile alone, Zynga already has the largest social gaming audience and remains the best positioned company to lead in building the future of social gaming."

As part of this push, it bought November Software for undisclosed sum in late 2012 for its in-development midcore F2P title. 

Zynga expects to make a loss of between $12 to $32 million in Q1 2013.

[source: Zynga]
editor-at-large

A Pocket Gamer co-founder, Jon can turn his hand to anything except hand turning. He is editor-at-large at PG.biz which means he can arrive anywhere in the world, acting like a slightly confused uncle looking for the way out. He likes letters, cameras, imaginary numbers and legumes.

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