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Zynga's Profits Down by 95%

Has the bubble finally burst for the social gaming giant? Gamasutra reports that ahead of the company's initial public offering, Zynga has reported year on year profits that were down by approximately 95% -- $1.3 million for the quarter ending June 30 versus $27.2 million for the previous quarter ending in March.

Zynga attributes its decline in profits to several major factors: the lack of any new game launches in the first half of 2011 prior to Empires and Allies on March 31; a higher than normal spend on hiring, acquisitions and international growth; and Facebook's requirement this summer that all game developers adopt its own Facebook Credits payment system, which takes a 30% cut of revenue.

Zynga's total revenues for the quarter were up by 15%, though this was slower growth than the previous quarter, which jumped up by 24%. However, the company's virtual goods sales and ad revenues were down by 4% on the previous quarter, and daily active users across all Zynga games also dropped by around 4% from 62 million to 59 million. This drop is attributed to a more competitive market than in prior quarters -- perhaps in part due to the launch of Google+ Games and its less intrusive approach to the notorious "game spam" that social games tend to generate.

Despite all this, Zynga still remains in the top spot on the AppData developer leaderboard, with 265,583,782 monthly active users across all its games compared to its nearest rival EA, enjoying strong growth thanks to The Sims Social but still lagging far behind Zynga with just 99,509,372 monthly active users. In terms of individual apps, however, EA's The Sims Social is hot on the heels of Zynga's flagship CityVille game, with 60,349,180 monthly active users for the Sims compared to 72,037,895 for CityVille.

It's too early to say whether Zynga is in trouble or not, but it's certainly got a lot more in the way of competition than it used to.

This article originally appeared on GamePro.com as Zynga's Profits Down by 95%


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