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Earnings Preview: Zynga to post 1Q results
The Associated Press
April 24, 2012, 2:22PM ET
Zynga Inc., the company behind popular Facebook games such as "CityVille" and "Texas HoldEm Poker," is expected to post higher revenue than a year ago and discuss its plans for continued growth when it report its first-quarter earnings on Thursday after the market closes.
WHAT TO WATCH FOR: Investors have been pushing Zynga's stock lower in recent weeks amid worries about its ability to keep growing. That's even though, unlike many other new Internet companies, Zynga was profitable before it went public. Investors will likely focus on Zynga's plans and ability to broaden its revenue stream, especially on mobile devices, and reduce its dependence on Facebook.
Zynga is the top maker of games for Facebook, the world's largest online social network. It gets nearly all of its revenue -- and its players -- through Facebook, which takes a 30 percent cut of what people spend on virtual items in Zynga games.
In turn, Zynga directly accounted for about 11 percent of Facebook's $1.06 billion revenue in the first quarter, Facebook said this week in a regulatory filing. Facebook has been a huge reason behind Zynga's growth and Zynga helps Facebook keep users on site. At the same time, the relationship was the first thing Zynga listed in its IPO filing under risks associated with its business when it went public last November. If the relationship sours, Zynga said, its business will suffer.
Zynga has been expanding beyond Facebook. It owns the popular game "Words With Friends," which can also be played on mobile phones, and it bought OMGPop, the company behind Pictionary-like mobile game "Draw Something," in March.
WHY IT MATTERS: Zynga's games are wildly popular, played about 284 million people on Facebook each month, according to AppData, which tracks Facebook apps. Its business model -- offering free games and making money on selling virtual goods -- is very new for a public U.S. company, so it's closely watched by competitors.
WHAT'S EXPECTED: Analysts, on average, are expecting earnings of 5 cents per share on revenue of $316.8 million, according to FactSet.
LAST YEAR'S QUARTER: When still a private company, San Francisco-based Zynga earned $17 million on revenue of $243 million in the first three months of 2011, according to documents it submitted to the Securities and Exchange Commission.