|ZNGA is down 14% in early morning trading.|
Zynga Warns Pandemic Lift Is Ending for Videogame Companies
Easing of Covid-19 pandemic restrictions has started to bite game publishers
By Sarah E. Needleman
Wall Street Journal
Updated Aug. 5, 2021 6:19 pm ET
Zynga Inc., the mobile game company behind franchises such as FarmVille, said its audience declined more than it expected late in the second quarter, and the company lowered its full-year forecast for bookings, a key indicator of sales.
The disclosures helped send Zynga’s shares down about 16% in extended trading Thursday, though the company posted record revenue and bookings for the quarter that ended in June.
“What we started to see as we entered June was this great reopening,” Zynga Chief Executive Officer Frank Gibeau said in an interview. “People started traveling and going out to dinner again.”
Zynga isn’t the only game company that noted a recent slowdown in engagement coming out of the most recent quarter. Take-Two Interactive Software Inc. and Activision Blizzard Inc. also cited that trend in their quarterly financial reports this week, though both said their number of active users remained above prepandemic levels.
Separately, image-sharing company Pinterest Inc. and Roku Inc. said people have started spending less time using their products in recent weeks.
The biggest drop-off for Zynga was in users added at the start of the pandemic, the company said. Changes in Apple Inc.’s iOS operating system are also hurting, and the company warned there would be more pressure on ad revenue in the current quarter than in the previous one. Zynga has said it derived 49% of its revenue from Apple platforms and 46% of its revenue from Google platforms in 2020.
The decline in engagement and the impact of Apple’s new privacy rules led Zynga to lower its full-year guidance for bookings by 3% to $2.8 billion. Zynga also delayed the launch of “FarmVille 3” to the fourth quarter from the third, “because of the choppiness in the market,” Mr. Gibeau said. “Originally we were looking at September, but then clouds moved in,” he said. FarmVille, a social agriculture-simulation series, is one of Zynga’s oldest franchises and remains among its most popular.
To offset the declining engagement, Zynga said it is planning to host more live events in its games. The company is also counting on the many new studios it has acquired in recent years to help it attract and retain more players.
On Thursday, Zynga said it agreed to buy StarLark, the Beijing-based maker of “Golf Rival,” from Betta Games for $525 million in cash and stock. Other studios it has gobbled up in recent years include Echtra Games, Rollic and Peak Games. Zynga recently closed its purchase of mobile-advertising-services company Chartboost.
In its earnings report, Zynga called out Istanbul-based Rollic—in which it bought a controlling stake last year for $180 million—for surpassing one billion downloads. Rollic has 15 mobile games including hits such as “Hair Challenge” and “High Heels!”
Zynga said revenue climbed 59% in the second quarter from a year ago to reach $720 million. The company swung to a quarterly profit of $27.8 million, or 2 cents a share.
Write to Sarah E. Needleman at email@example.com
Zynga Warns Pandemic Lift Is Ending for Videogame Companies - WSJ