Draw Something Spearheads Zynga’s Mobile Gaming Initiative

by Trefis Team
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Quick Take

  • Draw Something reported 100 million downloads as of Feb 2013
  • Zynga’s games are also available on feature phones, which is an under-served market
  • Mid-core games will improve engagement and retention of users
  • Mobile and real-money gaming to be areas of focus in 2013

Zynga (NASDAQ:ZNGA) which reported Q4 2012 revenues of $311 million to end a volatile year has something to cheer about regarding its mobile gaming initiative as Draw Something hit 100 million downloads since its launch in February 2012. As Zynga tries to gain share in the mobile gaming market in 2013, we can expect the company to relaunch and push its popular titles. Zynga is still the largest social gaming company in the world with about 30o million monthly active users of which nearly 72 million users are purely mobile users, a demographic it plans to target in 2013. The company generates most of its revenue from in-game virtual goods sales and advertising on multiple platforms like Facebook, Google+, iOS, Android and others. Zynga competes primarily with Electronic Arts (NASDAQ:EA), Playdom, which was recently acquired by Disney (NYSE:DIS) and other independent social gaming studios.

Below we highlight some of the key developments and what to expect from the company in the near future.

Check out our complete analysis of Zynga

Mobile, Core And Real-Money Gaming To Drive Revenues In 2013

Mobile is key in 2013, and the company set up the groundwork for its mobile presence by partnering with Nokia to provide popular titles in both, its feature phone and smartphone range. The hugely popular games, Draw Something and Zynga Poker, are available on the Nokia Asha Touch feature phones along with the rest of the Nokia Series 40 range. While Nokia’s smartphones haven’t done too well compared to Samsung and Apple phones, it is still a top player in the feature phone range in emerging markets and hopes to extend this lead with touch-based feature phones.

Zynga dominates the social casino scene across all web and mobile platforms. Zynga Poker grew to 37 million monthly active users in Q4. The company plans to introduce games such as Elite Slots in 2013, to beef up its casino gaming franchise. It also plans to launch real-money casino games in the U.K., in the first half of 2013. The fourth quarter also saw the release of multi-player poker tournaments which has led to increased user engagement.

Zynga also plans to introduce mid-core games in 2013, in a bid to keep users engaged for longer periods of time. A mid-core game tries to combine the engagement level of a core game with the learning curve of a casual game to provide an engaging gaming experience to a larger user base. This can potentially allow for retention of a large user base while promoting in-game purchases as the games are designed to be more engaging and users are likely to pay to upgrade rather than quit once the free-play stages are completed.

Outlook For Q1 2013

The company expects lower bookings in Q1 2013 – between $200 – $210 million, down sequentially from Q4, mainly due to slower new releases in a bid to control its game portfolio. The company also expects Q1 adjusted EBITDA between -$10 million and breakeven. GAAP revenue is expected to be between $255 – $265 million, with a net loss between $12 – $32 million. [1]

We have a $3 Trefis price estimate for Zynga, which is around its market price. We expect Zynga’s new platform and gaming network and online gambling initiatives to account for much of its future earnings potential.

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Notes:
  1. Zynga Earnings Transcript, www.seekingalpha.com, Feb 5 2013 []
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