Zynga’s FarmVille Successor: Are Sequels A Good Growth Strategy?

May 16th, 2012 by Trefis Team
9.50
Trefis
ZNGA: Zynga logo
ZNGA
Zynga

Zynga (NASDAQ:ZNGA) is the world’s largest social gaming company, with more than 260 monthly million active users. It competes primarily with other social gaming companies like Electronic Arts (NASDAQ:EA), Playdom which was recently acquired by Disney (NYSE:DIS), and other independent social gaming studios. It is reportedly working on a sequel to FarmVille, one of its most popular games to date. [1]

Check out our complete analysis of Zynga

FarmVille was one of Zynga’s first games, and one of its biggest hits to date. After FarmVille, Zynga went on to launch CityVille which was an even bigger hit, but FarmVille is the game which established Zynga as the top social gaming company. It continues to generate a significant portion of Zynga’s revenue.

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FarmVille’s monthly active user numbers have dropped to a fraction of what they were at its peak, and are now down to just 23 million. There has been speculation for months that Zynga was working on a successor to FarmVille to boost user numbers and revenue from the game again.

Reports suggest that Zynga is already beta testing FarmVille 2 as Big Harvest in the Philippines. It offers a 3D gaming experience and has much better graphics than its predecessor. There are also several gaming tweaks to improve the gameplay and get users to spend more on virtual goods within the game.

If FarmVille 2 proves to be a hit, Zynga could use the sequel strategy to roll out upgraded versions to all its popular games, thus boosting its active user base and gaming revenues without the need to depend only on new games.

We estimate Zynga’s new games to account a major portion of its revenues going forward. You can see the impact of the number of users for its new games, including sequels to its current ones, on its value using this chart:

We have a $14 Trefis price estimate for Zynga, which stands nearly 70% above its current market price. New games account for almost half of its total value.

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Notes:
  1. Zynga’s Next Cash Cow? FarmVille Sequel Spotted Under The Name “Big Harvest”, Techcrunch [↩]