Here’s How Zynga Is Better Monetizing Its User Base

November 10th, 2016 by Trefis Team
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Zynga (NASDAQ:ZNGA) reported an 11% decline in revenue from online games in the third quarter, which was partially offset by a 7% increase in advertising revenue in the same period. This decline in online games revenue has been fueled by the drastic decline in the company’s user base over the last twelve months. In the third quarter, Zynga’s user base declined on both the web and mobile platforms, with monthly active users (MAUs) declining 13% year-over-year (y-o-y) to 66 million.

However, this was better than the second quarter this year, when the company had 61 million MAUs. Also, the company was able to increase its average monthly unique users (MUUs) as well as its average monthly unique payers (MUPs) both y-o-y and quarter-over-quarter to 57 million and 1.3 million, respectively. Therefore, Zynga’s user base seems to be recovering from the drastic user declines suffered in the last year, and the company is monetizing its existing user base much better. Below we explore this further:

  1. Daily user engagement (DAUs/MAUs) increased: Even though Zynga’s monthly active user base declined by about 12% in Q3 2016, its daily active user count was almost constant. This shows some stickiness in the company’s loyal active user base. MAUs are also likely to improve in the near term with the launch of new games such as CSR 2 and FarmVille: Tropic Escape.znga-16
  2. Improvement in payer conversion rate (MUPs/MUUs): The stickiness of Zynga’s loyal user base can also be gauged from the fact that despite a 12% decline in MAUs, its monthly unique users actually increased by 14% and its monthly unique paying users increased by 44%. This helped the company improve its payer conversion rate from 1.7% in Q3 2015 to 2.3% in Q2 2016.
  3. Growth in average daily bookings per MAU (Monthly Bookings/Average MAUs): One of the most positive developments for Zynga over the last year has been its ability to generate higher bookings per active user. Despite a 12% y-o-y decline in MAUs in Q3 2016, its bookings increased 11% to around $197 million, translating into booking per average user of $3.00 in Q3 2016 compared to bookings per average user of $2.40 in Q3 2015.

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