Tomahawk, WI 01/02/2014 (BasicsMedia) – Zynga Inc (NASDAQ:ZNGA) would not remember 2013 with amusement. The company faced several challenges, most of which it was not prepared for. The company which develops and sells online games through social sites such as Facebook Inc (NASDAQ:FB) witnessed huge revenue and user-base decline as its relationship with partners strained.
The company’s quarterly revenue declined by about 30 percent in 2013 after shutting down several of its popular games due to industry and partnership challenges. In the process, the company’s users shrunk to less than 150 million in 2013 from more than 300 million in 2012.
As if that was not enough, the company also faced management upheaval which culminated in the recruitment of a new chief executive Don Mattrick. The question in the minds of the company’s investors is whether 2014 will be any better.
It is not easy to predict the future of any social games company with precision. But looking at the transformed Zynga Inc (NASDAQ:ZNGA), there is no denying that it is faced with a lot of opportunities in the new year.
Even though 2013 was a baptism of fire for Zynga Inc (NASDAQ:ZNGA), some of its popular titles showed rare resilience which suggest that they could even do better this year now that things have stabilized by most measures. The company’s most talked about releases which remained atop the social games chart in 2013 included Zynga Poker, Farmville, and Farmville 2.
The new CEO Mattrick has come with a management style which I believe is the best for the company for rapid bounce back. The CEO was recruited from Microsoft Corporation (NASDAQ:MSFT) and this means that he comes with a lot of experience on how to create games that tick. The CEO’s stint at Electronics Arts Inc (NASDAQ:EA) also exposed him to better company-turnaround strategies which are expected to benefit Zynga Inc (NASDAQ:ZNGA).
That the company has announced reduction of its workforce is a clear demonstration that the management is taking the right steps towards turnaround. Reducing workforce by 520 employees will help the company to make significant savings on its operating budget.
Having noted that the problem with social games lies in their typically short lifespan, Mr. Mattrick is helping in this challenge by expanding the company’s reach and entering into role-playing games which usually have longer lifespan due to their mind-boggling nature. One such game is the Battlezone which is expected to improve the company’s games retention rate.
Online gambling games
Zynga Inc (NASDAQ:ZNGA) already has a footprint in online gamble games business. The company launched ZyngaPlusCasino and ZyngaPlusPoker for the UK market. It is however disappointing that the management has given the U.S. online gambling markets a wide berth. Nonetheless, the company’s opportunities in the international market are still good enough to ensure its turnaround in 2014.
It is estimated that by the end of 2015, the global real money gambling will be worth more than $36 billion, up from $30 billion in 2012. This essentially means that with even a marginal market share of 2 percent in this market, Zynga Inc (NASDAQ:ZNGA) will be able to realize more than $700 million in incremental revenue.
That Zynga Inc (NASDAQ:ZNGA) has so far spent less than 90 percent of its shares buyback budget suggests that the company still has a lot of money to return to investors in 2014. Of the approved $200 million shares repurchase budget, the company has spent only about 30 million between 2012 and 2013.