Zynga profits plummet 90 percent, raises questions about imminent IPO

Will the big show still go on? That's what many wonder, as Zynga just revealed in an updated regulatory filing that its profits dipped by 90 percent in the June quarter, thanks to increased spending and a lack of major game releases earlier this year, Reuters reports. According to the news service, this raises questions as to whether the company can sustain growth ahead of its long-awaited IPO (initial public offering).

Zynga's net income took a nose dive to $1.4 million from $14 million a year earlier, and its net profit plummeted over 90 percent in three months from $16.8 million in March of this year. Reuters chalks this up to the fact that the filing shows that the FarmVille maker's expenses rose $149 million compared to a year earlier, and $59 million alone from the previous financial quarter.

We'd imagine a major chunk of those expenses are thanks to the 14 companies Zynga gobbled up in the past year. It's also worth noting that the developer didn't really release any major Facebook games in 2011 prior to Empires & Allies. (And no, we're not counting FarmVille English Countryside.) Since then, however, the company has been on a frenzy, launching three more Facebook games this summer: Words With Friends, Pioneer Trail and recently Adventure World.

This news speaks volumes to the fact that Zynga has reached a point where it constantly needs to produce in order to sustain its meteoric growth, and more importantly for them right now, the faith of investors. Since the company's last filing, Zynga conducted a third-party analysis that estimated the probability of an IPO at 75 percent. This is down from the 80 percent probability reported in Zynga's previous filing.

In other words, it looks like the anticipated Zynga IPO could be delayed, just as previous reports suggested, to wait for improved market conditions. However, EA is gaining on the company with The Sims Social, and fast. According to AppData, EA and Playfish's game has just about 1.6 million fewer daily players than CityVille's 12.9 million.

Do you think Zynga has anything to worry about, given the news? Would you ever invest in Zynga if given the chance? Sound off in the comments. 1 Comment

Habbo Hotel maker names ex-Playdom exec CEO in social games push

You might have heard of the mega popular social network slash social game Habbo Hotel (pictured), but Finnish developer Sulake wants to turn "might" into "absolutely." The company just announced that it has hired former Playdom VP of global distribution Paul LaFontaine as CEO, Reuters reports. Sulake made the hire in an ambitious attempt to help the company break into the world of social gaming, and who would know the space better than a guy who was there from the beginning?

LaFontaine, who was largely responsible for publishing Playdom's--now owned by entertainment behemoth Disney--games will replace Timo Soininen as CEO of Sulake. "We have been turning that direction for two years and are now accelerating it with this new CEO," Sulake chairman Mika Salmi told Reuters.

Habbo Hotel, for the uninformed, is a social network-meets-social game in which about 10 million monthly visitors interact in a world designed to hearken back to the good old days of 8-bit gaming. Players create their own rooms in collective hotels normally restricted to countries of origin or native language, and play mini games, decorate and share gifts with other hotel denizens. Of course, like any social game, players can buy premium items using real money.

Judging from the fact that prospective players can already connect to Habbo Hotel through Facebook Connect, and that Sulake has made their interest in traditional social games clear, Sulake making games for Facebook is certainly a possibility. Alright, with the crazy money everyone seems to be raking in on Facebook, this is most likely exactly where the company is headed. And LaFontaine will lead the charge--watch out, Zynga and EA, Habbo is looking hinder your hottest games.

Have you ever played Habbo Hotel before--what do you think of it? Do you think Sulake and Habbo Hotel will make waves in the Facebook gaming world with LaFontaine? Sound off in the comments. Add Comment.

Social game makers Gree, DeNA to take spotlight at Tokyo Game Show

Social games will go toe to toe with the hardcore scene at this year's Tokyo Game Show, Reuters reports. Gree, the 26 million player-strong mobile and social games creator hailing from Japan, will have one of the largest booths at Japan's equivalent of E3 this year, according to Reuters. In fact, both Gree and its competitor DeNA will conduct keynote addresses at the event, which runs Sept. 15 through 18.

Reuters reports that several game companies aside from DeNA and Gree, including famed creator of games like Contra and Castlevania (some of the most hardcore franchises around) Konami, are shifting resources toward social games. While the biggest Japanese games company, Nintendo, lags behind as it continues to focus on games created deliberately to take advantage of its hardware. Unfortunately, that hasn't been working out so well for the company as of late.

"Nintendo has done some pretty awful things - no software, poor pricing, poor PR, no sign of a sustainable turnaround, software support dropping like flies," JP Morgan analyst Hiroshi Kamide told Reuters, referring to the failed 3DS launch (and resultant massive price drop).

On the other hand, competitor Konami recently welcomed over 10 million players to its social games. "You can make serious returns with social games in Japan if done well - and that is exactly what they have done," Kamide said to Reuters about Konami.

Both DeNA (which enjoys 3 million more monthly players than its rival) and Gree have major ambitions of becoming global competitors in the social games space to companies like Zynga and EA, which have blazed the trail for Facebook and mobile social game in the western world. Just this past year, both Gree and DeNA made huge purchases to make global headway in the space with mobile social game network OpenFeint and mobile games developer Ngmoco, respectively.

Just as some social game makers invaded this year's E3 event in the states, it looks like the ballooning sub genre will fill up the streets of Tokyo this week, too. Whether the two companies will fill the conference halls with hot air has yet to be seen. But considering Mitsubishi UFJ Morgan Stanley analyst Masato Araki expects Japan's social games industry to grow to about 400 billion yen ($5.1 billion) by 2013 from 106 billion yen in 2011, according to Reuters, you can bet everyone will be all ears.

Do you think Gree and DeNA will have some new, interesting things to say about social games at this year's TGS? How do you think traditional Japanese gaming companies will respond? Sound off in the comments. Add Comment