What Does the Future Hold for Facebook Inc (FB), Zynga Inc (ZNGA) and Groupon Inc (GRPN)?

In my view, Zynga’s long-run prospects are weak. The fact of the matter is that the company is showcasing the early signs of death. Revenue is plateauing, and the company has scaled back by completely retiring some of its games. Either your core business is so eroded that you need to make cost cuts early in the game or your own games, well, stink. Either way, the company is not in the best of positions.

Between Groupon, Facebook, and Zynga, I believe Zynga has the worst likelihood of diversifying into a sustainable profit stream. Facebook Inc (NASDAQ:FB) can achieve sustainability by virtue of leveraging its 1 billion+ user base into different platforms, like e-commerce, pay-per-action, app development, you name it. What can Zynga do? It is now trying to move into online poker, but that area has plenty of existing competition.

Conclusion

The video game industry is large, but investors understand the competition issue. Most of the social network games are free-to-play, and they get an above-average amount of users. The chances of Zynga tapping into a sustainable market that requires users paying money in the long-term looks like a stretch. It is not a business plan I would want to invest into right now. By contrast, Groupon’s diversification both complements the existing business and is relevant in an increasingly mobile Internet.

The article What Does the Future Hold for These “Dot-Com” Stocks? originally appeared on Fool.com and is written by David Gould.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.