Zynga Inc (ZNGA): An Analysis Of The Business

Third-party Gaming Publishers: Zynga has been working with a number of third party developers to publish the games of these third parties on Zynga’s large ecosystem of 298 million users. A few successful franchises and the offering of newer and fresher games from third parties should lead to a lot of revenues for Zynga.

Introduction of 3D Games: Zynga Inc (NASDAQ:ZNGA) has introduced a 3D version of its popular game, FarmVille in the last quarter of 2012. As FarmVille was a big hit for the company, it generated total player purchases of more than $1 billion, including partner fees. If Zynga can introduce more 3D Gaming experiences on its existing franchises as well as build newer franchises, the enhanced user experience will lead to more gaming revenues, as well as pave the way for more advertising revenue.

Expand on Other Platforms: The company’s games are available on some of the leading platforms in the world including Google+, Zynga.com, chinese Internet powerhouse, Tencent as well as on Android and Apple’s iOS devices. Zynga should harness and engage more consumers to make purchases in these global platforms including some of the mobile platforms and reduce its dependence on Facebook Inc (NASDAQ:FB) alone.

Threats

Casual Players: A number of players on Zynga’s platforms are largely casual players who don’t play on a regular basis. Irregular players might stop frequenting the site altogether, as many analysts and investors have termed the social gaming industry ‘a fad.’

Competing Gaming Platforms: A number of smaller social gaming platforms like Kabam are coming up and many of them will likely gain more widespread consumer acceptance and might negatively impact Zynga Inc (NASDAQ:ZNGA).

RMG Is Very Competitive: The real money gaming platform is a very competitive market and faces a lot of regulatory scrutiny on a regular basis as well. Some of the leading companies have large and established audiences in their respective platforms.

The Takeaway

While Zynga is still a favorite amongst many short-sellers, the company’s foray into real-money gambling with casino and poker games might be a success, and might lay the foundation for greener pastures down the road.

Ishfaque Faruk has no position in any stocks mentioned. The Motley Fool recommends Facebook. The Motley Fool owns shares of Facebook.