Google Inc (NASDAQ:GOOG) could be the bigger winner in this recent engagement. Zynga is going to shift from computer to mobile. That change in competitive positioning means that Zynga will rely heavily on mobile application in order to generate revenues. According to a recent Reuters’ article,
App Annie, an analytics firm, showed Google’s app store revenues were 38.5 percent of Apple’s, a big gain from a year ago when it was worth just a tenth of Apple’s as its free Android mobile operating system helped it win nearly 70 percent of the global mobile market.
Google Inc (NASDAQ:GOOG)’s app store generated approximately $836 million in revenue in the first quarter. The growth in revenue was primarily driven by the improvement in market share globally. If anything, Zynga will heavily market its product on the Android platform as social gaming is highly compatible with low-end smartphones. Low-end smartphones are likely to run the Android operating system, and due to that, Google Inc (NASDAQ:GOOG) is likely to rake in a substantial amount in licensing, advertising, and profit sharing revenues with Zynga. Zynga will continue to pump out games onto the Facebook Inc (NASDAQ:FB) social network, but it is highly likely that Zynga will refocus all of its product distribution and marketing efforts onto the Google Play platform. Google Inc (NASDAQ:GOOG) offers greater market potential than the Apple App store, which may imply that Google’s revenues from its store could generate substantial net income and revenue growth going forward. Social gaming is better suited for mobile platforms anyway, and it seems that Google Inc (NASDAQ:GOOG)’s market is the best fit for Zynga Inc (NASDAQ:ZNGA)’s current business strategy.
Conclusion
Zynga will rely heavily upon mobile going forward. Zynga really has no choice but to pursue mobile gaming as it is the most compatible with its social gaming approach. That being the case, Zynga will have to invest aggressively to stay on top which is why Zynga gave some fairly weak guidance for the following quarter.
Zynga anticipates a $0.04 loss in the next quarter. Driven by rising costs in development for the mobile platform, it hopes to offset costs with the recent success of its Farmville 2 launch. Investors are taking on a lot of risk when buying the stock at these really low levels. Investors who buy the stock are buying the stock in the hope that the company’s foray into the mobile market is successful. That is yet to be known, but various research firms are anticipating Google to generate a substantial amount of revenue from the Google Inc (NASDAQ:GOOG) Play store, this may be a decent forward indicator for the success of Zynga in mobile apps going forward.
The article Zynga Ditches Facebook and Gets in Bed with Google originally appeared on Fool.com and is written by Alexander Cho.
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