(Reuters) - Shares of Zynga Inc fell more than 9 percent on Tuesday, to their lowest level since going public last December, on increased concerns that the craze for games on Facebook has already passed its peak.
The San Francisco-based producer of games such as "Farmville" and "Hidden Chronicles," which are played by millions of Facebook users, is suffering as gamers switch to their mobile phones for entertainment.
Zynga's daily active users dropped 8.2 percent to 54.2 million in May, according to App Data that tracks apps on Facebook and mobile platforms.
Cowen & Co analysts wrote in a research report released on Tuesday,
"We believe that interest in Facebook-based gaming may have reached a negative inflection point as more casual gamers migrate to mobile platforms."
The analysts wrote.
"The market for games on Facebook was in an accelerating user tailspin."
Zynga took advantage of the enthusiasm for Facebook and interactive online games with an initial public offering in December, which valued the company at $9 billion.
Since then, Facebook's messy IPO has dampened investors' appetite for consumer Internet stocks, while Zynga has struggled to ignite further growth and insiders have sold more than $500 million in stock.
Zynga shares were down 10 percent at $4.94 in afternoon Nasdaq trading.
COMMENTARY: The last time I blogged about a Zynga social game was on January 4, 2012, when I profiled the launch of "Hidden Chronicles," a new "hidden objects" game that was created to compete against Disney's "Gardens of Time." The object of both games is for the player to find as many hidden objects that are embedded within a mosaic or scene. At the time, I said somewhat prophetically,
"Many of their "ville" games are losing monthly average users in huge numbers so Zynga must continue to create new hit games with a lot of stickiness if they are to continue to grow revenues and profits, otherwise their business model will begin to crack."
Well, it appears that not only are Zynga's "ville" games like Farmville, Cityville and Castleville losing users, but the entire Zynga social game lineup is losing huge numbers of users in the AppData.com's Top 25 Facebook Games rankings.
If you review the Top 25 Facebook Game rankings for March, April, May and June 2012, you get a much clearer picture of what is happening to Zynga's audience.
June 2012 (Actual for May 2012)
As was the case in May 2012 (Actual for April 2012), Zynga’s CityVille and Hidden Chronicles were the biggest losers measured in daily average users (DAU). CityVille dropped by another 1.4 million DAU's, while Hidden Chronicles lost 1.1 million DAU's. Recently-launched Zynga Bingo was the biggest gainer with 1.8 million DAU's. For the month of June 2012 (Actual for May 2012), Zynga had 9 games in the Top 25 Facebook Games by DAU rankings, but they recorded a combined net loss of -2.7 million DAU's.
May 2012 (Actual for April 2012)
CityVille and Hidden Chronicles had the largest losses on the Top 25 Facebook Game by DAU for May 2012 rankings. CityVille was down by 1.4 million DAU's, while Hidden Chronicles dropped 1.2 million DAU's. For the month of May 2012 (Actual for April 2012), Zynga had 8 games in the Top 25 Facebook Games by DAU rankings, but they recorded a combined net loss of -5.1 million DAU's.
April 2012 (DAU during March 2012)
Castleville, Cityville and Words With Friends had the largest losses on the Top 25 Facebook Game by DAU for April 2012 rankings. Castleville was down by 1.2 million DAU's, Cityville dropped 1.1 million DAU's and Words With Friends was down by 1.1 million DAU's. On a more positive note, Zynga's Slingo, its first licensed game (licensed from casual gamemaker Slingo and launched in mid-February 2012) had 3.6 million DAU's. For the month of April 2012 (Actual for March 2012), Zynga had 9 games in the Top 25 Facebook Games by DAU rankings, but they recorded a combined net loss of -1.6 million DAU's.
March 2012 (Actual for February 2012)
Castleville and Cityville had the largest losses on the Top 25 Facebook Game rankings. Castleville was down by 400,000 DAU's, while Cityville dropped 300,000 DAU's. Only Zynga's Words With Friends and Hidden Chronicles had gains in DAU's. Both had 100,000 DAU's For the month of March 2012 (Actual for February 2012), Zynga had 9 games in the Top 25 Facebook Games by DAU rankings, but they recorded a combined net loss of -1.0 million DAU's.
Zynga is still tops in the Top 25 Facebook Games by DAU rankings with 8 or 9 games in the Top 25 during the rankings for the months of March through June 2012 (Actuals for February through May 2012). However, if you are keeping count, Zynga's social games in the Top 25 Facebook Games by DAU rankings for the above period have a combined net of -10.4 million DAU's.
Zynga's social games have clearly established a very negative trend based on DAU's, and this should send a clear signal that quite possibly social game usage is waning (at least on the desktop) and that Zynga must create big hit mobile games for its very survival.
Courtesy of an article dated June 12, 2012 appearing in Reuters, an article dated June 1, 2012 appearing in Inside Social Games, an article dated May 1, 2012 appearing in Inside Social Games, an article dated April 2, 2012 appearing in Inside Social Games, an article dated March 1, 2012 appearing in Inside Social Games