Shares of Zynga, the world’s largest social gaming company, finished 5% lower than their $10 initial public offering price as the stock made its debut on NASDAQ Friday.
Its games like FarmVille, CityVille and Texas HoldEm Poker have attracted millions of users worldwide and it makes money primarily by selling in-game virtual goods to its users and is on track for more than a billion dollars in revenue in 2011. Its main competitors include social gaming companies like Electronic Arts and Playdom which was recently acquired by Disney.
We recently launched coverage of Zynga, see our coverage launch article: Zynga New Coverage: $10.34 Pre-IPO Trefis Price Estimate
We currently have a $10.34 Trefis price estimate for Zynga, which we are tweaking in light of the final IPO details. New & other games account for almost 50% of its value while Texas HoldEm Poker accounts for around 30%, according to our analysis.
FarmVille, CityVille and Texas Holdem Poker Account for the Majority of Users
FarmVille, CityVille and Texas HoldEm Poker are some of its oldest games and its greatest hits. Despite being launched years ago, they still account for around 60% of its active user base.
Zynga has launched several new games in the last few months, but most of them have failed to gain the same traction as FarmVille or CityVille. Empires & Allies, which was launched in June 2011, peaked soon after its launch at about 48 million monthly active users and has seen a big decline since. Currently, it has around 18 million monthly active users.
Even Mafia Wars 2, the sequel to the very popular Mafia Wars, failed to generate much excitement and has dropped to nearly 12 million active users, after peaking at 17 million active users in mid-November.
While Zynga’s older games are seeing their active user base diminish, most of its newer games are failing to compensate for the decline. Additionally, Zynga didn’t launch many new games in the first half of the year, which has led to a decrease in Zynga’s monthly and daily active users in Q2 and Q3 2011.
CastleVille and Words with Friends show promise
CastleVille, Zynga’s latest fantasy themed social game, has been a silver lining for Zynga. It launched in November 2011 and has rapidly scaled up to around 20 million monthly active users. It is currently Zynga’s third most popular game after CityVille and FarmVille in terms of daily active users. It is still early but it looks like CastleVille is becoming Zynga’s next blockbuster after CityVille.
Words with Friends, a social game based on Scrabble, could turn out to be another major hit for Zynga. This gained even more popularity when actor Alec Baldwin was kicked off an American Airlines flight for refusing to quit playing this game before take off.
It was originally launched on mobile platforms like iOS and Android, but Zynga also launched it on Facebook in October 2011. It has seen a significant growth in its user base since, and currently has close to 12 million monthly active users.
We expect CastleVille and Words with Friends to help stem the decline in Zynga’s active user base and help it grow in the next couple of years. Going forward, New Games will continue to account for an increasing portion of Zynga’s user base, as users move on from older games.
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