Zyngas slow descent, starting with its failed initial public offering on the stock market last year, appears to be continuing. On June 3, the company, known for is casual online games such as Farmville and Word With Friends, announced massive layoffs. 520 staff members were let go. That constitutes 18 percent of Zyngas entire workforce.
CEO Mark Pincus, who is also one of the companys founders, said the move is intended to refocus the company toward mobile gaming. The move has been cast as right-sizing. Observers, however, see the move as part of the companys ongoing downward spiral.
Pincus also said Zynga will be closing its New York City, Los Angeles and Dallas offices. Offices in San Francisco, Beijing and Bangalore will remain open. So will several smaller offices, including the Seattle office.
Zynga has been plagued by missteps in the last year. The stocks value tanked almost immediately after its IPO last summer. Some investors even blame Zynga for the hard landing that Facebook had during its IPO. Zynga spent $210 million on the acquisition of Draw Something, an app that is now widely seen as a total failure. The company has retired 18 different games in recent months. The move upset loyal users, but it also freed resources to be used elsewhere.
The announcements further thrashed Zynga stock. Trading in Zynga shares had to be halted on the Nasdaq after the announcement. Trading has since resumed, although shares continue to be battered.
Zynga has noted that there has been a steeper decline in its web-based model than expected. The companys fortunes are tied to Facebook. The social media site itself has seen declining enrollment, especially as younger users migrate to other social media outlets, such as Twitter, Instagram and Snapchat. Zynga first came to prominence as the primary gaming platform that Facebook users encountered. As Facebook faces declining prospects, Zynga has tried to set its anchor elsewhere. This is one of the main reasons Pincus wants to focus on mobile gaming development in the coming year.
Zynga has also seen revived competition as other gaming companies have moved into its space. Electronic Arts, long the biggest dog in the video game world, has started offering social and mobile gaming options. Adoption of social gaming has been slow among hardcore gamers, who supply most of the industrys cash flow. This has anchored competing companies like EA and Valve, while Zynga has suffered. It has also allowed them to move judiciously into social gaming, while Zynga has failed to continue innovating.
Former Zynga employees quickly took to the web to lash Pincus and the company. An AMA by a former Zynga employee on Reddit offered a look at the companys inner workings. This included some interesting business data, such as the reflection that only 5 percent of Zynga players actually provide any revenue to the company. He also said the company has an astonishing burn-through rate, despite having large amounts of cash on hand.
The employee said workers were given no advance warning of the firings. Severance was reported to be good. Zynga bosses appear to be helping workers find new employers. Other employees who went online to complain werent so soft on Zynga. They noted the company continues to employ in-house chefs, and provides other perks to upper management.
Investors appear to be unable to do much about the company. Pincus is entrenched as CEO for the foreseeable future. The stock remains cratered. The companys future will rest on how well its mobile initiative works, and how well it can fend off competition.