Zynga On Fire: FarmVille studio burning as financial losses mount

Zynga's disastrous financial 2012 continues as projected losses are raised about $100 million. Will the MAfia Wars company sell?

Zynga’s 2012 riches to rags story continues apace as CEO Mark Pincus delivers a message to the social game studio’s staff and shareholders warning of even more troubled times coming along with its impending third quarter earnings report.

“Today we announced preliminary Q3 financial results and revised out forecast for the rest of the year,” reads the statement on Zynga’s blog, “I want to add more color to the announcement and our future opportunity. The challenges faced in our web business in Q2 continued in Q3 and while many of our games achieved plan, we still experienced overall weakness in the invest and express category.”

“So why are we lowering 2012 guidance? There are a few factors contributing to a weaker than expected outlook for Q4. The reduced performance of some of our live web games is continuing to impact results and we have several new games which are at risk of launching later than expected… Let’s not lose sight of the bigger picture. The world is playing games, and is increasingly choosing social games.”

Translation: Don’t worry about it! It only looks like our company is a burning boat slowly sinking into a frigid sea of consumer disinterest and mismanagement.

Zynga reported a net loss of $23 million at the end of the second quarter in July. Losses for the full fiscal year or now projected to be greater than $105 million. Its stock is currently trading around $2.50 per share, down 84 percent from highs following its initial public offering. Its market cap has crumpled from $20 billion before the IPO to around $1.7 billion today. Its executives have abandoned the company en masse. Its audience is dwindling. Its competitors are suing. Zynga is the portrait of a company on fire.

So what now? Is there a way to turn things around for Zynga? Maybe not as an independent company, but its brands are still valuable. Even if Zynga’s audience is turning away from FarmVille and its other time wasters, the company still commands an audience of 300 million. Since its value has diminished so greatly, Zynga is now a prime target for acquisition. Video game industry research firm EEDAR’s Jesse Divinch told GamesIndustry International that Zynga may become a subsidiary of the social network that gave it life. “At a $1.7 billion market cap, a Zynga acquisition seems favorable for anyone looking to pick up 300 million pair of eyeballs every month. I’d argue that Facebook could become a potential suitor for Zynga.”