From their announcement of a possible IPO a couple of months ago to looking for a new suitor, Zynga has been trying to expand from being just the "Facebook game company." This week, the company decided to officially say that it will be transitioning into a self-sustained machine that will no longer be tied as strongly to Facebook as it was before. Instead, Zynga will start to sell its line of games straight to online or mobile platform users.
With an IPO that could make the company worth $20 billion, Zynga is looking to directly impact the 230+ million monthly users who play their games on Facebook. We have more on Zynga's "it's not you, it's me" attitude after the break.
However, a couple of problems currently plague the company before it can really convince investors that it will succeed with its new plan. First, Zynga's pre-existing strong tie to Facebook has already given a couple of issues that they will have to work through, like Facebook Credits. Since its implementation back in July, Zynga has to give up 30% of its earnings over to the social network giant. Because of this, Zynga has suffered a 90%+ drop in profits in the previous quarter alone. Tie that in with many of its users simply and blindly trusting the Facebook platform as the sole way to pay and play, and you have the possibility of a good portion of the user-base not migrating over to whatever Zynga will deliver next.
So what is next? Chief Executive Mark Pincus says their new strategy, Zynga Direct, will not only allow them to distribute and market games directly to the consumer, but will also create "a whole sandbox and create socialness around the games", as if they did not have the social aspect before.
However, their new platform to connect to users, Project Z, available on Zynga.com, will be their way to get players off of Facebook and onto their own turf. The benefit here is that the migration won't be clear-cut, at least not to start. You will be able to play the same games on Zynga's site, and you will also be able to start playing on Facebook and continue the same exact session on their site. Plus, Facebook Credits will still be in effect on Project Z.
What we need to find out is if this light transition will really push users off of Facebook, which is Zynga's end goal. Second quarter profits dropping to $1.3 million from $27.2 million year-over-year certainly doesn't bode well for them, and with more than 80% of their users playing games on Facebook, that figure won't change for the better until Zynga establishes itself as its own entity. It'll be very interesting to see how successful Project Z will become and what step two of the move will take them.