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Zynga beats expectations as its mobile business starts to pick up social’s slack

Above: Fishing in FarmVille 2: Country Escape.

Image Credit: Zynga

Zynga might figure out this whole mobile thing after all.

The social-gaming publisher reported the results for its first quarter, and it outperformed its guidance. It generated bookings of $161 million. That’s down 30 percent compared to the same period in 2013, but it’s actually up from the fourth quarter. It also bests Wall Street’s consensus of $148 million by a good margin. Mobile games like Zynga Poker and Words With Friends were a big part of the publisher’s good performance during Q1, and the company reported an uptick compared to Q4 is several key metrics like the number of players actively engaged in its apps as well as how much people are spending. Gamers spent $16 billion on mobile games in 2013 and another several billion on social.

“In Q1, our teams delivered a solid start to the year against our strategic frame of growing and sustaining our franchises, creating new hits, and driving efficiencies,” Zynga chief executive Don Mattrick said in a statement. “We have established a strong base for 2014 and believe we are pacing well for a year of growth.”

Zynga had 123 million monthly active users (MAUs) in the first quarter of 2014. That’s down massively year-over-year from 253 million in Q1 2013, but it’s actually up 10 percent from Q4 2013. More than half of those MAUs, 62 million, came from mobile.

The company saw an average daily bookings per user (ABPU) of 6.3 cents. That’s up from 4.9 cents in Q1 of 2013, but that’s likely because Zynga has lost so many players compared to a year ago. The ABPU was also up 5 percent month-over-month from 6 cents, which is an especially good sign as Zynga starts rebuilding its customer base.

The company will likely hope that these trends continue into the rest of 2014, especially in light of the launch of FarmVille 2: Country Escape for iOS and Android. That game, which hit mobile last week, is Zynga’s next big hope.

“We believe these indicators demonstrate our strategy is working and the focus, rigor, and discipline of our teams is showing up in our results,” said Mattrick. “Since the launch [of FarmVille 2 on mobile], we have seen more than 4 million installs of the game and received great feedback from our players. We are pleased with the team’s execution and encouraged by the early indicators we are seeing.”

It’s possible that Q1 2014 marks the beginning of the end of a long transition for Zynga. The company burst on the fledgling social-gaming scene in 2009 with the Facebook hit FarmVille. In 2011, it went public, but it has since lost millions of MAUs as players have slowly started abandoning gaming on social networks in favor of mobile devices like Android and iPad.

Both Zynga Poker and Words With Friends were up in Q1. For the first time in nearly two years, Zynga Poker made more money than the previous quarter. It also grew its audience on mobile by 19 percent compared to the end of 2013. Words With Friends, meanwhile, grew its MAUs by 8 percent quarter-over-quarter. It also saw a 43 percent increase in bookings year-over-year.

Since 2011, the company has talked about improving its offering on mobile, but that never fully panned out under former chief executive officer Mark Pincus.

That prompted Zynga to bring in former Microsoft Xbox boss Don Mattrick to oversee the business as the new CEO, which moved Pincus over to chief product officer. In one of his first major moves as the head of Zynga, Mattrick orchestrated the acquisition of mobile developer NaturalMotion for $527 million in January.

Now, in April, the company has finally released FarmVille — the game it is best known for — on mobile. It’s back where the players are, and now it’s just up to the quality of the mobile FarmVille experience.

As part of its earnings announcement, Zynga also revealed that Pincus is stepping down as CPO. He will remain on as chairman of the company’s board of directors.

For the next quarter, Zynga projects that it will generate bookings between $175 million and $195 million, and it predicts an earnings per share of between 0 cents and a penny.

As for the entirety of 2014, Zynga anticipates bookings between $770 million and $810 million. It is also guiding an EPS between a penny and 3 cents.

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More information:

Zynga Inc. is the world's largest social game developer with more than 232 million monthly active users playing their games which include CityVille, FarmVille, FrontierVille, Words With Friends, Mafia Wars, Zynga Poker, Cafe World, and... read more »

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