Zynga is shutting down 11 games soon as part of a cost-cutting measure, according to TechCrunch. The free-to-play games are either unpopular or are older titles that stopped monetizing well. Still, some of those, like PetVille (pictured above), had millions of fans once upon a time.

Zynga chief Mark Pincus announced 13 closures as part of a cost-reduction plan in November. At that time, Zynga only identified FishVille and Treasure Isle. But now the company has also notified players of shutdowns in other games. Besides PetVille, the list includes the mobile games Mafia Wars Shakedown, ForestVille, Mojitomo, and Word Scramble Challenge. On Facebook, the affected titles include Vampire Wars (shut down on Dec. 5), Montopia (shut on Dec. 21), Mafia Wars 2 (shutting Dec. 30), and Indiana Jones Adventure World, which is closed for new players and will close Jan. 14 for all.

At the PetVille page, players are greeted with this message:

“Thank you for supporting PetVille and for being a loyal player! We’re sorry to inform you that PetVille will be shutting down on Dec. 30, 2012. In place of PetVille, we encourage you to play other Zynga games like Castleville, Chefville, Farmville 2, Mafia Wars and Yoville. We appreciate your participation in PetVille as it helped make the game a fun place to meet and war with friends. As a loyal PetVille player, you are eligible for a one-time, complimentary bonus package in one of either Castleville, or Chefville, or Farmville 2, or Mafia Wars or Yoville. You can start the process by logging into PetVille and clicking on the “Redeem” button. Please note that this offer will be valid only until Dec 30, 2012.”

Zynga is offering the bonus package of free stuff in other games. PetVille had 1 million monthly active users, while Mafia Wars 2 had only 200,000 monthly active users, according to market analyst firm AppData. At the time that Zynga announced closures, the company also said it was cutting 5 percent of its work force. Zynga shares are trading at $2.39 a share, far below the initial public offering price a year ago of $10. A spokeswoman for Zynga confirmed the closings.

[Editor's note: I didn't link to actual TechCrunch story since my antivirus software flagged it for malware.]

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As part of the settlement, Vostu will make changes to four of its games and pay an undisclosed sum to Zynga. Vostu will also drop a counterclaim it had made against Zynga.”The parties are pleased to have settled their disputes and to now put these matters behind them,” the companies said in a joint statement.

A Vostu spokesperson declined to comment further on the details of the settlement or which of its games would be changed under the terms of the agreement.

Allegations of game copying are widespread in the social and casual game industries, with popular titles quickly spawning copycats that slightly tweak the concept or gameplay in some small way. Zynga’s own FarmVille is widely considered to be a much more successful copy of Slashkey’s  previously released social game Farm Town.

But Zynga’s lawsuit, originally filed in June, accused Vostu of taking more than simple inspiration from Zynga’s titles by copying games including FarmVille, Zynga Poker, PetVille, Cafe World, and CityVille right down to key gameplay features and even structural glitches found in the titles.

At the time, Vostu called the lawsuit “frivolous” and said its titles were “chock full of original content” that had been “individually created.”

The settlement comes at a crucial time for Zynga, which will finally offer its long-mulled IPO starting December 15, though at a price much lower than previous expectations.

Vostu, which has offices in New York, Sao Paolo and Buenos Aires is backed by $46 million raised last year by Accel Partners and Tiger Global Management, among others. The company claims over 25 percent of all internet-connected Brazilians play its games, including recently launched soccer sim GolMania.

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Zynga is currently valued at $5.27 billion on SharesPost, a secondary market, where Zynga employees can sell shares that they own in the private company. Redwood City, Calif.-based EA is worth $5.24 billion in public trading on the Nasdaq stock market. The SharesPost listings are thinly traded compared to EA’s stock, but it is perhaps the only real measure of the value of Zynga’s stock at any given moment. Many hope that Zynga will go public, but it hasn’t done so yet.

Serial entrepreneur Mark Pincus (pictured in center) started Zynga four years ago to make Facebook applications. Starting with Texas Hold Em Poker, Zynga managed to grab lots of users on Facebook and figured out how to make money from a small percentage of them. Adopting the “virtual goods” business model pioneered by South Korea’s Nexon for online games, Zynga charged real money to players for virtual currency, which was used to buy poker chips and other virtual goods in Zynga games. Now, thanks to virtual goods sales, Zynga is expected to grab roughly a third of the $1.6 billion market for virtual goods in the U.S. in 2010, according to Inside Network.

Zynga really took off in the middle of 2009 when it launched FarmVille, which is still the No. 1 game on Facebook with 57.4 million monthly active users, according to AppData. With such popular market-leading games, Zynga can cross-promote its titles and advertise them as well, allowing it to turn lots of its games into huge hits. In addition to FarmVille and Texas Hold Em Poker, FrontierVille, Mafia Wars, Cafe World, Treasure Isle and PetVille all have more than 10 million users. Overall, Zynga has 214.5 million users.

CrowdStar is a distant No. 2 at 54.2 million monthly active users, and EA is No. 3 at 44.7 million users. These numbers fluctuate dramatically and are all down since Facebook cracked down on game message spam in the spring. EA bought Playfish for $400 million in the fall of 2009, but it hasn’t been able to close the gap against Zynga, which has been No. 1 for a long time.

EA’s market value has dropped this year. The company lost its title as the largest independent maker of video games to Activision Blizzard, which has titles such as World of Warcraft to fuel its growth. But EA is no slouch when it comes to online games. Digital online businesses at EA are expected to generate $750 million in revenue in the current fiscal year, or around 20 percent of overall revenue. That means EA’s online game revenue is significantly bigger than Zynga’s online game revenue (which, of course, is all of Zynga’s revenue).

Yet the market values Zynga as equal to EA in market share? Does this mean the market discounts the rest of EA’s nearly $3 billion or so in traditional video game console and PC game revenues? If so, then Zynga is truly overvalued.

It’s also interesting to compare Zynga’s value to one of its arch rivals in the social game market, Japan’s DeNA. DeNA has come on strong in the Japanese social mobile game market. It recently outbid Zynga to buy iPhone game publisher Ngmoco for $400 million. DeNA’s market capitalization in Japan is around $3.6 billion. But the company says its revenue run rate is currently around $1 billion. So DeNA’s revenue is likely bigger than Zynga’s (Zynga does not disclose its number). So Zynga’s stock is overvalued by that comparison as well. Yet another comparision: Activision Blizzard is valued at more than $13 billion.

Does that mean Zynga isn’t worth the current price people are paying on the secondary market? Perhaps. But there’s no question Zynga is at the center of the storm and has one of the most enviable positions in the game market today. That’s a remarkable achievement, considering EA is more than 28 years old and Zynga is less than four. Zynga’s valuation is not based on current revenues alone, but on its momentum in a fast-growing market. EA doesn’t have that momentum. And DeNA has momentum in the fast-growing social mobile game market in Japan, but it is only getting starting in social games in the U.S.

[photo credit: Fortune]

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