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Don Mattrick has been the chief executive of Zynga for the past year, and he didn’t hit earnings targets today for the second quarter. But he promised that good things lie ahead.
“We aspire to do better and improve execution across our business,” Mattrick said in a conference call with analysts. “We are in the midst of a multiyear transformation, and we are building Zynga and NaturalMotion against a growing market opportunity.”
Casino and farm game along with Words With Friends grew bookings in the second quarter. But the launch of Zynga Poker and the new Words With Friends were delayed after testing in certain geographies revealed that the games would benefit from more development focused on quality improvements. That was enough to hurt the quarterly performance, with bookings coming in at the low end of Zynga’s own expectations. With additional delays in other games, Zynga said it would push launches from 2014 to 2015.
“Our industry is growing at a fast clip in relation to iOS and Android,” Mattrick said. “Our industry continues to have a large addressable Web audience and market opportunity on Facebook. For Zynga and NaturalMotion to realize our true potential, we need to grow in mobile and continue to build great products on the web. Our intention is to build games that fit the way consumers are playing across various platforms. That means, we will offer games that are mobile-only, web-only and connected between web and mobile platforms based on consumer play patterns.”
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Zynga’s greatest priority remains expanding into mobile. For the first time, quarterly bookings in mobile exceeded those for Web games.
But clearly, more pain is ahead. Zynga’s flagship title, Zynga Poker, does not yet have an official mobile launch date.
“Inside Zynga, we recognize that our products have the potential to live for multiple years and with nurturing, refinement and investment, they can grow and scale,” Mattrick said. “Entertainment blends the emotion of the consumer with the science of execution — and that takes time to perfect. We are purposefully competing, and while we would like to be further along, we believe that we are making the right decisions to grow our business and unlock long-term shareholder value.”
Zynga is incubating its games for longer times, and it continues to get constant feedback from fans on the games under construction.
Meanwhile, Mattrick said that Zynga’s first major sports game, NFL Showdown, is in testing now in limited geographies. Clive Downie, the chief operating officer of Zynga, said the company is checking infrastructure for the game in various territories outside the U.S.
In response to questions, Mattrick said that “geolock” testing show a need for more polish as well as more new ideas to add to the products like Zynga Poker. He said no products were canceled. Several new NaturalMotion titles are expected to come in 2015.
As to the earnings disappointment, Mattrick said, “While I am disappointed to have to lower our outlook, I believe this is a prudent decision as we expect the remainder of 2014 to be an investment year leading up to an active launch cadence in 2015.”
Mattrick described Tiger Woods as one of the most iconic athletes in the world. But the value of Woods’ brand depends on how much it has been hurt by his fall from grace due to personal scandals and several years that featured sometimes lousy play — he hasn’t won a golf major championship in six seasons.
Downie said that marketing costs for Zynga are competitive with the rest of the market, and he acknowledged the company pays for ads for user acquisition. He said he sees TV advertising as becoming more important in planting interest in games among players.
“In July, we launched Zynga’s first national television ad campaign with a goal of reaching new consumers,” Downie said. “We are pleased with the return on our investment for this TV campaign and we expect to engage in more targeted, highly strategic marketing initiatives including future TV campaigns for top priority products.”
Zynga is also investing in games based on the Looney Toons cartoon franchise.
Since Zynga has begun to license more brands for its games, Mattrick said licensing costs will rise. But Mattrick believes there’s a lot of value in such a strategy.
Zynga has about 2,000 employees now.
“We want to be an at-scale leader,” Mattrick said. “We are at that awkward transition period. We are not hitting our full potential. We want to reach it.
“Do we still believe in original content? Hell, yes.”
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