4 ms·

Zynga Profits, Users Decline

45 points by Impossible 15y ago

danmaz74 15y ago
According to the article, Zynga made quarterly (or yearly?) profits of $1.3M out of revenues of $279M. If I'm not missing anything important, this means that the company had to sustain expenses of over 277 million dollars during the quarter. The company says that it "spent more than it traditionally had on hiring, acquisitions, and its international growth." But does anybody have an idea about where did all that money actually go? I would have expected a company like Zynga to be much more profitable.
- trun 15y ago
  More than likely it goes right back into user acquisition (ads) to drive more traffic to their games.
  - vtail 15y ago
    That statement is not supported by data - see my comment above.
- vtail 15y ago
  You can find everything that Zynga has reported here (particularly p. 59): http://www.sec.gov/Archives/edgar/data/1439404/000119312511253371/d198836ds1a.htm http://www.sec.gov/Archives/edgar/data/1439404/0001193125112... When they (Gamautra) say "year-on-year", they actually compare Q2 2011 to Q3 2010, which is not standard; in general, you would want to compare Q2 to Q2 to account for seasonality of demand etc. You can see that their sales and marketing expenses stayed roughly the same over the last 3 quarters, but there is a huge rise in R&D (almost 2x from Q4 10 to Q2 11), G&A and some small increase in cost of revenue (Facebook credits?).
  - vtail 15y ago
    All numbers are in mn USD Revenue Q3 2010 .. Q2 2011: $170.7 $195.8 $242.9 $279.1 Total cost and expenses: 136.4 124.3 206.7 266.1 - Cost of revenue: 49.9 51.6 67.6 78.1 - R&D: 39.8 51.5 71.8 95.7 - Sales and marketing: 28.9 38.3 40.2 38.1 - General and administrative: 17.8 (17.1) 27.1 54.2 Income (loss) from operations: 34.3 71.5 36.2 13.0 Net income: 27.2 43.0 16.8 1.4
    - kokey 15y ago
      Spending lots on R&D, and sales spend being flat while revenues increasing like that. Looking pretty healthy to me.
      - zerostar07 15y ago
        On the other hand they appear to be overspending in R&D, given that their primary products are derivative copycats of everything that's popular. (or are bandwidth and servers considered R&D?)
        Kadrith 15y ago
        Maybe they are trying to create something big that is not a copycat.
    - danmaz74 15y ago
      Thank you for the answer. So, the biggest costs are in R&D, so actually they should more an investment than expenses (but I wonder if sw maintenance is included there too). By the way, does "General and administrative" include the infrastructure costs?
- robjohnson 15y ago
  The only way they have to sustain $277 million in expenses is if those are fixed costs. I suspect that a lot of them are variable costs that are dependent upon a few scaleable independent variables. That being said, their profit margin does seem unnervingly low.
  - InclinedPlane 15y ago
    They're expanding like crazy, you'd expect them to be plowing what ever they're making back into hiring and new projects.
- robjohnson 15y ago
  The only way they have to sustain $277 million in expenses is if those are fixed costs. I suspect that a lot of them are variable costs that are dependent upon a few scaleable independent variables. That being said, their profit margin does seem unnervingly low.

45 points by Impossible 15y ago

According to the article, Zynga made quarterly (or yearly?) profits of $1.3M out of revenues of $279M. If I'm not missing anything important, this means that the company had to sustain expenses of over 277 million dollars during the quarter. The company says that it "spent more than it traditionally had on hiring, acquisitions, and its international growth." But does anybody have an idea about where did all that money actually go? I would have expected a company like Zynga to be much more profitable.

trun 15y ago
More than likely it goes right back into user acquisition (ads) to drive more traffic to their games.
- vtail 15y ago
  That statement is not supported by data - see my comment above.
vtail 15y ago
You can find everything that Zynga has reported here (particularly p. 59): http://www.sec.gov/Archives/edgar/data/1439404/000119312511253371/d198836ds1a.htm http://www.sec.gov/Archives/edgar/data/1439404/0001193125112... When they (Gamautra) say "year-on-year", they actually compare Q2 2011 to Q3 2010, which is not standard; in general, you would want to compare Q2 to Q2 to account for seasonality of demand etc. You can see that their sales and marketing expenses stayed roughly the same over the last 3 quarters, but there is a huge rise in R&D (almost 2x from Q4 10 to Q2 11), G&A and some small increase in cost of revenue (Facebook credits?).
- vtail 15y ago
  All numbers are in mn USD Revenue Q3 2010 .. Q2 2011: $170.7 $195.8 $242.9 $279.1 Total cost and expenses: 136.4 124.3 206.7 266.1 - Cost of revenue: 49.9 51.6 67.6 78.1 - R&D: 39.8 51.5 71.8 95.7 - Sales and marketing: 28.9 38.3 40.2 38.1 - General and administrative: 17.8 (17.1) 27.1 54.2 Income (loss) from operations: 34.3 71.5 36.2 13.0 Net income: 27.2 43.0 16.8 1.4
  - kokey 15y ago
    Spending lots on R&D, and sales spend being flat while revenues increasing like that. Looking pretty healthy to me.
    - zerostar07 15y ago
      On the other hand they appear to be overspending in R&D, given that their primary products are derivative copycats of everything that's popular. (or are bandwidth and servers considered R&D?)
      - Kadrith 15y ago
        Maybe they are trying to create something big that is not a copycat.
  - danmaz74 15y ago
    Thank you for the answer. So, the biggest costs are in R&D, so actually they should more an investment than expenses (but I wonder if sw maintenance is included there too). By the way, does "General and administrative" include the infrastructure costs?
robjohnson 15y ago
The only way they have to sustain $277 million in expenses is if those are fixed costs. I suspect that a lot of them are variable costs that are dependent upon a few scaleable independent variables. That being said, their profit margin does seem unnervingly low.
- InclinedPlane 15y ago
  They're expanding like crazy, you'd expect them to be plowing what ever they're making back into hiring and new projects.
robjohnson 15y ago
The only way they have to sustain $277 million in expenses is if those are fixed costs. I suspect that a lot of them are variable costs that are dependent upon a few scaleable independent variables. That being said, their profit margin does seem unnervingly low.