Tech stocks (in aggregate) have declined about 32% in the same time period. What this article fails to mention is that Zynga's stock price was at an all-time high when Zynga acquired OMGPOP. The stock has since floated around it's post-IPO price. OMGPOP is most likely unrelated to these fluctuations.
What is relevant is Facebook. Zynga's stock grew rapidly once Facebook's S-1 filings revealed that Facebook derives 12% of it's revenue from Zynga. This news cause a flurry of interest in Zynga, but the excitement has since waned, and both Facebook and Zynga have been scrutinized heavily since. This is to be expected, but I also expect that both company's stocks will perform well after May 18 and into next quarter.
Last, and possibly most important, is the misconception about how easy it is to launch a profitable mobile app to millions of users. Zynga now hosts about 80% of their games on their private cloud (the zCloud). This infrastructure separates Zynga from a group of 15 hackers who want to make the next Angry Birds. Zynga releases games in dozens of foreign languages; they have games on every social network and in dozens of countries, as well as in many emerging markets. The point is, it's easy to take pot-shots at Zynga's business model and claim it's a house of cards, but I think the reality is that Zynga is a well established company, with far vaster resources than many of their competitors. Mobile and social games are a clear-cut example of economies of scale.
> Last, and possibly most important, is the misconception about how easy it is to launch a profitable mobile app to millions of users. Zynga now hosts about 80% of their games on their private cloud (the zCloud). This infrastructure separates Zynga from a group of 15 hackers who want to make the next Angry Birds.
Sorry, I don't buy it. You don't need to host your own infrastructure to schlep virtual cows around. Zynga probably saves some money in self-hosting but that isn't going to make or break a title.
Yeah, zCloud only came into fruition late last year. Before that they were using AWS, and handling the same scale they do now. Private cloud is saving them money, but some other company could use AWS just as Zynga did before and handle millions of users absolutely fine.
Fair. But Zynga's games still suck. Perhaps their infrastructure is sound, but I run screaming every time I see their latest badly-programmed, ad-infested game take over my newsfeed.
A skilled independent dev actually puts time and effort into a beautiful UX. Zynga seems more concerned with churning out the next addictive rip-off, since they know their games have no staying power.
I don't think mobile and social games/apps are clear-cut examples of economies of scale. Accessibility to the cloud and scalable computing resources isn't exclusive to large companies but it may indeed be somewhat cheaper according to size. But even if it is cheaper, it doesn't automatically make mobile and social games more competitive according to the size of their creator's resources. Most economies of scale apply to segments where competitors are all selling equivalent products and can only compete on price or in markets that require extremely expensive infrastructures (billions). Most of the mobile and social games market is defined by small shops climbing to the top of the charts for a short lived but huge shot of revenue. Honestly the whole mobile and social app market strikes me as the furthest thing from an economy of scale IMHO.
Zynga is under-performing the Nasdaq by around 37% over the last 90 days. So no, tech stocks in aggregate have not declined 32% at all. The Nasdaq is around 2.5% below its 6 month high (off about 78 points).
A small list of major tech stocks not down substantially during ZNGA's public time frame: AAPL, INTC, HPQ, DELL, CSCO, MSFT, GOOG, ORCL, IBM, SAP, CRM, AMZN, RAX, BIDU, EBAY, EMC, and so on.
edit: just ran ZNGA against that list of stocks, and it's under performing all of them by a wide margin, and on average is below that group by roughly 35% over the last 90 days. It's blatantly specific to ZNGA, and given the date the plunge began, it is about the market questioning ZNGA's business as prompted by the OMGPOP acquisition. The only other big league disaster in tech on par with ZNGA right now is Groupon's stock.
What is relevant is Facebook. Zynga's stock grew rapidly once Facebook's S-1 filings revealed that Facebook derives 12% of it's revenue from Zynga. This news cause a flurry of interest in Zynga, but the excitement has since waned, and both Facebook and Zynga have been scrutinized heavily since. This is to be expected, but I also expect that both company's stocks will perform well after May 18 and into next quarter.
Last, and possibly most important, is the misconception about how easy it is to launch a profitable mobile app to millions of users. Zynga now hosts about 80% of their games on their private cloud (the zCloud). This infrastructure separates Zynga from a group of 15 hackers who want to make the next Angry Birds. Zynga releases games in dozens of foreign languages; they have games on every social network and in dozens of countries, as well as in many emerging markets. The point is, it's easy to take pot-shots at Zynga's business model and claim it's a house of cards, but I think the reality is that Zynga is a well established company, with far vaster resources than many of their competitors. Mobile and social games are a clear-cut example of economies of scale.