Zynga Q1 revenue hits $321M

Social game company says revenue up 32 percent year-on-year to US$321 million and daily active users up 6 percent to 65 million in first-quarter 2012, but closes quarter with US$85.4 million loss.
Written by Eileen Yu, Senior Contributing Editor

Following its recent OMGPOP purchase, Zynga has beaten Wall Street's forecasts to report strong first-quarter results with revenue growing 32 percent to US$321 million, compared to the same quarter last year.

In its statement late-Thursday, the social game company said its online game revenue climbed 27 percent to US$292.8 million in the first quarter, ended Mar. 31, compared to the first quarter last year. Advertising revenue climbed 117 percent to US$28.2 million.

Its daily active users grew 6 percent year-on-year to 65 million, while monthly active users clocked in at 292 million with a 24 percent year-on-year growth rate. For the quarter, it posted a US$85.4 million loss.

Zynga CEO and Founder Mark Pincus said in the statement: "We're pleased with the progress that Zynga has made in the first quarter, growing our audience reach 25 percent year-over-year and nearly 20 percent quarter-over-quarter. Our team did a great job launching five new games across mobile and Web including new hits like Hidden Chronicles, Slingo and Scramble with Friends."

It also added popular drawing game, Draw Something, to its portfolio after acquiring OMGPOP last month for US$183 million. However, investors were concerned Zynga would increasingly look to large acquisitions to compete against young rivals and boost company growth, according to a Reuters report, which noted that its shares had dipped 38 percent since its high on Mar. 2, on doubts that the company could sustain its revenue growth.

Pincus, though, said the purchase was a "rare instance" that should not be regarded as a change in the company's strategy.

During a conference call with analysts, he said: "The way we build this business has been organic development. That's what you should expect to continue to drive the bulk of our growth."

In fact, Zynga said its OMGPOP acquisition boosted its 2012 revenue outlook to between US$1.4 billion and US$1.5 billion.

The company also pointed to strong mobile growth as one of the key growth drivers for its first-quarter results. "We have been able to dramatically increase the size of our mobile network," Pincus said in the conference call. "It's very early days on mobile. We are focused on getting the product experience right, building out network, distribution, and bringing hits to market in a repeatable way."

Zynga also has been investing efforts to diversify its business and reduce its reliance on social networking giant, Facebook--the platform on which the game developer grew its primary audience.

Last month, the company launched its own games platform, Zynga.com, which supports its own games as well as titles from third-party developments, and runs outside of Facebook. It also announced new partnerships with three game developers to create and promote their titles on Zynga.com.

The company raised US$1 billion for its initial public offering in December last year, pegging its value at US$7 billion.

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