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Zynga tries to win over wary investors
Question of the Day
SAN FRANCISCO — Web game maker Zynga is trying to turn its digital playground into an even more entertaining place, working to prove wrong investors who doubt that it can build a long-lasting business.
Zynga unveiled features Tuesday that include a network designed to provide the more than 290 million players of its games with the same tools, whether they are competing on Facebook’s online social network, a mobile device or the company’s own website.
Zynga Inc. also previewed several new games, including a food-themed title called “ChefVille” and a virtual house-building experience called “The Ville.” Those are the latest riffs on a franchise that began with “FarmVille” three years ago.
The addictive allure of Zynga’s free games helped establish the company as one of the past decade’s brightest Internet stars. Just five years after Mr. Pincus founded the company and named it after his dog, Zynga has more than 290 million users worldwide and is expected to generate $1.4 billion in revenue this year.
But investors are worried Zynga is running out of new ideas as it girds for fiercer competition. The strategy laid out Tuesday evidently didn’t provide much reassurance.
After edging up earlier in the session on hopes for bigger news, Zynga shares fell 30 cents, or nearly 5 percent, to close Tuesday at $5.77. That’s well below the company’s initial public offering price of $10 six months ago. The IPO raised $1 billion, enabling Zynga to buy its San Francisco headquarters for $234 million to accommodate the growth envisioned by Mr. Pincus.
The concerns dogging Zynga include its ability to keep churning out popular games, increasing competition from more experienced entertainment companies such as Walt Disney Co. and Electronic Arts. Inc., and a shift toward playing games on smartphones that is expected to fragment that industry.
Toward that end, in March Zynga began hosting some of its games on its own website. The Zynga With Friends network is meant to ensure some of the features on Zynga.com also are available to players when they are on Facebook or mobile devices.
The network is also being opened to other game makers in an attempt to encourage players to come to Zynga.com more frequently. That could create more opportunities for Zynga to sell advertising to supplement the sales of virtual goods that make its games more engaging. Those items bring in most of Zynga’s revenue. Just 3.5 million, or about 1 percent, of Zynga’s users buy virtual goods, underscoring the challenges facing the company as it tries to convert more of its audience into paying customers.
Zynga probably wouldn’t have thrived if not for Facebook’s social network, where posts about players’ progress on various games have become a common sight — much to the consternation of many Facebook fans.
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