Zynga - Strategic Analysis
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Zynga is a pioneer and innovator of social games and a leader in making gaming a core activity on the Internet. It believes its leadership position in social games is the result of its significant investment in its people, content, brand, technology and infrastructure. Zynga has changed the ecosystem of the video games industry. The traditional video game ecosystem involved six key activities: Content providers, software developers, software publishers, platform providers, retailers, and consumers. Zynga opened a new space within this ecosystem. The company positioned itself as a social online game developer. It develops its own content and software, and offers the games online for free through platforms such as Facebook, its own website, Google plus and mobile phones operating systems (iOS and Android).
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Zynga - Strategic Analysis
- 1. Team members Mateo Fadul Gonzalez Rafael Navarro Domenic Millen Aman Mehra Siriorn Vichaiwatanapanich Nabeeha Qazi
- 2. • Company Overview • Zynga’s Industry Position • Revenue Composition • Company Evolution • Financial Analysis • Strategy Analysis • Zynga’s Future Prospects Agenda
- 3. • Created in January 2007 and based in San Francisco, California • The world’s leading provider of social game services • Social Networks dependent (i.e. Facebook), also Mobile and Zynga.com • Social games & internet gaming pioneer • Leadership position: investment in their people, content, brand, technology and infrastructure • Connect the world through games Overview
- 4. Profit Pool Profit pool largely dominated by Retailers and Software developers
- 5. Zynga’s Industry Position • Develops its own content and software • Offer games through online & mobile platforms • Use of existing infrastructure (PC & social websites) • Huge savings (+ Profit)
- 6. Revenue Stream Online Gaming (89%) Advertising (11%) • Consumable Virtual Goods (energy) • Durable Virtual Goods (tractors) 30% 70% Geographical Distribution
- 7. Revenue Stream • Zynga top three games accounts for 55% of Revenues, of the remaining 45%, no single accounts for more than 10% 55%
- 8. Timeline Company started First sale of virtual goods Aquisition of YoVille First 3rd party in- game advertising IPO Launched Draw Something Real- money gambling Expand API to increase game penetration Texas Holdem Expanded virtual goods concept to other games Facebook notific- ations Large rollout of mobile games Large scale in-game advertising Slashed workforce Application program- ming interface (API) Expand real-money gambling business Launched Farmville Agreement with Facebook signed Facebook credits Agreement with Facebook revised Zynga with Friends 2007 2008 2009 2010 2011 2012 2013 2014 2015
- 9. Financial Performance - 200,000.00 400,000.00 600,000.00 800,000.00 1,000,000.00 1,200,000.00 1,400,000.00 2009 2010 2011 2012 Online game Advertising Total Revenue 570% 85% 7% -36% 226% 84% Revenue Growth (in thousands $)
- 10. Financial Ratios -43% 5% -35% -16% -50% -40% -30% -20% -10% 0% 10% 2009 2010 2011 2012 Profit margin
- 11. Financial Ratios 1.08 0.57 0.30 0.29 - 0.20 0.40 0.60 0.80 1.00 1.20 2009 2010 2011 2012 Debt Ratio
- 12. Financial Ratios 2009 2010 2011 2012 ROA -20.41% 2.51% -16.07% -8.13% ROE 245.94% 5.78% -23.11% -11.47% -50.00% 0.00% 50.00% 100.00% 150.00% 200.00% 250.00% 300.00% ROA & ROE
- 13. Financial Evaluation ZNGA DNACF EA Market Cap: 2.76B 3.43B 5.61B Employees: 3,058 1,810 9,200 Revenue (ttm): 1.28B 2.45B 3.96B Gross Margin (ttm): 73% 74% 64% EBITDA (ttm): 54.00M 1.05B 393.00M Operating Margin (ttm): -7% 40% 4% Net Income (ttm): -209.45M 561.80M 175.00M Net Profit Margin : -16% 23% 4% EPS (ttm): -0.28 4.02 0.55 P/E (ttm): N/A 6.33 34.17 PEG (5 yr expected): -3.35 N/A 1.43 P/S (ttm): 2.16 1.39 1.41 Compare to 2 main competitors: ZNGA = Zynga, Inc. DNACF = DeNA Co., Ltd. EA = Electronic Arts Inc.
- 14. Industry Future Prospects Mobile games becoming popular Growing competition from US & Intl. firms Facebook opening up to more game developers Demand for sophisticated games driving up costs
- 15. Zynga’s Future Prospects Established customers (players) base Reduced dependence on Facebook Consistent innovator Core mgt. team is not the same Reduced R&D expenses Business integration issues
- 16. Zynga’s Future Prospects Industry Attractiveness High Medium Low MediumLowHigh BusinessPosition
- 18. DeNa Co., Ltd. • Established in Tokyo in 1999 • A global internet company focused on social games, e-commerce and other Web services for mobile devices and PCs. Sale by segment
- 19. DeNa Co., Ltd.
Editor's Notes
- At an industry level:Mobile gaming gaining popularityGrowing competition from US firms as well as international players like Tencent in ChinaSocial platforms like Facebook allowing more game developersDemand for sophisticated games driving up the costs
- At company level:Established customers (players) baseReduced dependence on FacebookCore management team is no moreLitigation issues with EAIntegration issues that come with acquisitions
- DeNA Co., Ltd. (pronounced “D-N-A”) is a global Internet company (TSE: 2432) focused on social games platform, social games, e-commerce and other Web services for mobile devices and PCs. Established in Tokyo in 1999 as a small startup with the launch of an online auction service, DeNA has continuously expanded its portfolio of growth engines.