By Eric Eldon
Zynga’s (ZNGA) first earnings release today makes the social game developer’s business look notably stronger than it had when the company went public in December. Its traffic, paying user base, and projected bookings are all headed into positive territory, whereas these numbers had been flat or falling towards the end of last year.
Bookings, the short-term measure of when the company sells a virtual good or other item, were already up last quarter. But Zynga says in the release that more growth is on the way — a year-over-year increase of between 16% and 25% in 2012, to between $1.35 billion and $1.45 billion. “We expect that growth will be weighted towards the back-half of the year with slower sequential growth in the first half of the year,” according to the release, although the reasoning isn’t explained.
That’s a bit surprising considering that the company has invested heavily in launching and marketing a string of new titles over the last four months or so — these games should be driving bookings up now, not in half a year. Maybe Zynga knows something about what’s happening on Facebook (FB), Apple’s (AAPL) iTunes App Store and its other platforms, that it’s not talking about? Or maybe it is planning something else that’ll make a big positive difference, like the launch of its long-rumored standalone gaming portal?
[Update: Zynga executives said on the call today that, generally, they see older games make more money over times as serious users get more committed -- that is, spending more. Also, like I guessed, they hinted that the "Project Z" platform is still in the works, and will be launching at some point.]
Even if the first and second quarters of this year aren’t as exciting, investors should still look for bookings increases when the numbers come out for those quarters. Zynga says that its paying users grew from 2.6 million to 2.9 million over the fourth quarter, which is part of a long-term trend in the industry — everyone is gradually figuring out how to lure more users to pay, even though only a fraction of them currently do. For Zynga, the growth in paying users was no doubt aided by its launches and traffic growth during the quarter — as I noted earlier today, the company has managed to increase its daily active user count significantly in recent months. As of the end of 2011 it was up from 48 million a year ago to 54 million. As of today, it’s past 58 million, according to AppData. Daily active usage tends to correlate with paying users, because the more often you’re playing a game the more often you’re going to want to pay.