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Joseph Poma
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- Bachelors Degree in Mathematics Education - Masters Degree in Mathematics - Series 6, 63, 65 Completed Successfully (All three completed within 6 months, No longer registered) - High School Teacher - Former Personal Banker for Chase Bank - Amateur Photographer -Options Enthusiast
  • Search And Site Analytics: A Tech Company Ready To Move 0 comments
    Feb 5, 2013 2:59 PM | about stocks: FB, ZNGA

    At the close of trading today Zynga (NASDAQ:ZNGA) will announce the results of its fourth Quarter. Current estimates stand for the company to report a loss of 3 cents per share on revenues of $212.11 million. Recently analysts have given conflicting statements with BofA/Merrill giving the tech company a two notch upgrade and Credit Suisse downgrading the stock to underperform. To help determine which of these analysts is making the right move, I've considered the site's web analytics and the results were surprising.

    Over the recent 3 months, Zynga's website has seen significant improvements in the time users spend on the site, up 28% to 4:58 minutes, and pageviews/user, up 5.6% to 3.01 pages. These are significant changes given that one year ago the site managed to only capture it's audiences attention for approximately 2 minutes and the number of pages viewed per user stood at approximately 2.4 pages. The 28% increase in time on site could be a result of successfully delivering video advertisements to users.

    It is important to note also that Facebook (NASDAQ:FB) has also seen users spend 8% more time on its site (28:09 minutes) over the past three months. While this increase in time may be a direct result of Facebook's own initiatives, gains may could also be attributed possibly to users spending more time on "high-engagement" titles. During its Q3 conference call, Mark Pincus, Zynga's Chairman and CEO, announced that Zynga would pursue a mobile gaming lineup that would include more "high-engagement" titles. Mobile bookings accounted for 20% of its bookings at the time and with the increasing migration to mobile devices that number is likely to increase this quarter.

    A wild card factor in the earnings call today will be the development of the company's own advertising platform. The company, though deriving a significant portion of revenues from the sale of virtual goods, has sought initiatives to grow advertising revenues to bolster its top and bottom lines. Advertising generated $41 million in revenues for the company in it's second quarter, a 170% increase year over year. It is likely that analysts will keep a hawk's eye out for the status of this project as it is a crucial step in the company's efforts to generate greater advertising revenue.

    One last statistic cites that the Zynga website has experienced fewer users "bouncing", viewing one page and then leaving, from the site. During the last three months the site's bounce % decreased 9% to 40.4%, this being approximately 20% lower year over year from when the site's bounce percentage was in the low 50% range.

    If search and website analytics can offer any insight for the upcoming earnings report, it may be that the picture is not as bleak as Credit Suisse's downgrade claims it to be.

    Disclosure: I am long ZNGA, FB. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

    Additional disclosure: I am long both Zynga and Facebook using call options with January 2014 and 2015 expiry.

    Themes: long-ideas Stocks: FB, ZNGA
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