The unopposed king of Facebook games, and one of the largest, fastest growing gaming companies in the world, has finally seen a massive slow down in profit. Gamasutra has it that Zynga’s fiscal quarter ending June 30th showed a sharp, 95% decline in year-on-year profits from $27.2 million to $1.3 million.
All social games from companies big and small have seemed to enjoy titanic growth in a very, very short period of time. While it was smart to become part of the bubble before it bursts, Zynga’s profit downturn could signify the end of the incredible swell for every contender.
Revenue actually did increase for the company by 15% over last quarter as they earned roughly $279.1 million, but its costs to operate seemed to be much higher this time around. The company saw a 4 percent drop in both ad sales and daily active users (moving from 62 million to 59 million).
Zynga is offering an explanation for their decline in profits that may do less damage to the world of hope for social game creators. And, in fact, the explanation lines up with the previously mentioned revenue growth statistic.
According to the company, they feel they saw such a big dip in profit because of two major reasons: They did not release a major game until the end of their first quarter of this year, and they spent more money than ever before in order to hire new employees and spread further internationally.
However, the decrease in ad sales and daily users may not be such a good sign for the company’s future. If that trend continues in its currently downward direction, the social games bubble may burst before too long. Zynga, along with the large amount of startups brought about because of this new genre, may have to slow down and cut cost in order to stay alive.