Mark Pincus: 2013 will be a transitional year for Zynga

Company will focus on mobile, real money and mid-core games going forward

After beating Wall Street expectations in its Q4 earnings report Tuesday, Zynga shares popped higher, while CEO Mark Pincus discussed what's next for the company, during the company's call with investors. 

Shares rose 7% in after-hours to $2.74, after already rising 7% in regular trading.

In 2013, the company has three stategic objectives to support its Web business while growing on mobile, Pincus said.

One, the company will be developing more franchises, expanding existing ones and establishing new ones.  Second, the company will be focused on using these franchises to grow its network. Third, is a focus on profitability, so the company can continue to invest in these franchises. Investments in mobile will come from profits made from the company's Web game franchises.

"We're confident that these investments in 2013 will position Zynga for long-term growth," he said, adding that Zynga "had the right team in place to execute on this strategy."

In the first half of 2013, Zynga will be launching a "full suite of real money casino games in the U.K, through previously announced partnership with bwin.party.com," he added.

As for mid-core games, this category "respresents our biggest opportunity to reach new audiences and drive growth across web and mobile," Pincus said. The year 2013 is "heavily weighted to mid-core."

Zynga's network strategy needs to make mobile less fragmented, Pincus went on. On the Web, players can rely on Zynga's social center to play games together. On mobile, though, despite the company's growth, it is still hard for users to find people to play with. So Zynga is creating a mobile network to make this easier for users. This also guarantees developers the biggest audiences possible.

Pincus also talked about 2013 being a year of change. 

"2013 is a pivotal transition year for us at Zynga. We're realigning the company to capitalize on the $9 billion opportunity in social gaming. And we're excited to deliver, for our players, a whole new class of mobile, social games that make it easier, and better, to play together across mobile, and Web, platforms.

About the fourth quarter

Pincus said Farmville2 was the company's most successful launch in two years. 

In the fourth quarter, the company also realigned itself around its best growth opportunities in the fourth quarter, he said, by taking five actions:

• Realigning the company to a mobile first focus in the third quarter, having more game teams focused on mobile games, over Web games, by the end of the year
• Closing game some studios, including Boston and Japan
• Promoting four leaders to round out its "senior, long-term management team"
• Realigning its studios around the four leading game categories: investment express, social casino, casual and mid-core. The company also promoted "four proven product leaders to run them"
• Continuing to invest to in talent, with more than 550 people taking on greater roles and responsibilities

The company continues to learn from every game and feature it has released, Pincus said. FarmVille 2, for example, was made successful by frequent player testing and a new Flash 3D platform. Zynga will take the same approach toward promoting its new IP for mobile. 

Best positioned

Zynga, Pincus said, is in the best position to lead the future of social gaming since it has the largest total audience, 298 million, with 72 million on mobile alone. In December, Zynga's mobile game players in the United States alone spent more time on Zynga's games than the next five game companies combined. 

Right now, Zynga is the only company with leading franchises in three of the top four social game categories, he said.

Investor express: In 2012, Pincus said, FarmVille passed $1 billion in total player purchases. In the fourth quarter, the franchise delivered its sixth quarter of more than $100 million in gross bookings. FarmVille 2, and other investor express games, will become available on mobile.

Social casino: Zynga Poker is still leading after being around for six years. There were 37 million monthly active players in Q4, up 8% for the year. New games, including Elite Slots will become available.

Casual: Words With Friends was played for 7.5 billion minutes in December alone. More casual titles are on their way in 2013.   

The numbers

In its fourth quarter results, Zynga reported GAAP revenue of $311 million, flat year-over-year, with bookings of $261 million, down 15% year-to-year. Earnings per share came in down 6 cents, while adjusted earnings per share was a penny.

Analysts had been expecting to see a loss of 3 cents per share on revenue of $212 million.

The company experienced a net loss of $48 million for the quarter, down 89% from its net loss of $435 million a year ago.

Full year revenue for the company was $1.28 billion, up 12% year-over-year, and bookings of $1.15 billion, down 1% year-to-year.

Zynga's daily active users increased 3% year-to-year, from 54 million to 56 million. DAUs were down 6% from 60 million in the third quarter.

Monthly active users were up 24% year-to-year, from 240 million to 298 million. Once again, though, they were down 4% quarter-to-quarter, from 311 million. 

Zynga is projecting revenue in the range of $255 to $265 for the first quarter of 2013, with a net loss in the range of $32 million to $12 million. Bookings are projected to be between $200 and $210 million.

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