Zynga laid off hundreds of employees this week. Here’s why:
Zynga is letting go of 18 percent of its total workforce and is closing its offices in New York, LA, and Dallas. This suggests the social gaming sector is contracting and less profitable than previously anticipated. Here are 4 reasons Zynga laid off workers this week and may struggle for the next few years.
4 Reasons Zynga Laid Off 18 Percent Of Its Workforce:
- The ‘relative’ decline of Facebook – Rupert Murdoch identified some challenges for Facebook in a tweet on the anniversary of the IPO and after losing money on Myspace, his opinion should be highly regarded. Facebook just isn’t as hot as it used to be.
- Zynga’s game selection was an extended digital fad – People just don’t play Farmville as much as they did a year ago.
- Zynga’s stock price decline – Zynga is now a penny stock and institutional investors can’t hold it.
- Other social media rising – The rise of Pinterest, Tumblr and other social media sites have cut in on Zynga’s engagement metrics.
- No new hits – Zynga currently doesn’t have a ‘must play’ game like “Words With Friends” and needs a new hit game every six months.
These four factors weigh heavily on Zynga’s decision to let go 520 workers from it’s ranks and there is no reason to believe a turnaround is on the cusp. If Facebook does continue to decline as a social media hub or users engage much less than a year ago, all downstream industries such as virtual gaming could be adversely affected.