News just in that the social gaming giant Zynga is to cut around 18% if its workforce with 500 + jobs being lost. This is a substantial cut for Zynga and it has also announced that it will close multiple locations as a part of an effort to lower annual expenses by something around the $80 million mark. These changes are expected to add up to around $26 million in the second quarter and $5 million in the third. This comes hand in hand with more bad news from Zynga who have also projected huge losses for Q2 stating that the number will be a net loss of up to $39 million. The finger is being pointed at the under performance of some of its top games.
Zynga shares traded a little higher early Monday but that stopped at 3pm for this restructuring announcement and once trading resumed share fell by over 10% and at close they were 11.8% down. CEO Mark Pincus posted a blog to Zynga employees and admitted that the company were struggling with how game users were changing their appetites for how and where games are delivered. This is bad news for companies that had put a little faith in social gaming in the hope that this would offer a new revenue stream. Is this another sign that maybe this is not the way to go right now? Converting free game players to playing for real money is a tricky business and Zynga, having cut plenty of ties with Facebook and going out on a limb with real money gaming in the UK, hasn't got that balance right yet. It does have a huge database and plenty of people are aware of the well designed and extremely high quality games that they offer, however a large amount of these players simply will not part with cash to play games.