Zynga's (ZNGA) Top Executives and Creative Directors Depart in a Mass Exodus

Shares of social games maker Zynga (ZNGA: Charts, News), currently trading at less than $3 per share, are slowly fading to new lows as news that it has now lost several of its top executives since August. The company, which rose to prominence with the popularity of Farmville and Mafia Wars games on Facebook (FB: Charts, News), has lost at least 15 of its key employees.

Chief Marketing and Revenue Officer Jeff Karp, Chief Infrastructure Officer Allan Leinwand, Chief Operating Officer John Schappert and Chief Creative Officer Mike Verdu all resigned over the past two months. Other departing key employees include Allan Patmore and Erik Bethke, the respective General Managers of Zynga's Cityville and Mafia Wars franchises. Several other vice presidents, across Zynga's Studios, Marketing and Mobile business segments, have also resigned. Daily Chart
This mass exodus has exacerbated the disappointment of shell-shocked investors, who have watched Zynga's shares plummet 70% since going public last December. The epic fall of social media bellwether Facebook, which depends on Zynga for over 10% of its total revenue, further contributed to Zynga's fall. Analysts have repeatedly cited Zynga, Facebook and Groupon (GRPN: Charts, News) as the bearish indicators of a social media bubble. Of these social media IPOs, only job search site LinkedIn (LNKD: Charts, News) is trading above its initial IPO price. Zynga attributed its troubles to an increased amount of games being played on smartphones and tablets, on Apple's (AAPL: Charts, News) iOS and Google's (GOOG: Charts, News) Android operating system. Zynga's mobile presence has been largely marginalized by natively mobile apps, such as Angry Birds, which are built from the ground up to be used on mobile devices. Many of Zynga's games run on resource-intensive Adobe (ADBE: Charts, News) Flash, which run poorly on mobile platforms. Zynga has traditionally depended on its games to be played on higher-powered personal computers, where its ads can also be properly monetized. Facebook CEO Mark Zuckerberg recently noted the difficulty of properly generating revenue from smartphones and tablets, due to the lack of display advertising in its mobile apps. In the second quarter, Zynga reported a loss of $22.8 million, a steep slide from the loss of $1.4 million it posted in the prior year quarter. Both earnings and revenue missed Wall Street's already lowered expectations. Looking forward, Zynga has made some questionable investments, the latest of which is Montopia, a Pokemon-style monster battle game that has been accused of copying both Nintendo's best-selling Pokemon franchise as well as a popular card game, Rage of Bahamut. Electronic Arts (EA: Charts, News) has also taken Zynga to court over its new Sims clone, The Ville, which attempts to mimic the style of EA's Sims Social, currently the most popular game on Facebook. Some analysts believe that Montopia and The Ville are symptomatic of Zynga's attempts to clone successful franchises rather than create new ones. Even its best-known franchise, Farmville, was a copy of a popular Chinese game known as Happy Farm. The lack of innovation at Zynga, combined with the alarming aforementioned "brain drain," should raise red flags for potential investors. Even Zynga's recent deal with Nokia to bring its games to the struggling handset maker has been labeled as desperate attempt by both companies to survive. Although shares of Zynga have stabilized over the past few weeks, the company's profitability is expected to slip further, as marketing expenses outpace revenue - a downward spiral that is starting to mirror Groupon's recent plunge. Other News About ZNGA Zynga Inc. Keeps Shedding Top Executives Can Zynga stop its brain drain? Is Nokia Corporation a Life Saver for Zynga Inc. or Sinking Ship? Will these two drowning companies be able to save each other? Other Stocks in the News Where to Follow the iPhone 5 Announcement Blow-By-Blow Can Tim Cook finally step out of Steve Jobs' shadow? Facebook Inc. to Launch Branded Corporate Career Sites Is Facebook about to tackle LinkedIn? Copyright 2012 by InvestorGuide.com, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. This is not a stock recommendation newsletter but rather a source for investment ideas, and we encourage you to fully research any company before considering investing. The opinions expressed herein are those of the author and do not necessarily represent the views of nor are they endorsed by WebFinance Inc. No employee of WebFinance has owned or currently owns any shares in the company described above. The above is neither an offer nor solicitation to buy or sell any securities. The trading of securities may not be suitable for all potential readers of this newsletter, and the purchase of stocks mentioned in this newsletter may result in the loss of some or all of any investment made. We recommend that you consult a stockbroker or financial advisor before buying or selling securities or making investment decisions. We are not responsible for claims made by advertisers and sponsors. Anyone who makes decisions based on what they read here does so at their own risk and cannot hold WebFinance Inc. (DBA InvestorGuide.com, Inc.) or its employees responsible.

Published on Sep 13, 2012
By Leo Sun
Leo Sun
Leo Sun is a freelance finance writer and position trader. He focuses on a combination of value and momentum investing, with a strong interest in the trading philosophies of Warren Buffett and Peter Lynch. Leo also has experience writing articles to help small business owners acquire loans and manage their finances. He regularly contributes to the Stock of the Day analysis.

Copyrighted 2020. Content published with author's permission.

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