For those interested in application software, pay close attention to the following: On Wednesday, August 2, Zynga Inc. (NASDAQ:$ZNGA) forecast current-quarter bookings below analysts’ estimates. The reason? Lower advertising sales and a weak demand for the company’s older games and products.
According to Zynga, the company now forecasts bookings of $205 million for Q3, which ends in September. This is significant as it is below the $207.9 million forecast by analysts surveyed by FactSet.
Confused? There are two things to clarify before moving forward. First, Zynga is the creator of online game FarmVille – one that took over the lives of teens and young adults around the globe. Second, bookings are a crucial metric used for indicating future revenue, and it includes the sales of virtual goods like currency and lives.
Let’s move on!
Zynga also announced that growth in the current quarter would be weighed down by the following: declines in web and older games and continued softness in advertising. “We’re redoubling our efforts on advertising to get to a place where we can start to come out of the softness and start to grow,” chief executive Frank Gibeau said.
Generally speaking, Zynga tends to experience a drop in player activity on its live services in Q3. The company wants to focus more on increasing player engagement in its games than spending money on developing and marketing new ones.
Zynga Inc.’s Second Quarter
The San Francisco, California-based company reported bookings of $209.2 million for Q2, which ended on June 30. According to FactSet, this is above analysts’ estimate of $206.2 million.
Additionally, average mobile daily active users hit 19 million, which is up 28% from 2016. Zynga also posted a net income of $5.1 million (1 cent per share), compared to a net loss of $4.5 million in 2016.
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