Zynga found its footing in mobile, and now it’s finding big growth

Zynga is once again one of the fastest-growing game developers. The studio saw its revenue jump to $306 million during the second quarter of its fiscal 2020. That’s up 41% year-over-year. The company also had bookings of $376 million, which is up 61% compared to the same quarter from its fiscal 2019. While the studio was once known for social-network games like FarmVille on Facebook, it has spent the last half decade attempting to shift to mobile. That transition is now over. Zynga now generates 95% of its revenue from mobile.

Both Zynga’s revenues and bookings were ahead of Wall Street estimates, and the stock is up around 1 percent in after-hours training. Investors are likely pleased to see that the developer has a lot of diversity in its strategy in the moment. Empires & Puzzles and Merge Dragons both hit record revenues during Q2. The long-running hit Words With Friends had its best Q2 for mobile revenue and bookings ever. And other familiar Zynga brands, like CSR2, Zynga Poker, and Hit It Rich Slots are all growing as well.

“We put together a pretty strong Q2,” Zynga chief executive Frank Gibeau told GamesBeat. “We delivered ahead of guidance and saw a very strong uptick in our bookings — 61% year-over-year. It was the best mobile-bookings quarter we’ve ever had. We’re starting to see really nice cash flow. We generated $99 million in the quarter, which is the best Zynga has seen since 2011. It’s up 140% year-over-year. We were able to raise our annual guidance based on the momentum we’ve had in live services.”

As for its earnings, Zynga recorded a net loss of $56 million. That was ahead of its guidance of a $70 million loss. And with the company is pointing to its strong cash flow and significant revenue growth as evidence for its future profitability. For Q3, it is expecting to see a net income of $250 million, but that includes $305 million from the recent sale of its San Francisco headquarters.

The secret to Zynga’s growth

Zynga’s revenue growth is significant and impressive. And if you’re looking for the reason why it’s happening, Gibeau will cite the company’s live-service strategy.

“The live services component of our business is really humming,” Gibeau told GamesBeat. “We’re seeing record performances from all the forever-franchises like Words With Friends and Zynga Poker. That’s the foundation of our success: investing in these ongoing franchises and growing them globally.”

Empires & Puzzles is benefiting from that more than any other game. Zynga tries to update it weekly with new content or in-game events, and that keeps players engaged and interacting with their friends. Empires & Puzzles accounted for $84 million of the company’s $310 million in online game bookings.

To compound that growth, Zynga is looking at multiple paths forward. It wants to create more of these “forever franchises.” These are games that don’t just come and go. Instead, they come and then they stick around for years. The studio already has multiple releases like that with Zynga Poker and Words With Friends. But it believes it needs more. That is why it recently launched FarmVille 3.

Additionally, the studio is working with more big intellectual properties. It just launched Game of Thrones Slots. And it also has games based on Star Wars and Harry Potter in the works.

Zynga is also on the lookout for new acquisitions. The company recently sold its headquarters in the hot S.F. real-estate market. That should give it some cash should it wish to move forward with bringing in any new studios or IP.

Zynga in Asia

But one of the biggest potential growth opportunities for Zynga is in the numerous and significant Asian markets. The company has focused its efforts for years on Europe and the Americas. When it did launch games in Asia, it didn’t put a lot of direct effort into growing in those regions. But it’s trying to change that now.

“We’ve officially entered Asia,” Gibeau said. “We’ve had games out in Asia before, but now we’ve gone to a self-publishing model in South Korea and Japan with Empires & Puzzles. And it’s doing very well. In fact, it’s doing well enough that we’re going to turn on some marketing to start to grow out our business in Asia.”

China, South Korea, and Japan are among the biggest markets in the world for mobile gaming. While Zynga’s growth is impressive, it is potentially leaving a lot of money on the table if it’s not finding ways to capitalize on those territories.

“For us to be able to open that market is very exciting,” said Gibeau.

The executive also noted that the company plans to be very global when it launches games based on popular brands like Star Wars and Harry Potter.