Is Zynga’s New Homepage a Facelift Or a Game Changer?

By Roger Baettig | March 22 2013 11:50 AM

Reuters

Struggling social game developer Zynga Inc. is expected to report continued heavy losses in its fiscal fourth quarter.

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Shares of Zynga (NASDAQ:ZNGA) increased as much as 2.4 percent in morning trading on Friday. Besides getting slapped with an Underperform rating from analysts at CLSA, the big news is that the social game developer will be rolling out a new version of its homepage next week.

While ostensibly a superficial change, a new homepage represents more than just a facelift for a company that has lost 75 percent of its market value over the past 52 weeks. As Zynga articulates in a blog post about the change, the company’s core business is creating games, and then serving the communities that develop around those games.

Previously, the platform for the community side of this equation was Facebook (NASDAQ:FB). Zynga’s early growth was a function of its ability to tap the social network, with the company deriving nearly 90 percent of revenues from the platform. At the same time, Facebook received nearly 15 percent of its income as fees from Zynga.

But the golden days of the Zynga-Facebook relationship are over. Facebook remains a social powerhouse and is evolving into more sophisticated revenue streams (targeted advertising), while Zynga faces a growing heap of problems. Chief among them is a broad decline in the number of people engaged with its games.

“We believe many players of social games are experiencing fatigue, as many social games have been too similar at their core and games are shifting players from game to game, not necessarily adding new players,” wrote analysts at Pacific Crest, according to Forbes. The analysts conducted a survey that found fewer players were ‘playing more’ games than before, suggesting an overall decline in new interest.

As Zynga and Facebook settle into less-involved relationship, Zynga will be forced to establish itself as a more robust social platform. The new homepage — and an independent account-creation system that removes the necessity to have a Facebook account to play Zynga games — is a strong step in that direction. Whether or not the new homepage can attract new players remains to be seen.