Zynga Has A Soft Quarter For Advertising, But Players Who Once Churned Are Returning

Both Words With Friends and Zynga Poker are more than 10 years old. But players who left long ago have been returning to the titles organically in recent weeks thanks to shelter in place. And new users are coming on board too.

The uptick, which only really started in earnest during the last two weeks of March, isn’t evidenced in Zynga’s Q1 daily active user count (down 7% YoY to 21 million), said Zynga CEO Frank Gibeau on the company’s Q1 earnings call Wednesday. But there was good momentum going into April, and Zynga expects it to be reflected in the Q2 results.

Similar to King, though, Zynga experienced an advertiser pullback in mid-March. Ad revenue and bookings were $59 million, down 9% year over year.

The negative impact on ad monetization was somewhat offset, however, by a surge in player engagement, said Bernard Kim, Zynga’s president of publishing.

“Players want to engage and it might take some companies a little time to catch up to where the trends are going,” Kim said. “But more people are gaming and talking about games today than even just a few months ago.”

AdExchanger caught up with Kim.

On supply vs. demand dynamics during COVID-19: “Sports, the Olympics, live events – they aren’t going away, but they are going to be different. Games could become a more important advertising platform in the future as players get even more engaged.”

On the gaming audience: “Our gamers often don’t even consider themselves to be gamers. A Words With Friends player might think of the game as a brainteaser or a social platform rather than a gaming experience.”

On lapsed users returning on their own to older, nostalgic games: “The Words With Friends franchise has been around for over a decade, but we’re seeing players who left jump back in organically. Maybe they got an invitation from a friend. I’ve been playing with all of my friends from high school in lieu of doing group Zoom calls. We chat with each other, it’s fun and it’s low stress – almost a social platform more than a game.

The same is true of Zynga Poker, which is a real-time card game where people sit at tables with one another. They’re shoulder to shoulder, virtually. Compared with before COVID-19, we’re seeing an uptick in people chatting at these tables and sending each other notes, like, ‘Hey, great play.’”

On retaining new and reactivated users when quarantine ends: “It’s really hard to forecast what will happen once baseball is back on TV or the local pub opens again. We’re forecasting that the elevated levels of engagement we’re seeing due to shelter in place will normalize in the second half of Q2.

But today, a game like Words With Friends is also a lot more retentive than it was even two years ago. There’s a lot more to do in the game, more players, more features and more of what we call ‘bold beats,’ or regular content updates. These additions in general have been fundamental to our turnaround and bringing Zynga back to growth as an organization.”

On game development … at home: “We don’t have any disruption to our supply chain. I live in Los Angeles and my neighbors in Hollywood can’t go to the set anymore. But we can deliver as many if not more virtual items, content and events in our titles as we did three months ago.”

On striking a balance between advertising and in-app purchases: “All of our titles are free to play, and there’s a tremendous amount of optionality. If someone doesn’t want to spend money, they can just engage or they can watch an ad to get virtual currency. It gives us multiple different revenue streams.”

On taking advantage of lower CPMs to acquire users: “Even though the advertising yield might be a little softer than expected, our supply is up because of higher engagement. The two level each other out. If things are a little softer on the advertising side, there’s a user acquisition opportunity to bring players in at higher volumes and at a lower cost, which can help push up our in-app purchase business.”

On why free-to-play games are well positioned during an economic downturn: “Most people have a smartphone in their pocket and over 96% of our revenue is driven on mobile. This summer I would have been watching ‘The Fast and the Furious in the theater’ – and now I’m going to experience it in our CSR Racing game.

People might have less disposable income, but they’ll still be able to play these games for free.”

This interview has been edited and condensed.

 

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