The total installed base for games on smartphones and tables is expected to go beyond 1 billion by the end of 2017, as one-third of the world’s population will be using these devices. And in the next five years, approximately 1.3 billion people will be gaming on these mobile devices, creating a strong market for the gaming industry. This is indeed good news for most of the gaming companies, and many of them will violently move to benefit from this huge opportunity to have their share of the market. So, Zynga (ZNGA, Financial) expects overall mobile gaming industry revenue to double from $12 billion to approximately $24 billion during that period.
Zynga is making the right moves
Zynga is doing well as it expects its mobile bookings to outshine its web bookings and to contribute more than 50% to the total booking base. Mobile booking already recorded 36% of the total booking in the reported quarter. Zynga is seeing a healthy momentum for its mobile audience as its monthly and daily active users grew about 45% and 23% respectively in the last reported quarter on the sequential basis. This momentum is further being supported through solid momentum in its biggest franchises such as Casino and Word with Friends.
Casino witnessed double-digit growth for the first time after seven consecutive quarters, and it is expected to grow at the healthy pace henceforth as it started gaining traction in the market with in-depth enhancement made in Zynga Poker, the world’s largest poker game, and in its slot products that have become center of attraction in recent times –Â "Hit It Rich"Â along with the recently launched “Riches of Olympus” should certainly enrich users experience in the coming months. In addition, it also posted the strongest mobile audience growth of 19% in the last quarter. Zynga is also focused on launching new mobile products in Zynga Poker in the current quarter that should certainly supplement its growth and increase its profitability in the years to come.
Alongside, its second largest franchises, Word with Friends has completed five years posted handy growth of 43% in bookings with monthly audience growing about 8%, which is impressive milestone for the company as it continue to fetch more audience to its fold despite decline in seasonal commercial. Also, Zynga is determined to launch New mobile Word With Friends franchises in the category by the end of current quarter that should increase its volume in the second half of this financial year and help the company to drive growth as the management was seen reiterating that 2014 will be a growth year for Zynga.
Key acquisitions and partnerships to drive its growth
In addition, the company successfully closed down the acquisition of NaturalMotion in February 2014. NaturalMotion enjoys impressive slate of proven hits, technology, tools and new games that should help Zynga together to drive its growth in the future and create value for shareholders. Zynga has also recently launched CSR Classic on Google Play, where its franchise’s product will now become available to more users that should push its growth quite a big in the upcoming quarters.
Zynga also remains on track to add many new exciting features to its Farmville 2 which is not available anywhere else in the market such as linking the user’s web experience to the mobile platform for its Farmville 2, social control that allows the players choice of connectivity with friends and families and its offline mode that enables the players to play the game offline without the internet connection. These added features should fetch better profit and operating margins for the company in the second-half of the year.
Last but not the least; the company is aggressively practicing content strategies it has in place that should help Zynga to create new games and develop the next generation game while engaging its mainstream global audience. Also Zynga enjoys diversified portfolio with more number of games than its competitors that creates winning edge for the video game maker.
Wrapping it up
The shareholders must avoid short term gain while they must focus on its long term growth opportunity that will undeniably bring better profit to them. Besides the company has cheap valuation and is the best buy at the current price. And as stated above the investor must look at the $24 billion opportunity that could in mobile gaming industry that will create enough value for them in next four years. Moreover, the analysts have estimated CAGR of 30.00%, higher than industry average CAGR of 20.86% for the next five years indicate certain growth for the company in the future.
