3 Ways Zynga Can Maintain High Growth Beyond COVID-19
Zynga (NASDAQ: ZNGA) had a super 2020 with the help of high levels of player engagement during the coronavirus pandemic as well as the completion of two acquisitions that add more titles and players for the company to monetize.
As the events and actions related to the pandemic eventually attracted more players to Zynga’s mobile games, it would be helpful to know if management has a way of sustaining this new business momentum beyond COVID-19.
Here are three ways that Zynga’s management is striving to maintain its current growth path.
1. Management targets Asia
An investment in Zynga is a gamble on the growing use of smartphones around the world. This has been fundamental to Zynga’s growth so far, and the rollout of 5G cellular speeds should only make mobile gaming more appealing to players in hot markets like Asia.
New technologies will not only improve the appearance and playability of games, but the faster connection speeds will particularly benefit the type of social games that Zynga produces, such as the multiplayer game mode in CSR race.
These trends serve as catalysts for Zynga’s international expansion. On the company’s third quarter conference call, CEO Frank Gibeau said, “As the industry continues to grow and evolve, we are investing in new markets, categories and technologies that will have the ability to increase Zynga’s total addressable market and further accelerate our long-term growth. ”
Zynga has already extended its Empires and puzzles game in Asia during 2019. Penetrating this rapidly growing market also appears to have been part of the rationale for Acquiring Peak for $ 1.85 billion last year. In 2020, Peak’s Cartoon explosion has become one of the highest grossing games in Japan.
International bookings represented 38% of Zynga’s business in the third quarter and grew 49% year-over-year. But Zynga is also seeing strong growth in its country, with bookings in the United States up 66% year-over-year in the last quarter.
2. More acquisition opportunities
Zynga has makes efficient use of acquisitions develop its activity over the years. Over the past four years, the company has spent a net spend of $ 1.7 billion on acquisitions. Investors should expect more deals.
It is important to add more games and development talents to build a large monthly active user base and achieve greater scale in the industry. It will be even more critical after AppleThe move to give iOS users more privacy over data collected by third-party apps for advertising purposes, while ad revenue is only a small part of Zynga’s business.
Last year, Apple announced a further change to Advertiser Identifier (IDFA) declarations that will allow users to block apps from tracking their data.
The rule changes are a minor headwind for Zynga as advertising only made up 11% of Zynga’s total bookings last quarter, but that percentage was already down before Apple’s announcement.
Nonetheless, Apple’s new policy could serve as a catalyst for growth over the next few years by presenting more acquisition opportunities. As a result of the changes to IDFA, smaller studios will likely be more interested in joining a larger company like Zynga, which has more sophisticated advertising capabilities to circumvent the impact of the new privacy rules.
3. Growth in in-game spending
Following the recent acquisitions of Peak and Rollic, Zynga ended the third quarter with 31 million daily active users and 83 million monthly active users – the highest levels the company has seen in more than six years.
Management now expects bookings for 2020 to be up 43% from the previous year, reaching $ 2.2 billion. Most of Zynga’s bookings come from in-game spending, so maintaining healthy player engagement levels is important to support growth.
Zynga is seeing great momentum in its live services, especially after the successful launch of Harry Potter: puzzles and spells in September. Management waits Harry potter to generate significant growth beyond 2021.
Along with strong performance from social slots titles and a full year of earnings from Peak and Rollic, management expects double-digit growth growth of turnover in 2021.
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