Troubled online social gaming giant Zynga announced that it lays off 5 percent of its workforce of around 2,850 people. The cuts are mostly concern the USA, with 100 layoffs alone in the Austin, Texas office. Zynga also closed its offices in the United Kingdom and Japan.
In a letter to employees, Zynga CEO Mark Pincus described the cuts as “the most painful part of the cost-reduction plan.” Pincus also informed about cuts on data hosting and advertising. Services from contractors were also discontinued.
Pincus said the cuts “streamline our operations, focus our resources on our most strategic opportunities, and invest in our future.”
According to rumors, 13 unspecified game titles will also taken off from the market. Zynga kept its firm plans to enter into real money online poker in the UK as early as next year. Further details about Zynga plans with the British poker market are not known.
Not surprisingly, Zynga shares dived further after the bad news. The bottom was at $2.15, before gaining some strength to $2.20. Still light years away from the original IPO price of $10.
Zynga is due to file its Q3 financial report on Wednesday, October 25. The stock market is speculating heavily, but most of the analysts are rather pessimistic.
Bad news from Facebook, high hopes on social gambling
Facebook Q3 reports revealed that Zynga contributed 7 percent of its revenue in the last quarter. It is 3 percent down from the 10 percent in the second quarter of 2012 and far from the times when Zynga was the biggest contributor to Facebook revenues.
The Facebook quarterly report also showed that average user spending on Zynga games via social site is down 20 percent compared to Q2. However, user spending on games from other developers showed an increase of around 40 percent.
It seems that only real-money wagers could save Zynga from the further downfall. The current American gambling regulations do not support fully legalized online gambling.