Social gaming company Zynga has endured a rough couple of months. After its acquisition of the NYC-based company OMGPOP–producers of the fad-friendly game Draw Something–Zynga has experienced a downward spiral. Earlier this month, it reported an estimated net loss of $90 million to $105 million for its third quarter, sending its already-low stock price into a tailspin. Now, The Next Web reports that the company has laid off 100 staffers from its Austin headquarters, and may even be shuttering its Boston office altogether.
Writes The Next Web:
We’ve heard from a former employee at Zynga who tells us that the layoffs did happen in the company’s Austin office. Additionally, TheVille will be discontinued. More than 100 employees were let go and ordered to turn in their computers, phones, and badges — many of whom have been working at the company for more than two years.
Employees affected by this change were given two hours to vacate the office. It appears that those affected were from two different game divisions: theville and bingo.
that it has received first-hand confirmation that Zynga is shuttering the Austin office altogether. [Update: Gamasutra says they may have incorrectly reported the full closure of the Austin office. “We can confirm that over 100 people are out of work in Austin, but we can not confirm whether the studio is remaining open in some capacity, nor if Zynga’s QA office in Austin has been affected.”]
Gamasutra also reports it has heard unconfirmed rumors that Zynga also intends to shut down its Boston and Chicago offices. A Twitter user reported to Gamasutra that one of his friends was laid off from the Boston office, and posted the following to his Facebook: “Zynga Boston is no more. Shocking and not awesome.”
A source confirmed to The Verge that there have been layoffs in Austin, Boston and Chicago today.
[Update 4:05 PM: Techcrunch reports that it has confirmed Zynga has shuttered its Boston office and laid off 2/3rds of its Austin employees. “One former employee said the Boston office was almost ready to release a product that Zynga management was enthusiastic about. But the need to trim the company through severe layoffs meant that product couldn’t be seen through to launch.”]
Zynga also has a New York office and Betabeat is investigating whether or not employees there will also face layoffs. OMGPOP cofounder Dan Porter was announced as the VP and general manager of Zynga New York back in March. ”Maybe we can turn New York City into a hotbed of gaming activity as well,” Mr. Porter told us then.
As TechCrunch points out, TheVille–which is kind of like The Sims but lame?–has been hemorrhaging users, losing 33 percent of them in just one month. In fact, in its third quarter results, Zynga blamed downgraded revenue forecasts on “reduced expectations” for games like The Ville. The company is also facing a lawsuit from EA games for violating copyright laws.
UPDATE: As news of the layoffs continues to leak, anticipation for Zynga’s third quarter earnings call scheduled for tomorrow afternoon is building. Like, oh, pretty much everyone, Sam Barberie, who has been crunching Zynga’s daily active user numbers for Super Data Research, anticipates “bad news, especially with regard to their simulations games.” Earlier this month, shortly after Zynga released its downgraded forecasts, Fortune‘s Dan Primack tweeted:
Zynga needs legalized online poker yesterday.
— danprimack (@danprimack) October 4, 2012
Mr. Barberie, who recently released a report on the company’s future concurred, predicting a “definite move into the social casino games.”
“Basically, that’s sort of where the industry is heading as one of the remaining places to make money,” he said. “They got rid of a bunch of people in the sim games and bingo to refocus on the real money games.”
Poker games were mentioned during Zynga’s last earnings call, with an expected release date next year. “[Zynga is] gaining users, but not maintaining them. If they’re not maintaining their users, they’re not going to turn those players in payers,” via in-app purchases or advertising revenue, he said. “The thing about social casino is that it’s gambling, which has a hook regardless of the medium that it’s in.”
A former Zynga employee told TechCrunch, “[CEO Mark] Pincus wants to be able to say that the company’s profitable but that’s harder as revenue goes down. They’re doing short-term things that don’t make any sense at all if you’re thinking about this being a stable company with $1.6 billion in cash in the bank.”
A Zynga representative emailed Betabeat a copy of the internal memo from CEO Marc Pincus:
Earlier today we initiated a number of changes to streamline our operations, focus our resources on our most strategic opportunities, and invest in our future. We waited to share this news with all of you until we had first spoken with the groups impacted.
As part of these changes, we’ve had to make some tough decisions around products, teams and people. I want to fill you in on what’s happened and address any concerns you may have.
Here are the most important details.
We are sunsetting 13 older games and we’re also significantly reducing our investment in The Ville.
We are closing the Zynga Boston studio and proposing closures of the Zynga Japan and UK studios. Additionally, we are reducing staffing levels in our Austin studio. All of these represent terrific entrepreneurial teams, which make this decision so difficult.
In addition to these studios, we are also making a small number of partner team reductions.
In all, we will unfortunately be parting ways with approximately 5% of our full time workforce. We don’t take these decisions lightly as we recognize the impact to our colleagues and friends who have been on this journey with us. We appreciate their amazing contributions and will miss them.
This is the most painful part of an overall cost reduction plan that also includes significant cuts in spending on data hosting, advertising and outside services, primarily contractors.
These reductions, along with our ongoing efforts to implement more stringent budget and resource allocation around new games and partner projects, will improve our profitability and allow us to reinvest in great games and our Zynga network on web and mobile.
Zynga made social gaming and play a worldwide phenomenon, and we remain the industry leader. Our success has come from our dedication to a simple and powerful proposition – that play is not just something people do to pass time, it’s a core need for every person and culture.
We will all be discussing these difficult changes more with our teams and as a company. Tomorrow, Dave and I will be hosting a post-earnings webcast (details to follow) and next week we will be discussing our broader vision and strategy during our quarterly all-hands meeting. I’m confident this puts us on the right path to deliver on the promise of social gaming and make Zynga into an internet treasure.
If you have any immediate questions, I hope you will talk directly with your manager, Colleen, or me.
I look forward to talking with you tomorrow.
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