Zynga, a once mighty San Francisco-based social media games provider, announced Monday they're laying off a considerable 18 percent of their employee base. Including most of the Omgopop team, the Dallas-based studio behind Draw Something.
In order to cut costs, Zynga has fired 520 employees and has reportedly shut down its offices in New York, Los Angeles and Dallas. The company expects this will save them $70 to $80 million per year.
According to tweets from both employees and the studio itself, it appears that Zynga has completely shut down the New York City offices of recently acquired Omgpop, the studio that designed the popular Pictionary-esque game Draw Something.
Zynga picked up Omgpop for $180 million last March shortly after Draw Something reached millions of players worldwide. In November, after the relatively speedy collapse of the game, Zynga reported a $95 million write off for Omgpop, meaning they significantly overpaid for the smaller company. In fact, one gaming consultant estimated that Zynga lost about $528,000 per day on Omgpop.
Although franchises like FarmVille have continually performed well, Zynga has been struggling lately, with most games performing lower than expected. The number of daily active Zynga users has decreased by 13 million - from 65 million users last year to just 52 million in the first quarter. After the company's restructuring announcement, Zynga shares fell 12 percent to $2.99, significantly lower than the $10 the stock was offered at a year and a half ago.
Zynga has been successful in their creation of social media-based games, but they're having trouble transitioning to mobile games for smartphones and tablets. Zynga is working on becoming less dependent on Facebook as a major source of revenue - partly because Facebook takes a 30 percent cut of in-game purchases, partly because cofounder Mark Pincus sees mobile platforms as "where the social games are going to be played." The company is also trying to increase revenue by launching poker and other real-money gambling games, although analysts are uncertain that this will be able to help the company, given strict online gambling regulations in the US.
Despite the cuts, TechCrunch reports that Zynga's ex-employees are optimistic about their futures apart from the company, with at least one employee saying most of their team had job opportunities before they left the office.
