As Zynga prepares for its much-anticipated initial public offering (IPO), it appears it is not all smooth sailing in the social gaming space - despite the company's dominance.
Best known for its hit games on Facebook such as FarmVille and CityVille, Zynga has over 49.5 million daily active users.
TechCrunch, however, notes that despite the developer's position as the most popular developer on Facebook, Zynga's user numbers have been slowly declining from the 59 million active users it had in the second quarter this year.
To offset the loss of interest in its older gamers, Zynga keeps its developers churning out new releases in the hope of getting more users hooked.
The latest offering, CastleVille, was released this month and according to Zynga, it broke the five million daily active user mark in just six days, making it the developer's fastest-growing Facebook game to date.
The game is currently on 6.9 million daily active users, with 300 000 new users per day, according to Appdata.
Other games released by Zynga since the second quarter include Empires & Allies, Words With Friends for Facebook, Adventure World and Mafia Wars 2.
While Zynga hoped to capitalise on the success of Mafia Wars with Mafia Wars 2, since its October release, the game has lost 4.1 million monthly active users and is bleeding daily active users at a rate of 200 000 per week.
According to InsideSocialGames, the last month has seen a less than 10% increase across the Zynga user base.
“This suggests that, while CastleVille is growing at a rapid rate, there is not a large increase in the total number of Facebook users playing Zynga games as a result of the game's growth compared to recent periods before the game's launch.”
Social spam
The social gaming space has proven to be a hard nut to crack for other developers as well. Electronic Arts recently entered the social gaming space with the launch of The Sims Social on Facebook in August.
In its first week of launch, the game had 20.8 million monthly active users and 7.2 million daily active users. The game's charts are now, however, looking dismal, with daily active users down to 6.1 million - down two million users in the past week.
World Wide Worx MD Arthur Goldstuck says the problem with social gaming is that for the most part, it is not indistinguishable from spam.
“For the average Facebook user, when they receive these social gaming requests, they're most likely receiving them for the fifth, sixth or 10th time. Social gaming essentially requires users to spam their friends.”
In terms of Zynga's proposed $1 billion IPO, Goldstuck says he suspects the market will be very sceptical, especially after Groupon's market capitalisation failure.
“These companies tend to wait too long, so by the time it actually happens their value is already on the decline,” says Goldstuck.
“It's indicative of the faddish nature of social activity. In this environment, IPOs must happen fast because there's no question that any social enthusiasm for a product, game or network peaks and diminishes.”
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