Is Zynga Fighting an Uphill Battle?

While Facebook has no plans to immediately change its revenue model, there is logic in providing incentives for smaller developers. The social gaming space as a whole could use a jolt of electricity and creative new games could go a long way in enticing users back.

CHEAT SHEET Analysis: Do the Trends Still Support Zynga?

One of the core components of our CHEAT SHEET investing framework explains that companies riding macro trends tend to outperform those that don’t. Think of the investing proverb, “A rising tide raises all boats.”

When Zynga launched its IPO, the hype surrounding social gaming was so thick investors could float in it. The company’s stock price took off in February and peaked in early March before beginning its long, 74-percent slide. User interest in Zynga’s games has evaporated and, with it, the value of the company.

Successful gaming companies like Activision Blizzard (NASDAQ:ATVI) recognize that success comes in two forms: blockbusters, and cash cows. Zynga hasn’t been able to produce either one since the good-old days, and with the exodus of talent seen in the last few months, it’s seems increasingly unlikely to pull a smashing success out of its hat.

The renegotiated deal with Facebook may give the company some more freedom to pursue mobile-based games, but success feels dubious. The power behind Zynga’s gaming philosophy seems to fizzle without Facebook, and the trends indicate that developers are seeking more lucrative opportunities developing for Apple’s (NASDAQ:AAPL) iOS and Google’s (NASDAQ:GOOG) Android. As much as Facebook wants to be the platform of choice for game developers, Apple and Google may claim that title.

Data from iSuppli indicates that the downward decline in Facebook gaming began in the fourth quarter of 2011, and could continue to decline further before seeing a bottom.

Investing Insights: The Bulls are Charging on This Internet Stock.