Why is Zynga CRASHING?

Zynga (NASDAQ:ZNGA) is tumbling pre-market on Thursday, falling more than 39 percent to $3.08 after staying way short of already-low second-quarter earnings expectations. Zynga reported earnings of 1 cent a share, way below the street consensus of 6 cents a share, on revenue of $332.5 million. The average analyst expectations for revenue had been $344 million.

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The online game maker clocked a net loss of $22.8 million, down from a gain of $1.4 million in the same period last year. Zynga said the net loss included $95.5 million of stock-based expense. The company had also paid about $180 million earlier this year in cash to acquire OMGPOP, the maker of the popular mobile game Draw Something.

Bookings, or the total value of virtual goods sold, fell 8 percent from the first quarter to $301.6 million, though they rose 10 percent from the same period last year. Zynga makes most of its money by charging for virtual items, such as poker chips or farm crops, in its games. The number of daily active users increased to 72 million from 59 million in the second quarter of 2011, while monthly active users increased 34 percent to 306 million from 228 million from the year-ago period.

“The company achieved some significant milestones in the quarter including the launch of Bubble Safari, which is now the number one arcade game on Facebook (NASDAQ:FB), and the launch of The Ville, now the number two game behind Zynga Poker,” chief executive Mark Pincus said in a statement.

“Our advertising business continued to show strong growth with revenue up 170 percent year-over-year. Our games reached record audiences, achieving over 300 million monthly active users. We grew our mobile footprint five-fold in the year to 33 million daily active users making Zynga the largest mobile gaming network,” Pincus added.

However, Zynga (NASDAQ:ZNGA) lowered its full-year forecast for bookings to between $1.15 billion and $1.23 billion, down from an April projection of between $1.43 billion and $1.5 billion. The company said it expects 2012 earnings, excluding some items, of 4 cents to 9 cents a share, compared with a prior range of 23 cents to 29 cents.

Zynga (NASDAQ:ZNGA) shares had been thrashed lately as concerns about weakening active user numbers and the company’s high reliance on Facebook’s platform continued to grow. While Zynga’s most successful games, including CityVille and Words With Friends, have been built on Facebook, the company has been trying to expand beyond by launching its own web portal and a separate gaming-based social network.

Zynga’s earnings were being viewed as something of a preview for Facebook, since about 15 percent of the social network’s first-quarter revenue was attributable to the games creator. Facebook is scheduled to report on Thursday.

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