Zynga Closes Three Offices Amid Widespread Layoffs

Zynga has announced the closure of three major offices in the US, shuttering its presence in Dallas, New York, and Los Angeles. Along with the studio closures came the announcement that the company will lay off 520 employees, a full 18% of its workforce, between now and August.

The company is now reporting an expected net loss of between $20 million and $40 million for the current quarter, even though they still expect to earn nearly $200 million in in-game transactions for the same period.

The announcements came as no surprise to those who have followed Zynga’s tumultuous story since the peak of its success in social gaming. After riding what turned out to be a short wave of wildfire growth in games like Farmville and Castleville between 2009 and 2011, the company has seen an almost continuous decline in financial success and the popularity of its games, and it’s stock (ZNGA) has plummeted from a high of around $15 in March 2012 to a current price just below $4. The design philosophies of so-called “social games” have been the topic of heated debate in the gaming community since their rise to prominence on Facebook and a range of first-party social-gaming platforms, but history has clearly proven that the fledgling genre does not have staying power in its current iteration.

In a pivotal moment for the company last year, Electronic Arts sued Zynga for what it claimed was blatant copyright infringement of The Sims Social. Coverage of the suit revealed that many of Zynga’s popular franchises were near-perfect copies of games made by companies too small to stand up for themselves. Although the suit was eventually dismissed by the court, the damage to Zynga’s reputation could not be undone. After that, Zynga announced a major development shift towards real-money gambling, and it has built up an infrastructure of free-to-play casino games that can quickly be turned into cash machines if federal prohibitions on internet gambling are lifted soon. The company has also announced a shift in focus away from the PC platform towards mobile devices, but recent financials reveal that this strategy has not yet paid off.

Are the Zynga layoffs another brick in the wall of its eventual demise, or could the company still pull through? Speaking for myself, I can excuse the unfortunate studio closures as the appropriate scaling down of a company that grew too large, too quickly. Zynga has a few cards left on the table, and I don’t quite think its on its way out yet. Even though I’m not a fan of Zynga’s design philosophies, I have to admit that the company’s leaders have an incredible amount of business savvy, which leads me to expect that they will find an opportunity to pull themselves back up, even if they never reach the same levels of popularity they once enjoyed.