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Will Zynga's New Strategy Work in Its Favor?

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Part 5
Will Zynga's New Strategy Work in Its Favor? PART 5 OF 6

Why Zynga Relies on Innovation

New ways to entertain people

Zynga’s (ZNGA) mobile success is, to an extent, connected to smartphone innovation. Speaking at a Cowen industry conference early this month, Zynga’s CFO James Gerard Griffin talked about the benefit that game publishers enjoy from mobile technology upgrades.

According to Griffin, any time there’s a mobile technology enhancement, game publishers get the ability to come up with different ways to entertain mobile users through games. New ways to entertain mobile users can also mean new revenue for publishers.

Why Zynga Relies on Innovation

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Smartphone competition is beneficial for game publishers

Griffin’s comment implies that Zynga and peers like Electronic Arts (EA) and Activision Blizzard (ATVI) enjoy smartphone competition that’s forcing the likes of Apple (AAPL), Samsung (SSNLF), and Google, an Alphabet (GOOGL) company, to upgrade their devices more frequently.

Emerging technologies such as AR (augmented reality) and VR (virtual reality) are promising to expand revenue opportunities for the entertainment industry. Apple executives have recently spoken positively about AR, leading to speculation that Apple’s future iPhones could come with AR capabilities, potentially unlocking more capabilities for game publishers.

Zynga’s mobile success

Mobile is one of Zynga’s bright spots. The company’s mobile revenue rose 19% year-over-year to $161.6 million in 1Q17. Mobile contributed 83% of overall revenue and 85% of overall bookings in the quarter, as the above chart shows.

Griffin’s view is that Zynga’s mobile metrics have room to continue improving as long as mobile technology innovation continues.

When Cowen upgraded Zynga to “outperform” from “market-perform” last year, Zynga’s consistent mobile growth was one of the impressive factors.

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