Zynga’s Plans for Its Advertising Business
Advertising revenue down 1%
Whereas softness in the mobile gaming advertising market continues to rattle Zynga (ZNGA), its impact was reduced in 2Q17, with metrics showing that the decline in advertising sales had slowed. Zynga posted advertising revenue of $45.5 million in 2Q17, down 1.0% YoY (year-over-year). Advertising revenue fell 18% YoY in 1Q17. Advertising represented 22% of Zynga’s total revenue in 2Q17, compared with 21% in 1Q17 and 25% in 2Q16. Zynga is vying for digital game advertising dollars against fellow game publishers Glu Mobile (GLUU) and Activision Blizzard (ATVI).
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Shift to mobile hurting advertising
The above chart shows Zynga’s advertising revenue trends over the last five quarters. Weakness in Zynga’s advertising business highlights how the shift to mobile gaming is a double-edged sword for digital game publishers. While the mobile gaming market could be a $58-billion revenue opportunity by 2023, mobile advertising doesn’t bring game publishers as much revenue as desktop advertising. To counter the weak advertising environment for digital games, Zynga said earlier this year that it would seek out strategic partnerships to bolster its advertising revenue.
Strategic advertising partners
With the release of its 2Q17 results, the company announced that it has netted Unity as a strategic advertising partner. Unity is a global development platform whose tools and technology can add value to Zynga’s advertising business, unlocking more revenue opportunities.