Do Zynga's Big Layoffs Signal Trouble For Social Gaming?

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Do Zynga's Big Layoffs Signal Trouble For Social Gaming?

There are some out there that say social gaming is dead, to be replaced with mobile gaming instead. While this is hardly an item with a consensus behind it, the point remains that there are critical problems in the space, as evidenced by the recent layoffs at Zynga.

Ahead of their financial reporting tomorrow, which is likely to look about as dismal as the Slough of Despond in The Neverending Story, Zynga fired the better part of its Austin studio, meaning about a hundred programmers are currently on the street. But that wasn't all the plan at last report, as word also emerged about firings in Boston--from which the Indiana Jones Adventure World game was distributed--as well as potential further firings in Chicago, the UK, and Tokyo. Word also suggests that the entirety of the Zynga Bingo staff is also out.

The timing of the announcements has caught several folks' attention, as the announcements emerged while Apple was engaged in its string of announcements earlier today, prompting some to wonder if Zynga was trying to distract from the news ahead of their financial reporting tomorrow, which will almost certainly look better now that they've cut out about five percent of their work force. The move was only of limited effect, as Twitter began to fill up with job openings suggested for those affected, which is about as good a result as can be asked for.

While the response to this move varies from "a sad necessity in troubled economic times" to "completely reprehensible", one thing's for sure: Zynga is in trouble. Successful companies don't fire measurable percentages of their work force ahead of earnings announcements. The reaction to this move is likely to be unpleasant indeed, and Zynga's stock price is likely to take a hit. It's up slightly in after hours trading, but not sufficiently so to erase losses sustained earlier in the day.

This doesn't bode well for social gaming as a whole. Even Mark Zuckerberg was spotted only hours ago saying "Gaming on Facebook isn't doing as well as I'd like.". Revenue from Zynga is down, but there are plenty of other developers getting into the space. Some have projected that this signals a switch from social gaming to mobile gaming, a fact given a little extra shot of credence by the rise of HTML5 gaming.

The market space is changing. There's no denying that Zynga's having trouble, but with other game studios like King.com and Wooga, among others, stepping in, it may simply be that Zynga's in trouble, as opposed to social gaming. With the market in the condition it's in overall, there's a lot of potential here for anything to go either way. Hopefully those programmers affected will find new jobs quickly, and in the event of a switch to mobile gaming, they just might.
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