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Zynga Plummets On Earnings and Outlook Misses

Zynga plummeted to an all-time low after reporting earningsthat fell short of expectations and a much weaker outlook. The news also sent Facebook shares lower.

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The social and mobile gaming company reported earnings of a penny per share — Wall Street was looking for 5 cents — on revenue of $332 million, $12 million less than expected. (Click here for the latest after-hours quote.)

But what really dragged on Zynga's stock is the fact that the company lowered its outlook for 2012, saying it now expects bookings in the range of $1.15 billion to $1.225 billion, far short of the up to $1.5 billion Wall Street expected.

Now the company’s projecting non-GAAP EPS for the year in the range of 4 to 9 cents, just a fraction the 26 cents that’s Wall Street’s consensus.

Zynga’s business is intricately intertwined with Facebook , which is why this news of a weak quarter also dragged on Facebook shares after hours, pulling FB stock down as much as 8 percent 24 hours ahead of its first quarterly earnings report. (Click here for the latest after-hours quote.)

What happened?

The company says its new numbers “reflect delays in launching new games, a faster decline in existing web games due in part to a more challenging environment on the Facebook web platform, and reduced expectations for Draw Something.”

Zynga’s user numbers actually surpassed expectations — daily active users increased 23 percent year-over-year to 72 million, monthly active users grew 34 percent to 306 million and monthly unique users grew 27 percent to 192 million.

While all three of those metrics were higher than analysts projected, the problem for this quarter’s results is the fact that the amount that those gamers were spending to play Zynga’s games actually declined year-over-year, to far less than expected. The key metric of daily bookings per average daily user decreased 10 percent to $.046 in the quarter.

What’s Zynga’s plan?

CEO Mark Pincus said the company “faced new short term challenges which led to a sequential decline in bookings. Despite this, we’re optimistic about the long-term growth prospects on mobile, where we have a window of opportunity to drive the same kind of social gaming revolution that we enabled on the web.”

Translation: Zynga is betting big on mobile, an area Pincus is sure to stress on the earnings call. Another focus for future growth Pincus is sure to mention: advertising. The company points out it grew ad revenue 170 percent year-over-year.

-By CNBC's Julia Boorstin
@JBoorstin

Questions? Comments? MediaMoney@cnbc.com

  • Working from Los Angeles, Boorstin is CNBC's media and entertainment reporter and editor of CNBC.com's Media Money section.