Empires & Allies on Growth Offensive for Zynga Ahead of Reported IPO
Empires & Allies is setting a strong pace in its fourth week after launch. While its monthly active user and daily active user growth numbers are so far coming in below where Zynga’s last big launch on Facebook was — CityVille, back in December — it is the clear leader in the strategy genre of social game.
By the traffic numbers in our AppData tracking service, it’s already the third-largest game on Facebook by MAU with 37.7 million, and with 6.73 million DAU about to pass Texas Hold’Em to reach third by that metric. This growth is in turn boosting Zynga’s overall Facebook traffic numbers to 54.8 million DAU and 269.2 million MAU.
The context here is that some people have questioned Zynga’s ability to keep producing hits on Facebook as development and marketing costs go up. The company is occasionally lumped together with other newly successful technology startups as an example of an internet bubble especially given reports that Zynga is looking to public in the next couple of the months.
Other developers who build these types of city-building-plus-army-battling games for hardcore gamers have reported very strong revenues per user. Given Zynga’s experience with monetization, we expect it is doing quite well for itself now, and in the filings will reinforce Zynga’s argument that it is reshaping the gaming industry through social connections.
The strategy genre wasn’t the focus for most social game developers until the last year or two. Pioneered by Kabam (which just raised a big new round) and smaller developers, the strategy genre recently expanded to include entries from larger companies. Digital Chocolate’s Army Attack — launched a week ahead of Empires & Allies — uses a different game mechanic in its synchronous building and fighting simulation, and it’s been growing well despite Zynga’s offensive. Playdom’s own military-themed strategy game, City of Might, is due out soon.
For Zynga, however, the competition is also about beating its own records and the expectations of investors as much as it is competing with other strategy game developers. A solid launch on Facebook like this shows that it can continue to produce hits, despite the many changes Facebook has made to communication channels in games. The question is how much Zynga is profiting despite increasing development and marketing costs. The production value of the game is high, and prices on Facebook advertising have gone up as more companies of all sorts have begun using it.
However, Zynga has reportedly been making nearly 50% profit as recently as last year, according to some reports, which pegged total revenue at $850 million and profit at $400 million, and it could show even better numbers when it files to go public.