Good riddance to bad rubbish.

Just out of curiosity... How does a software company with >$300MM in revenue lose money? Is it spent on people, hardware, advertising?

Honestly, it couldn't happen to a more deserving guy (Mark Pincus). I say this after his extortion racket last year [1]. These kinds of antics (and I include the Skype clawback scandal [2] in this) threaten to undermine the tech industry as a whole.

But as far as Zynga goes, I see these "social games" as largely parasitic and should be regulated in much the same way that gambling is for much the same reasons. Zynga is struggling in a world where such gamers are going increasingly mobile.

Zynga is a proxy for Facebook because Facebook's near-term revenue sources are essentially:

1. Facebook credits; and

2. Display advertising.

(1) explains the correlation with Zynga. Apple is really drinking Facebook's milkshake here.

And I remain skeptical about the value of (2). I continue to believe that people's behaviour builds a better profile of what they want than what they tell you (ie look at what they do rather than listen to what they say). Facebook profiles reflect the human predilection for lying--to oneself and to others--about who they are and who they appear to be.

Don't get me wrong: Facebook could be a valuable display ad property. That just doesn't, by itself, make a $100B company.

You can count me as one of those that'll dance on the grave of Zynga however. The same goes for Groupon.

EDIT: regarding "parasitic", I refer you to Zynga's notion of "whales" [3] [4]. As much as Zynga might publicly state that these people might just be rich, I think they well know they're preying on those who are largely without self-control, intentionally cultivating addictive behaviour.

Some are OK with this. I am not. I see this as no different to encouraging gambling or drug addicts. YMMV.

[1]: http://online.wsj.com/article_email/SB1000142405297020462190...

[2]: http://www.businessweek.com/technology/silicon-valley-wakes-...

[3]: http://articles.businessinsider.com/2012-02-06/tech/31028725...

[4]: http://articles.businessinsider.com/2012-03-05/tech/31123148...

Our main weapon is facebook users and dedicated social gamers. Our two main weapons are facebook users, dedicated social gamers and micropayments. Our three main weapons are... I'll come in again.

I think they may turn out to be a very good long term bet. Pincus is quite directly attempting to mimic Bezos' strategy with Amazon. He's in control and he doesn't care (much) about the short term stock price.

Zynga is in the best position to profit from the rise of social/casual gaming. It may take 10 years but they could quietly grow into the behemoth of gaming the way that Amazon did in shopping.

From quarterly report: As of June 30, 2012, cash, cash equivalents and marketable securities were $1.6 billion

This is out of their current market cap of ~2.5B. Facebook down 7% after hours too. Honestly looks like an over-reaction that shows investor worries about new business models.

Dangerous time trying to exit a social gaming company methinks.

"surprise" loss? I guess a lot of people are surprised by things that seemed obvious to me. Zynga's userbase consists of fossilized shut-ins who don't know they're wasting money buying virtual trinkets online. As they die off, their revenue stream will too.

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This cant be suprising to anyone in the tech world but it seems that many in the finance sector are amazed at how this could happen. Is there really that much of a disconnect when it comes to valuations?