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CEO Update

by on October 4, 2012

At Zynga, we are committed to engaging in a transparent dialogue with our employees, players and shareholders. As part of that effort we wanted to share the note our CEO and Founder Mark Pincus sent to employees today regarding Zynga’s Q3 2012 preliminary financial results.

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Team,

Today we announced preliminary Q3 financial results and revised our forecast for the rest of the year.  I want to add more color to the announcement and our future opportunity.

The challenges we faced in our web business in Q2 continued in Q3 and while many of our games achieved plan, we still experienced overall weakness in the invest and express category. To address this we’re further investing in other genres like casino where we already lead with Zynga Poker and blue PVP, a category we pioneered with Mafia Wars, and now have the opportunity to reinvent with the industry’s best talent here at Zynga.

While we’re disappointed with these financial results, we’re proud of the progress that our teams made on many fronts.  We continue to see the power of our player network, launching three games, each achieving top 10 status with more than 6 million daily players. Within its first six weeks, ChefVille has become a mainstay for 45 million monthly players and FarmVille 2 introduced stunning 3-D farming for the first time in a web browser becoming the most popular social game within three days of network launch.

So why are we lowering 2012 guidance?  There are a few factors contributing to a weaker than expected outlook for Q4.  The reduced performance of some of our live web games is continuing to impact results and we have several new games which are at risk of launching later than expected.

We’re addressing these near-term challenges by targeted cost reductions and focusing our new game pipeline to reflect our strategic priorities. At the same time, we are continuing to invest in our mobile business where we have one of the strongest positions in the industry. These actions support our strategy to transition from being a first-party web game developer to a multi-platform game network.

Let’s not lose sight of the bigger picture. The world is playing games, and is increasingly choosing social games.  Zynga has become synonymous with social gaming serving 311 million monthly active users, the largest player network on web and mobile.  When we offer our players highly engaging content they respond. FarmVille 2 has been our most successful launch since CastleVille. Our With Friends franchise is defining social play on mobile where Zynga represents 3 of the top 5 most popular mobile games in terms of time spent in the U.S. according to Nielsen. While we’re encouraged by our strong starting position on mobile, developing this new growth market to the scale of our web business will take time.

Over the past few weeks, we’ve been meeting with you all to check-in and answer your questions.  It’s exciting to hear how much passion you have to innovate on new ideas. We have an amazing opportunity to channel this into breakthrough new products that surprise and delight, excite and ignite our players.

Please join me and your fellow Zyngites today to discuss Q4 OKRs and our next steps.Thanks for all your hard work to pioneer social gaming. I look forward to working together to deliver on our mission of truly connecting the world through our games.

Mark

Forward-Looking Statements

This blog post contains forward-looking statements relating to, among other things, our expectations for third quarter financial results; our outlook for full year 2012 bookings; games under development and expected game launches; investments in certain game genres; building and expanding the Zynga Platform and Zynga With Friends Network; the continued success of our franchise games and our games, platform and network generally; our strategy to transition from being a first party web game developer to a multiplatform game network; potential cost reductions; and our future operational plans, prospects and opportunities to expand our business. Forward-looking statements often include words such as “outlook,” “projected,” “intends,” “will,” “anticipate,” “believe,” “expect,” and statements in the future tense are generally forward-looking statements. The achievement or success of the matters covered by such forward-looking statements involves risks, uncertainties and assumptions. Our actual results could differ materially from those predicted or implied and reported results should not be considered as an indication of our future performance.  Factors that could cause or contribute to such differences include, but are not limited to, our relationship with Facebook or changes in the Facebook platform or our agreements with Facebook, our ability to launch new games in a timely manner and monetize these games effectively, our ability to anticipate and address technical challenges that may arise, our ability to control and reduce expenses, competition, the changing interests of players, intellectual property disputes or other litigation, asset impairment charges, including any income tax impact resulting from our impairment charge related to OMGPOP, our ability to retain key employees, acquisitions by us and changes in corporate strategy or management.

More information about factors that could affect our operating results is included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Quarterly Report on Form 10-Q for the three months ended June 30, 2012, in our registration statement on Form S-1, as amended, filed with the Securities and Exchange Commission on March 23, 2012 and in our Annual Report on Form 10-K for the year ended December 31, 2011, copies of which may be obtained by visiting our Investor Relations web site at http://investor.zynga.com or the SEC’s web site at www.sec.gov. Undue reliance should not be placed on the forward-looking statements in this blog, which are based on information available to us on the date hereof. There is no guarantee that the circumstances described in our forward-looking statements will occur. We assume no obligation to update such statements. The financial information set forth in this blog reflects our current preliminary estimates, is subject to the completion of our third quarter review process, and is subject to change. Our full third quarter and full year 2012 results could differ materially from the preliminary estimates and outlook we have provided in this blog.

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