Zynga is losing $150 on average for each paying new customer it gains, an analyst has claimed.
The social games giant has allegedly spent $120 million on acquiring new customers in the first nine months of this fiscal year, but has been unable to gain enough players.
“That's our math; that's not what the company says,” Arvind Bhatia, an analyst with Sterne Agee, told Benzinga.
“They've given us the sales in marketing dollars for the first nine months – $120 million. Almost all of that is for acquiring customers. We also know that they had 3.4 million unique payers in the September quarter, which is up from 3 million at the end of December 2010.
"In other words, they added 400,000 additional payers and they spent $120 million to acquire them.”
He added: “We know that generally they say that a person is staying with Zynga for about 12 to 15 months. We know that, on average, these people are spending about $150 or so. “
“Our concern is [whether or not it's worth] spending $300 to get these customers when people are spending $150. That math won't work for very long.”
Zynga recently launched its IPO, and despite making the company $1 billion, shares have fallen from the original $10 offering price and have yet to recover.
Bhatia stated that Zynga is struggling to release games that are as popular as its most famous titles such as FarmVille and CityVille, with new titles fading in popularity “very rapidly”.
“Not immediately, but down the road this is going to catch up with them – whether it takes three quarter or four quarters is hard to say. But our projection for the next 12 to 15 months is that growth is slowing significantly," he said.
“That's with us giving them a lot of credit for the possibility that they will add more payers and that [each payer] will pay more.”
Bhatia admitted however that these figures are estimates based on their own findings, and not necessarily those held by the social games giant.
Zynga declined to comment on the story when contacted by Develop.
[Update] Zynga is actually making $30 on each new paying customer, according to NaturalMotion CEO Torsten Reil.
Speaking to Founderware, he stated that over a period of nine months, social games companies like Zynga will lose a proportion of paying users through normal attrition, but admitted these were rough calculations.
"Let’s say that this attrition rate is approximately 20 per cent, with a base rate of three million users, that’s a loss of about 600,000 during the period," he said.
"However, Zynga finished this same period with 3.4 million paying users so taking this attrition rate into account, this means they actually acquired one million new paying users.
"With a $120MM marketing spend, this obviously equates to an acquisition cost of $120/new paying user. And with an average revenue per paying user of $150, it means Zynga are actually generating $30 of net revenue per user."