Bee Cave Games Raises $1.3 Million Round of Seed Funding

Bee Cave Games, the developer of the social casino game Blackjack Casino, has closed a $1.3 million seed round of funding led by Matrix Partners. The round is aimed at helping the company grow and continue to support its existing game, which is available on Facebook. Last month, Zynga co-founder Eric Schiermeyer became a board advisor and investor in Bee Cave.

Don Mattrick Debuts as New Zynga CEO, With Loss Expected in Q2

Former Microsoft Xbox head and new Zynga CEO Don Mattrick will helm his first quarterly report and conference call later today, after the company's founder and former CEO Mark Pincus removed himself from the top job several weeks ago.

Unfortunately for Mattrick, the San Francisco online gaming company is expected to report a second-quarter loss of seven cents per share, a decline from last year. On an adjusted basis, the loss will be less. Revenue is also expected to be down, around $185 million. Zynga will report after the markets close.

Such lackluster results might be the new normal for a while, with Zynga still in turnaround mode as it seeks to find lucrative new businesses, especially in mobile.

The tone and tenor of the new leader will be much watched by Wall Street, which will be interested in what Mattrick has in store. And although the Q2 results are not under his watch, Mattrick has already been at the job since July 8, working at its HQ in the city, having moved his family from up north to a house he owns in Silicon Valley.

One can expect a tougher message from Mattrick, who has a lot of experience in turnaround situations, and very little sugar-coating of the difficult situation that the company finds itself in now.

He might not get too specific, though, such as whether or not he will preside over additional staff reductions. Such cuts had already started under Pincus, who laid off more than 500 employees in June.

Pincus will apparently be on the call later today at the start, but only for a short while, as it will clearly be Mattrick's show from now on.

Betable Snags Zynga VP for Chief Revenue Officer Post

Betable, the startup that lets developers integrate real-money gambling into their virtual games, announced Thursday it hired Ryan Linton as its new Chief Revenue Officer. Linton comes most recently from his position at Zynga as Vice President of Revenue Operations, responsible for building more revenue channels at the social gaming giant and creating partnerships with other companies.

No Dice: Zynga Decides to Abandon Real-Money Gaming Efforts in the U.S.

In its lackluster second-quarter report today, at the very bottom of its press release, Zynga made a very important strategic announcement, saying that it would not pursue real-money gaming in the U.S.

It added that it would continue to evaluate its tests of such gaming products in the United Kingdom, where betting is legal. U.S. online gaming, in comparison, requires Zynga and others to jump a series of long-term and difficult hurdles.

While some investors had been counting on the potentially lucrative online business to be a potential growth area for the troubled San Francisco online social gaming company, management said it has decided to focus on fixing its core business instead.

Said Zynga in a statement:

"Zynga believes its biggest opportunity is to focus on free to play social games. While the Company continues to evaluate its real money gaming products in the United Kingdom test, Zynga is making the focused choice not to pursue a license for real money gaming in the United States. Zynga will continue to evaluate all of its priorities against the growing market opportunity in free, social gaming, including social casino offerings."

No surprise, given this surprise, Zynga's stock is off 14 percent so far in after-hours trading.

Zynga's Lackluster Q2 Earnings Still Beat Wall Street Expectations, but User Stats Plummet

Zynga said it lost one cent a share today, on an adjusted basis, which bested Wall Street expectations of a loss of up to four cents. Last year in the same period, Zynga earned one cent.

That passes as good news for the troubled San Francisco online social gaming company, which is in the midst of a turnaround.

Adjusted revenues - or, in Zynga's case, bookings - were essentially in line with expectations, at $188 million versus expectations of about $185 million. Total revenue was $231 million, down almost 40 percent from a year ago.

In addition, there was a significant drop in monthly active users in the quarter to 187 million from 306 million a year ago, Zynga said. Daily active users were also down to 39 million from 72 million a year ago, and monthly uniques declined to 123 million from 193 million.

Not good, obviously.

"The next few years will be a time of phenomenal growth in our space and Zynga has incredible assets to take advantage of the market opportunity," said former Microsoft Xbox head Don Mattrick, who was appointed new CEO of Zynga two weeks ago. "To do that, we need to get back to basics and take a longer term view on our products and business, develop more efficient processes and tighten up execution all across the company. We have a lot of hard work in front of us and as we reset, we expect to see more volatility in our business than we would like over the next two to four quarters."

Zynga also said today that it would abandon real-money gaming efforts in the U.S., which rattled investors hoping for a lucrative payoff down the road in the fast-growing arena.

There will be a conference call with investors at 2 pm PT today, where execs will explain it all for you. Or not so much.

Here's the actual press release, if you want to study up:

ZNGA_News_2013_7_25_General_Releases

IGT Not Deterred by Zynga Scrapping Real-Money Gambling Plans

In its Q2 earnings report earlier this week, Zynga said it has abandoned its plans to pursue real-money gambling in the U.S. But Nevada-based IGT, which makes both physical and virtual casino games, said its plans are unaffected.

"What Zynga's finding out is that breaking into real-currency wagers is a difficult thing," said executive VP Robert Melendres, who heads IGT's interactive division. "They built their business as more of a causal social gaming business. We are well situated to take advantage of [real money], just as we've done in Europe."

Melendres's goal is "convergence": Bringing the experience someone might have playing, for example, a Wheel of Fortune slot machine (which IGT develops and manufactures) with the separately branded games of its social casino product DoubleDown Casino. In addition to getting cleared by regulators, he said part of the challenge is in the gameplay itself: Offering the same odds and the same "thrill" (his word) of risking real money that one gets in Vegas.

IGT acquired DoubleDown for $500 million in early 2012, one week before Zynga announced its now-scrapped casino ambitions. The Facebook-integrated site now offers roulette, blackjack, video poker and 37 slots games, which - like many of the innumerable competing social/mobile casino games - encourage users to purchase virtual currency, which is then what's (legally) wagered.

According to its Q3 earnings report, the company's social casino gaming revenue is up 105 percent year over year to $61.4 million, and monthly active users increased 28 percent from 5.2 million to 6.7 million in the same time frame. But Melendres said he is confident that IGT will be part of the "first meaningful wave" of real-money gambling for players in states that have legalized it, expecting to have a foot in the door by Q1 2014.

The real-money online gambling market, which H2 Gambling Capital said currently grosses about $30 billion worldwide, already surpasses other forms of social gaming and is expected to keep growing, as shown in this chart from Betable.

With New CEO Mattrick At Helm, Zynga Reports Loss of $16M And Revenue Decline Of 31%

Zynga's revenues for the second quarter of 2013 declined 31% year-over-year to $231 million in the midst of a challenging transition that saw former CEO Mark Pincus hand over the reins to Don Mattrick.

The company had a net loss of $16 million compared to last year's net loss of $22.8 million during the same quarter (which also had $95.5 million of stock-based compensation expenses). If you account for that then, the company's net loss was $6.1 million compared to last year's net loss of $4.6 million based on non-generally accepted accounting principles. Zynga said when it laid off nearly 20 percent of its staff last month that it expected to see a net loss of between $39 million to $28.5 million so this is actually a slight earnings beat.

"We need to get back to basics and take a longer term view on our products and business, develop more efficient processes and tighten up execution all across the company," wrote Mattrick in the release. "We have a lot of hard work in front of us and as we reset, we expect to see more volatility in our business than we would like over the next two to four quarters."

Last quarter, COO David Ko said the company was in the midst of a "pause" to re-evaluate its entire game slate and that this decision would be financially apparent in this quarter.

This quarter's revenue is projected to be even lower in the range of $175 million to $200 million, with a net loss of $43 million to $14 million.

Through the company's pivot onto iOS and Android, Zynga has had to compete against older and historically smaller rivals from the Facebook platform like King and Kabam. Both of those companies have fared well with King's Candy Crush Saga bringing it the top grossing spot and numerous Kabam titles in the top 25.

In contrast, Zynga just has its longstanding Poker franchise in the U.S. top grossing 25. Even today, nearly 70 percent of the company's monthly active users remain on the web.

The losses in Zynga's user base from not being able to hold onto its core Facebook customers are staggering. The company's level of daily active users is not much higher than half of where it was a year ago at 39 million this quarter compared to 72 million in 2012. It also saw 187 million monthly active users, down from 306 million users in the same time period a year before.

The company's launches like Draw Something 2 have also underperformed without any slots in any of the top 100 charts and Zynga's other big mobile launch, Running With Friends, remains in 45th place in the U.S. top grossing chart. Zynga had six major releases this quarter including War of the Fallen, Draw Something 2, Battlestone, Solstice Arena and Running With Friends.

But older franchises like FarmVille and FarmVille 2 continue to do well as both games have grown combined bookings by 29 percent year-over-year.

Zynga's struggles in diversifying away from Facebook and missing the pivot to mobile ultimately convinced Pincus to give up the CEO role, although he remains chairman of the board and serves as chief product officer. It's now Mattrick's 15th day on the job.

Zynga Won't Pursue Real-Money Gaming License In The U.S.; Shares Drop 13% In After-Hours

Zynga is giving up what many investors had hoped might be its trump card: a real-money gaming business in the U.S. The company, which has been testing out real-money casino games in the U.K., said it won't be pursuing a U.S. license after all in its second quarter earnings report today.

Sources tell us this is a decision to focus and not spread the company too thinly between real-money gaming, diversifying onto mobile and maintaining a core on Facebook. If it weren't for the political and legal complexities of opening up real-money gaming in state after state, the business could have been interesting for Zynga, especially considering how long Zynga Poker has dominated both on the Facebook platform and on iOS and Android. None of Zynga's social casino games, which use virtual currency, are affected by this. Shares declined 13 percent in after-hours to $3.02.

In the release today, Zynga said:

Zynga believes its biggest opportunity is to focus on free to play social games. While the Company continues to evaluate its real money gaming products in the United Kingdom test, Zynga is making the focused choice not to pursue a license for real money gaming in the United States. Zynga will continue to evaluate all of its priorities against the growing market opportunity in free, social gaming, including social casino offerings.

Zynga has long been exploring real-money gaming. It partnered with operator Bwin.Party to offer titles in the U.K. Then last November, the company took its first steps toward real-money gaming in the U.S. by applying for a "preliminary finding of suitability" from the Nevada Gaming Control Board.

It's not that this option is forever off the table. It's just that the company is in the middle of a significant platform transition now, and real-money games - which would probably only be available to players in Nevada at first anyways - could be distracting.

Zynga's New CEO Don Mattrick Says It Won't Be Quick Or Easy To Get The Company Back On Track

Don Mattrick, the new Zynga CEO announced at the beginning of the month, offered his initial on-the-job observations today during the conference call discussing the company's second-quarter earnings.

Mattrick (on the right of the photo with Zynga founder and former CEO Mark Pincus) started out by offering some positive commentary, saying that the company "caught lightning in a bottle" and "achieved in only a few years what most companies took a decade or more to do." However, he acknowledged, "We're missing out on platform growth that Apple, Google, and Facebook are seeing. In short, we can do better."

So how is he going to try to turn things around? He said he's going to be working with the company's leadership to "challenge previous assumptions" and to focus on "business fundamentals - which, candidly, we've struggled with over the past year." Mattrick predicted that there will be two to four more quarters of volatility as the company tries to find a new direction.

"Getting a business back on track isn't easy and isn't quick," he said.

Pincus, now Zynga's chief product officer, was also on the call, and among other things, he said he was impressed that Mattrick set up his desk in the middle of the Farmville studios. Both Pincus and Mattrick described their relationship as one between "partners".

Mattrick said he's also going to discuss his priorities on this call - I'll update this post when he does.

Update: Later in the call, Mattrick said his priorities for his first 90 days on the job include "getting under the hood" to evaluate the business, identifying the real market opportunities, improving product quality, looking at how people are deployed across the company, and reassessing the product pipeline. He also suggested Zynga is a young company that has "the ability to break some bad habits" but that while he'll be in listen-and-learn mode initially, "When it becomes clear what change is necessary, I'll move quickly and decisively to do what's in the best long-term interests of our players, our employees, and our shareholders."

He concluded, "There are some good winds at our back, and my job is to get our sails up and Zynga pointed in the right direction."

Zynga Shows Investors It Has a Chance

Zynga’s fourth-quarter earnings are just rolling in, and they look good compared to the company’s already lowered expectations for the period.

Minutes after the release went out, Zynga’s stock was up nearly 5 percent to $2.88 a share. During regular trading today, Zynga’s shares were already higher based on an analyst’s upgrade.

Here’s what it reported:

The social games company said bookings for the year totaled $1.15 billion to beat the company’s forecast of $1.1 billion (bookings account for the sales from virtual goods that occur in the fourth quarter).

It also said adjusted EBITDA, which is earnings before some expenses, totaled $213.2 million for the year, which was way above its range of $152 million to $162 million. For the full year, though, it said non-GAAP earnings totaled seven cents a share, a nice beat over its forecast of two cents to three cents a share.

On a quarterly basis, Zynga beat analyst expectations, which were no doubt low for the period.

The company reported a net loss of six cents a share (or a profit of one cent a share on an adjusted basis) on revenue of $311.2 million. Analysts were expecting an adjusted loss of three cents a share on revenue of $212.1 million, according to FactSet.

Zynga’s GAAP net loss of $209.4 million in 2012 was heavily influenced by a $53.8 million restructuring charge for changes it made internationally. However, revenue was up 12 percent year over year to $1.28 billion, fueled by a 7 percent increase in online game revenue and an 84 percent increase in advertising revenue.

Over the past three quarters, Zynga has been working hard on its turnaround, so this is just another baby step along the way.

The San Francisco games company slashed expenses, including a reduction in headcount, and named an all-new executive team as AllThingsD featured in a story yesterday. We’ll be hearing at 2 pm PT from the company’s management team, including CEO Mark Pincus, along with its new COO David Ko and CFO Mark Vranesh, who replaced Dave Wehner in November.