Zynga has not had the best of performance the past few weeks on the stock market after the Facebook IPO opened to disaster and an investigation from the SEC and Congress. It looked like it was maybe getting better for a bit, but then Zynga got kicked in the teeth again.
Zynga's shares hit an all-time low of $4.78 today. This was the first time that the social game maker's stock went below $5 a share. Reuters reports that Nasdaq leaped to action before 10 a.m. by prohibiting short sales. Short sales will be banned until Wednesday.
According to Reuters, the reason Zynga suddenly dropped 10 percent wasn't due to Facebook this time, but rather a damning report publishing by analyst Doug Creutz. Creutz said that "interest in Facebook-based gaming may have reached a negative inflection point."
What's the cause of all this? The mass migration to mobile. It's the one area that Facebook has traditionally struggled in. While Zynga puts the majority of their games on mobile platforms, many of them lack the install base that their top apps command with many of them having under 1 million DAU.
Zynga attempted to reinvigorate their mobile presence last month with their acquisition of OMGPOP and the developer's hit game - Draw Something. The game can be played on Facebook, but the majority of users were playing the iOS or Android app. Unfortunately, that plan may have backfired as Draw Something began to bleed users as Zynga started to flood the game with celebrity and product endorsements - the latest of which featured Jennifer Lopez and Enrique Iglesias.
All of this is a cautionary tale to other game developers that make their living off of Facebook. The future for casual games is mobile and many developers, including Zynga, would do well to cultivate that audience. Facebook needs to join in the mobile foray as well by bringing native support for apps inside Facebook on mobile devices. The newly launched App Center may be a set up for such a feature in the future.
Since the dramatic plunge this morning, Zynga has been slowly climbing back up to $4.98 a share. Here's hoping they get above $5 a share by tomorrow's end or they may be in for a rough week.