Zynga commits to marketing in spite of profit slide

Zynga, the maker of FarmVille and CityVille, has pledged to increase its marketing spend despite posting a 95% profit drop in the last quarter.

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In documents filed with the Securities and Exchange Commission, the social games maker said its profits declined to $1.3m (£832,000) in the three months to June, down from $27.2m (£17.4m) reported in the same period in 2010.

Profits were hit by the amount of staff in research and development roles it has hired as part of its global expansion, as well as investment in new technology.

Zynga’s revenue grew 115% year on year to $279m (£178m), despite combined sales of its virtual goods and advertising dropping quarter on quarter.

The company says this was due to a decline in the number of daily active users and the fact it did not release any new games in the first half of 2011. Revenue growth was also stifled in part due to Zynga transferring to the Facebook Credits system, which retains 30% of payments from users.

Zynga says that its sales and marketing expenses are likely to increase “for the forseeable future” as it looks to grow its player base and build brand awareness globally.

The filing also adds that Zynga will make other “significant investments” to drive long term growth, including expenditure on new distribution channels such as mobile and other platforms such as Yahoo!.

Zynga is currently preparing an estimated $1bn (£640m) initial public offering, although has been reported that these plans could be delayed due to “poor market conditions”.

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