Zynga’s days as the top dog in the Facebook gaming world appear to be fading. As challengers such as Kixeye and King.com emerge, taking up more of a share in the Facebook gaming ecosystem, Zynga’s financial stake has decreased. Sister site Inside Social Games reported Tuesday that Zynga has laid off more than 100 employees from its Austin office and plans to close its Boston studio.
In addition to the layoffs and the closure of the Boston studio — first reported by Justin Maxwell on Twitter — Zynga claims that it may also shutter its offices in offices in Chicago, Japan, and the U.K. The company is also sunsetting 13 older games (which were not specified) and decreasing its investment in The Ville.
Inside Social Games got a hold of the letter Zynga CEO Mark Pincus sent to employees Tuesday:
Earlier today, we initiated a number of changes to streamline our operations, focus our resources on our most strategic opportunities, and invest in our future. We waited to share this news with all of you until we had first spoken with the groups impacted.
As part of these changes, we’ve had to make some tough decisions around products, teams, and people. I want to fill you in on what’s happened and address any concerns you may have.
Here are the most important details.
We are sunsetting 13 older games, and we’re also significantly reducing our investment in The Ville.
We are closing the Zynga Boston studio and proposing closures of the Zynga Japan and U.K. studios. Additionally, we are reducing staffing levels in our Austin studio. All of these represent terrific entrepreneurial teams, which makes this decision so difficult.
In addition to these studios, we are also making a small number of partner team reductions.
In all, we will unfortunately be parting ways with approximately 5 percent of our full-time work force. We don’t take these decisions lightly, as we recognize the impact to our colleagues and friends who have been on this journey with us. We appreciate their amazing contributions and will miss them.
This is the most painful part of an overall cost-reduction plan that also includes significant cuts in spending on data hosting, advertising, and outside services, primarily contractors.
These reductions, along with our ongoing efforts to implement more stringent budget and resource allocation around new games and partner projects, will improve our profitability and allow us to reinvest in great games and our Zynga network on Web and mobile.
Zynga made social gaming and play a worldwide phenomenon, and we remain the industry leader. Our success has come from our dedication to a simple and powerful proposition – that play is not just something people do to pass time, it’s a core need for every person and culture.
We will all be discussing these difficult changes more with our teams and as a company. Tomorrow, (Chief Financial Officer Dave Wehner) and I will be hosting a post-earnings webcast (details to follow), and next week, we will be discussing our broader vision and strategy during our quarterly all-hands meeting. I’m confident that this puts us on the right path to deliver on the promise of social gaming and make Zynga into an Internet treasure.
If you have any immediate questions, I hope you will talk directly with your manager, Colleen, or me.
I look forward to talking with you tomorrow.
Facebook Co-Founder and CEO Mark Zuckerberg also discussed the issues regarding games on the social network during the company’s third quarter earnings call:
Overall, gaming on Facebook isn’t doing as well as I’d like, but the reality is that there are two different stories playing out here. On the one hand, our payments revenue from Zynga decreased by 20 percent this quarter compared to last year. But the interesting thing is that the rest of the games ecosystem has actually been growing. Our monthly payments revenue from the rest of the ecosystem increased 40 percent over the past year since payment has been adopted.
Readers: How often do you play a Zynga game?