Will the Market Madness Maul Troubled Zynga?

I admit it: I'm a Zynga addict. The social strategy game Empires & Allies has me so hooked that I've pretty much sworn off requests to play sister games such as CityVille for fear I'll have even less of a life than I do now.

Lately, these concerns are fading -- not because of the pull of Zynga's aggressive marketing but because of outages. E&A has run remarkably slow this week, possibly because of ongoing trouble with Amazon.com's (Nasdaq: AMZN  ) EC2 cloud-hosting infrastructure.

All of the company's games appear to have been affected. Separately, some FrontierVille players saw their games roll back over the weekend, eliminating progress they'd made in days prior. Zynga's games may be tempting, but my life is way too busy to wait around for wheezing servers to catch a digital breath.

All this comes as The Associated Press is reporting that eight proposed public offerings have been pulled -- spooked by Mr. Market's lunatic flailing. Groupon and Zynga could survive the turmoil and still get to an IPO, but if the daily-deal specialist's recent results are any indicator, competition is taking a toll.

Zynga has its own troubles with rivals. Google (Nasdaq: GOOG  ) is courting developers to write social games for its Google+ social network, several news outlets reported last month. Contractual obligations may keep it from moving existing games away from Facebook. Around the same time, Electronic Arts (Nasdaq: ERTS  ) paid $1.3 billion to acquire PopCap to boost an already-growing social-gaming portfolio. FacebookVille is about to become another face in the crowd.

Competition. Outages. Market panic. Zynga is one of the best-positioned businesses I've ever seen, but the combination of these factors has even me worrying about buying into this IPO. The negatives are beginning to outweigh the positives.

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Fool contributorTim Beyers is a member of theMotley Fool Rule Breakers stock-picking team. He owned shares of Google  at the time of publication. Check out Tim'sportfolio holdings andFoolish writings, or connect with him on Google+ or Twitter, where he goes by @milehighfool. You can also get his insightsdelivered directly to your RSS reader.

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  • Report this Comment On August 12, 2011, at 3:03 AM, ihatezynga wrote:

    Zynga treats their players like sh*t.

    I used to play their poker game all the time until I got my account suspended because some random player falsely reported me as a poker bot.

    Every time someone reports you for abuse on Zynga, you are automatically guilty with no chance of proving innocence.

    They took away 8 billion in chips. They offered to reinstate my account with just 1 million in chips.

    I said, "Screw You Zynga" and instead created http://IHateZynga.com

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