Zynga (NASDAQ:ZNGA) will release its quarterly report on Thursday, and despite a 50% bounce in the shares so far in 2013, the stock still trades for less than half its initial public offering price less than two years ago. Now, as Zynga struggles to remain profitable, the company's reliance on Facebook (NASDAQ:FB) for its success appears to be in jeopardy. If Electronic Arts (NASDAQ:EA)succeeds in capturing more of Facebook's potential than Zynga, then it could prove even more problematic for the social-gaming company's shareholders.

Zynga has been one of the biggest casualties of the ongoing transformation of the social revolution. Once seen as arguably the most innovative game-maker, Zynga has seen revenue fall steadily for more than a year, even as the social-gaming market overall has grown extensively. Competition from rival game-makers, including those behind the wildly popular Candy Crush game, has also taken its toll on Zynga. Moreover, with its Madden NFL 13 Social, Electronic Arts has started looking to translate its strength in the console-gaming arena onto Facebook's mobile platform. Let's take an early look at what's been happening with Zynga over the past quarter and what we're likely to see in its report.

Stats on Zynga

Analyst EPS Estimate

($0.04)

Year-Ago EPS

$0.00

Revenue Estimate

$143.35 million

Change From Year-Ago Revenue

(44%)

Earnings Beats in Past 4 Quarters

3

Source: Yahoo! Finance.

Can Zynga earnings ever recover?
In recent months, analysts have gotten less optimistic about Zynga earnings, doubling their loss estimates for the third quarter and widening loss projections for both this year and next. The stock has recovered 10% since late July, giving investors some hope for its future.

Zynga's fall has been dramatic. In its second-quarter results, Zynga saw revenue drop 31%, with a 45% drop in year-over-year daily active users of its games. Perhaps worst of all, Zynga lost its top social-gaming position on Facebook, as King.com's Candy Crush Saga led it into the top spot. Even worse, one of its much-heralded initiatives to make money went by the wayside, as it chose to exit its domestic real-money gambling efforts.

Now, Zynga faces yet another challenge. With major console game-makers releasing updated versions of the Xbox and PlayStation gaming platforms, a renaissance in console-based gaming could interrupt the rise in popularity of social games. That spells likely success for more diversified game producers, with Electronic Arts being an obvious winner, as it has demonstrated an uncanny ability to profit from social games on Facebook, console games, and other mobile and PC-based offerings.

Optimistic investors believe that new CEO Don Mattrick can turn Zynga around, with plans to refocus its efforts on building traffic rather than embracing its long-held freemium business model. Yet with co-founder Justin Waldron having announced just last week that he would leave Zynga, the company is clearly going through a crisis of confidence internally that could hinder efforts to create a successful recovery.

In the Zynga earnings report, watch to see how the new CEO decides to position the company for the future. With little to lose, Zynga needs to get bold about regaining its former Facebook glory and matching rivals like Electronic Arts with innovative new game offerings of its own. Without that, Zynga could quickly fade into irrelevance.

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Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends Facebook. The Motley Fool owns shares of Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.