The Good

Zynga's (Nasdaq: ZNGA) third-quarter revenue rose 17% to $316.6 million, topping the high end of its expectation, which was $305 million. Bookings growth was slower, though, rising a modest 4% to $256 million. That figure also edged past the high end of guidance by a hair. Zynga posted a GAAP net loss of $52.7 million, or $0.07 per share.

On an adjusted basis that excludes the $95.5 million impairment related to Draw Somethingand $37.8 million of stock-based compensation expenses, among other things, the net loss was "only" $361,000, or close enough to breakeven when rounding per share.

As part of its turnaround efforts, Zynga is implementing a cost reduction plan that hopes to generate pre-tax savings of $15 million to $20 million next quarter. The company laid off roughly 150 employees, or 5% of the total workforce. The layoffs actually broke a couple days ago, along with the news that Zynga is also shuttering 13 different titles as well. Cost reductions are a mainstay of just about any turnaround, and Zynga is no different.

Zynga is also implementing a share repurchase program of $200 million, which could potentially be viewed as confidence that shares are undervalued. But then again, we know that share repurchase programs don't always work out as intended.

As part of its ongoing push into real-money gaming (i.e., gambling), Zynga has partnered with to offer casino and poker products in the U.K. These are expected to launch in the first half of next year, and Zynga recently hired online gambling exec Maytal Olsha to help lead that push.

The Bad

There's no doubt Zynga's had its fair share of challenges lately. CEO Mark Pincus conceded that the company has failed to meet its own growth expectations and owned up by citing Zynga's game execution and player migration to mobile platforms.

On Facebook's platform, which has long been Zynga's bread and butter, the social networker recently said its payments from Zynga dropped 20% last quarter. A year ago, Zynga comprised 62% of Facebook's payments segment; that figure has now fallen to 43%.

Monetization also decreased with average bookings per user, or ABPU, falling 19% to $0.047. CFO David Wehner attributed this to players shifting from older, higher-monetizing games to newer, lower-monetizing games.

The Ugly

Investors should closely monitor the relationship between bookings and revenue. Since bookings includes an adjustment for the change in deferred revenue, it represents Zynga's future revenue pipeline. If bookings are lower than revenue, then players are consuming virtual goods they've already purchased faster than they're buying new virtual goods, a negative indication of future revenue recognition. This has steadily deteriorated:

Znga B Vs R Labels

Source: SEC filings.

Over the past eight quarters, five of them have seen bookings levels below recognized revenue (seen above), with the most recent quarter being the worst.

For the first time in two years, Zynga also saw a sequential drop in monthly unique users, or MUUs. In addition, monthly unique payers, or MUPs, have also fallen to 3 million, representing just 1.7% of the MUU base.

Mup Perc Labels

Source: SEC filings.

That's a notable drop in player engagement, but Wehner blamed this fall on Draw Something. It looks like all that criticism of the OMGPOP acquisition was well-deserved, as Zynga has now taken a $95.5 million impairment related to that purchase, and the only meaningful title it got for all those dollars has been a major contributing factor to Zynga's recent woes.

Bottom's Up?

Zynga is certainly cheap right now, with its current cash position of $1.6 billion representing nearly 90% of its $1.8 billion market cap currently. The depressed valuation may lend to the notion that Zynga has bottomed out, but that doesn't mean I like its business one bit. There have been a couple positive developments over the past quarter, but far more negative ones.

Fool contributor Evan Niu, CFA, has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insights makes us better investors. The Motley Fool has adisclosure policy.