I like you, Zynga (NASDAQ:ZNGA). You punch failure in the face.
Someone gave you guys a T-shirt cannon full of hundred-dollar bills, and you never missed a chance to fire it. I am a strong believer in conviction, and you lack none. No matter what nearly everyone has been saying about your condition, you have not changed course. It's a double-edged sword -- if you're right, you're all insta-geniuses. If you're wrong, I'll expect David Einhorn to show up at your front door with a sledgehammer. What's going on over there?
You're a tough beast to love, Zynga.
Back in April, you upped your guidance for the year. It was a wonderful ceremony, but a short honeymoon. Since then, it appears that you have slashed guidance and basically told us the short attention span of your users has shifted -- which by its very nature should not be surprising.
I know this was a while ago, but you bought a company with one product that had been around for a corporate nanosecond -- and you paid $183 million for it. Now, you've had to lower your guidance, and then lower it again, because you failed to realize that a company called OMGPOP wasn't as sound of an investment as its name suggests.
Another thing I like about you, Zynga, is that you've made yourself indispensable to other companies, regardless of fading interest from end users.
In its prospectus, another Internet company called Facebook (NASDAQ:FB) shows that 14% of its revenue in 2011 came from you. After the biggest IPO debacle of the decade thus far, the last thing Facebook needs is for a big chunk of its revenue to vanish. Realistically, that is unlikely, as its management has been trying hard to get off the Zynga juice. According to Mark Zuckerberg, the company's overall focus is monetization of its mobile platform. Its mobile ad platform is supposed to be more lucrative for both the company and its advertising partners -- though let's wait for the jury to come back on that one.
Facebook enjoyed a nice bounce lately because it finally realized it needed to tell investors there was hope at the end of the sad road. Facebook can't be just about making money to build better products -- it has to make money to make shareholders money. You have yet to assuage us, Zynga, and you've paid for it. The stock has gone from an incredibly overvalued $16 per share to a probably still incredibly overvalued $2.48. Have you found a way of melting down FarmVille coins yet? Because that may be your last hope.
We can't blame everything on CEO Marc Pincus, even though there have been calls for his head.
Pincus attempted to calm down analysts and shareholders by giving his plan to clean things up. First, he's going to fire some people, because you always want to get rid of employees when your business depends on developer talent. Next, he's going to focus on "strategic priorities" such as mobile and gambling titles.
I'm on your side
I don't want you to fail, Zynga. You are the one that taught me there are four-letter words out there that aren't inappropriate. As far as tech companies go, you have yourself one pretty-looking balance sheet -- lots of cash and no debt. The risk of having that $1.5 billion is that you may spend it on Chinese finger traps and pinwheels (considering the results of your previous shopping trips). But really, if you drive toward the gambling business, you have a shot at making something of yourself. Everyone loves to gamble, and even more so on the Internet. Chase that dragon with everything you have -- which is $1.5 billion and a legion of tractors.
Fool contributor Michael Lewis owns none of the stocks mentioned above. You can follow him on Twitter, @MikeyLewy. The Motley Fool owns shares of Facebook. Motley Fool newsletter services have recommended buying shares of Facebook. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.