Zynga's Social Network Games
Social games developer and creators of "CastleVille" Zynga is preparing to report its’ second-quarter earnings, even though the company has seen massive dips in its user-base. Zynga.com

Social games developer Zynga is preparing to report second-quarter earnings, even though the company has seen massive dips in its user-base.

The company, known for games like CastleVille, FarmVille, and Mafia Wars, has staked a claim on the social gaming market through its own website (Zynga.com), as well as through Facebook and originally, Myspace. Zynga has maintained its hold on the social gaming (and to an extent, mobile gaming) by acquiring OMGPop, makers of Draw Something.

The company, in recent months, has seen a massive dip in its user-base, according to gaming site Gamasutra. This news comes just days after Dave Pottinger, former lead designer on CastleVille, left Zynga to form his own, smaller game development studio, BonusXP.

Zynga's online games have seen a 3.5 million user drop in recent months, leading some to speculate that the bubble has burst in terms of social gaming's dominance on the market. About 3.5 million users are considered a critical threshold for social gaming, Doug Creutz, an analyst at Cowen and Company, told Gamasutra.

Eight out of 10 of Zynga's top games have dipped below the 3.5 million user number. This could spell harsh financial times for the company, as advertising revenue, as well as transactions conducted in-game are no longer happening. Zynga has had its share of financial difficulties in the past, but this reduction in users is particularly impactful.

This projected loss indicates a potential drop in revenue generated by Zynga. Social games traditionally function differently than a console or disc-based game in that they are typically free to install or download, yet often require the use of microtransactions to generate revenue for the developer. Many developers have been successful in creating online games that do, in fact, generate more money than the standard game publisher's offerings. Even to the point where EA (Electronic Arts), one of the biggest game publishers in the world, now has a social gaming platform, as well.

Zynga is expected to report its quarterly results on Wednesday.

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