Zynga Earnings May Reflect Facebook Gaming Slowdown: Analyst

By Katie Little, Special to CNBC

NEW YORK ( CNBC) -- Although Zynga ( ZNGA) beat earnings and revenue estimates on Thursday, one analyst told CNBC that the company may be experiencing the effect of the slowing of Facebook's social game market.

The company, which operates its games on Facebook, Zynga.com, Google+, Tencent, Apple ( AAPL) iOS, and Google ( GOOG) Android, saw quarterly advertising revenues more than double year-over-year.

At the same time, Facebook's portion of the company's payments and fee revenue slowed, said Colin Sebastian, an equity research analyst at Baird Research.

"But as we saw earlier last week from Facebook's revised filing, the social game market on Facebook may be slowing a bit, and Zynga appears to be experiencing that trend as well," Sebastian told CNBC's "Squawk Box."

More from CNBC
10 Unusual Vodka Flavors
Economy's Biggest Drag Right Now Is Government
Are You in the Wrong Job?

In its filing with the U.S. Securities and Exchange Commission , Facebook said that its advertising business, which comprises the bulk of its revenue, typically slows down in the first three months of the year. In the first three months of 2012, its revenue declined 6% to $1.06 billion from the previous quarter.

Last year, Zynga accounted for approximately 12% of the social-networking site's revenue, Facebook said.

In its earnings report, Zynga said that its daily active users grew 6% from the year-ago period to 65 million, topping the Street's expectations. Meanwhile, monthly active uniques grew 25% over last year while monthly active users rose 24%.

The company has stepped up its efforts to draw users to its own site with its March launch of "the Zynga Platform, which includes Zynga.com (beta release), a new destination for social games, and Zynga Platform Partners, a program that enables third-party developers to publish their games through Zynga," the company said in its earnings press release.

"It's somewhat speculative on their own platform," Sebastian said. "It's difficult and expensive to build your own platform, and so I think the jury's still out, although we do think that it is certainly a viable strategy for Zynga."

Still, with Facebook's 900-million-user base, the site remains an efficient place to acquire new customers, he said.

Zynga has also shown strong growth in mobile games, which helps the company's diversification. In general though, monetization of users is lower for mobile games than it is for the social game market, the analyst said.

"I think monetization of users on mobile platforms is still somewhat immature compared to the social game market, so we'll see how that evolves over time," he said. "I think there's an opportunity to close that gap, but in general, I think revenue diversification is positive for Zynga given their dependence thus far on Facebook."

-- Written by Katie Little at CNBC
CNBC is a world leader in business news, providing real-time financial market coverage and business information.