Zynga's Fate Rides on CastleVille

 | Sep 19, 2013 | 3:47 PM EDT
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Zynga (ZNGA) is finally having a good day when the rest of the market is flat. Wednesday, despite a barn-burning, Fed-induced stock rally, Zynga shares were flat.

Almost three months into Don Mattrick's tenure as Zynga CEO and there haven't been any real changes observable to outsiders.

It wouldn't surprise me to hear about a layoff following his three-month anniversary as CEO. Three months is a sufficient amount of time to get a sense of what's what at the company. It's then time for the new CEO to put his or her mark on the company.

But while a big job cut will certainly be a positive for the company, what is really going to start moving the stock will be growth in daily and monthly active users (as well as good signs of monetization).

That has to happen through games.

But here's the thing: We probably won't see any games that Mattrick has overseen from start to finish for another year. Therefore, all the games we'll see in the meantime will have been started well before he arrived. That doesn't mean they won't be good, just that they came out of the old Zynga era.

Mattrick has, of course, had a say in which games in development see the light of day. Earlier in the year, Zynga was boasting that it had a back-half-weighted schedule of new games coming out. So far, the back half of this year hasn't seen many new titles. That suggests he has killed a lot of those planned games already.

Wednesday, Zynga released "CastleVille Legends" on mobile. After a day, it's No. 4 in the U.S. on the iOS chart according to AppAnnie. That's OK, but it will really take the next week to get a sense if this game is going to be a big hit or not.

It is important for Zynga. If this game can hit, it's likely that Zynga can very quickly come out with other derivative 'Ville games on mobile and promote them to the Zynga user base.

An advantage that Zynga has over lots of other publishers is that it still has a large mobile network of players. That lets them market other games to those users effectively cost-free. One of the big challenges to lots of publishers is the cost of acquiring new gamers to try and then keep coming back to play their games. Customer acquisition costs can be huge.

If this first CastleVille can be big on mobile, Zynga can likely take advantage of that in short order, which will help them carry through the period before the new "Mattrick Only" titles start to show up next year.

If CastleVille Legends stays popular for the next week, Zynga is a buy.

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