Now That Zynga's Earnings Are Out, Here Are Three Questions Mark Pincus Must Answer

Zynga's fourth-quarter earnings are out.

The headline numbers:

• Q4 revenue of $311 million, flat year-over-year, and bookings of $261 million, down 15% year-over-year

• Q4 net loss of $48.6 million, down 89% year-over-year, adjusted EBITDA of $45 million, down 34% year-over-year

• Q4 GAAP EPS of ($0.06) and non-GAAP EPS of $0.01

The stock closed up 7.4% at $2.75, and it rose further to $2.92 in after-hours trading.

Revenues beat expectations of around $250 million, Barron's notes.

That appears to be because Zynga did a better job in the fourth quarter of getting the small fraction of users who spend money in its games to pony up.

While the number of monthly active users contracted from 311 million users in the third quarter to 298 million in the fourth quarter, and daily users shrank from 60 million to 54 million, the number of monthly unique payers—paying customers—only shrank 2 percent quarter-over-quarter to 2.9 million.

The average Zynga user spent $0.051 a day on its games in the fourth quarter, up 8 percent from $0.047 in the third quarter but down from the year-ago figure of $0.061.

That's a crucial metric to watch, a number which has taken a beating as players have migrated to mobile, where Zynga has a harder time figuring out how to get players to spend money in games than it did through social games on Facebook.

The key questions Zynga CEO Mark Pincus will need to address on the earnings call:

• How is Zynga doing on mobile games, as well as multiplatform titles that bridge the Web and mobile devices?

• Now that Zynga's renegotiated its relationship with Facebook, how is it planning to get new users on non-Facebook platforms?

• When will newly released games restart Zynga's growth engine?

Here are highlights from the earnings call:

• Advertising performed better in the fourth quarter, accounting for some of the expectation-beating performance in revenues.

• Pincus didn't address recent executive departures, but highlighted promotions and called Zynga's team "the best bench in the industry." Zynga has "more talent against this opportunity than any other company."

• $100 million in gross bookings from FarmVille franchise in the fourth quarter—sixth consecutive quarter at that level.

• Zynga Poker monthly audience grew 8 percent.

• Zynga players send more than 1 billion gifts, in-game help, and other messages a day.

• Words With Friends grew 13 percent in daily active users in the fourth quarter.

• CityVille 2 was a flop, as was The Friend Game, an experimental social game. Zynga is shuttering both. COO David Ko said the company is trying to get more disciplined about shutting games that don't catch on.

• Zynga "remains on track" to deliver online betting games in the UK in the first half of 2013 through a partnership with Bwin.party.

• Older social games like FarmVille, CityVille, and FrontierVille account for most of the decline in bookings. FarmVille 2 launch compensated for that decline, said CFO Mark Vranesh.

• Cash at $1.65 billion, up $4 million from the third quarter even with the commencement of a share buyback.

• Question about whether CityVille 2 was launched too soon after FarmVille 2. "Hard to say," says Ko. "We are learning."

• Third-party mobile games published by Zynga, like Phosphor's Horn and Fat Pebble's Clay Jam, will not contribute materially to revenues in 2013, says Vranesh.

• "Lighter slate of games to launch in Q1." Trying to focus on launching games that can become franchises.

• Slight decline in mobile paying customers in the quarter, mostly due to Draw Something.

And that's a wrap!