Beagle3, James33 are you saying their model is not sustainable? Do you think they would be afloat or keep loosing money were they cut their marketing expenses significantly?
I'd say it's not sustainable since there is a limited lifetime value of a user in their game space. In order to continue increasing revenue you must grow new users at a rate that exceeds the loss of existing or prior users that have aged out of that phase of "spend money in game."
I suspect that Zynga IPO'd near the top of their possible revenue and without the ability to constantly acquire new users and/or re-engage previous users who have moved past spending money in-game they are going to decline over time. Even if they establish a stasis between loss of user revenue vs new revenue their share price will have to drop since the P/E multiplier would be that of a matured company rather than a growth stock. Share price would be discounted accordingly.
