It was a rough quarter for social and mobile publisher Zynga. The company has reported significant losses and a precipitous drop in unique users both year-over-year and in consecutive quarters.

According the second quarter financial release, Zynga lost $15.8 million dollars in the most recent quarter. What's worse for the company is the significant erosion of its user base. Monthly unique users dropped from 192 million in 2012 to 136 million (36 percent). This also represents a drop of 22 percent from last quarter.

Daily active users dropped 45 percent year-over-year, and 24 percent from last quarter. All of this is a troubling trend for the company.

Zynga recently laid off a significant number of staff and has seen a steady exodus of key officials. The company was in the news recently for the acquisition of Don Mattrick, former head of Microsoft's interactive business and the person at the center of much of the Xbox One controversy.

Zynga is projecting net loss for next quarter ranging from $14 million to $43 million, but Mattrick offered hope for the future. "The next few years will be a time of phenomenal growth in our space and Zynga has incredible assets to take advantage of the market opportunity," he said in a statement. "To do that, we need to get back to basics and take a longer term view on our products and business, develop more efficient processes and tighten up execution all across the company. We have a lot of hard work in front of us and as we reset, we expect to see more volatility in our business than we would like over the next two to four quarters. I'm privileged to lead Zynga and I look forward to spending more time with our players, employees and shareholders." 

[Source: Zynga]


Our Take
Zynga's user base is walking away from the company. In addition to what we heard earlier this week from EA on its shift away from Facebook, this spells trouble for the Farmville publisher. 

The company needs a drastic shift in culture and product. Solstice Arena, a mobile, streamlined MOBA, is a perfect example of ways the company can compete in today's market. Zynga bet too big on Facebook and cloned games. It needs to invest in innovation, ethical monetization, and unique experiences in order to survive.