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Following massive user drop, Zynga folds its gambling plans

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Zynga Poker (Credit: Zynga)

New Zynga CEO Don Mattrick has a lot of work ahead of him.

As the company continues to see users abandon its games at an alarming rate, it has reversed course on its plan to pursue real-money casino games in the U.S., a combination that led to investors punishing the stock Friday.

On the surface, the earnings revealed Thursday afternoon were actually better than analysts were expecting. Zynga reported second-quarter revenue of $230.7 million -- notably more than the $160 million Wall Street expected.

The good news ended there, though. Daily active users fell 45 percent from 72 million a year ago to 39 million last quarter. Monthly active users were down 39 percent, sliding from 306 million to 187 million.

[Related: Mattrick to make at least $50 million at Zynga]

And the players who stuck around were spending less. "Bookings," corporate speak for spending by players, were down 38 percent compared to a year ago. The company said it looked like that trend would continue, with bookings for this quarter already showing softness.

Zynga shares were down 16 percent in mid-day trading Friday.

As investors absorbed this bad news, they were caught short by Zynga's announcement that it was backing out of the U.S. online gambling market (though would continue to pursue it in the U.K.).

Many analysts had viewed real-money gambling as a way for the company to start generating dependable revenue. Under Mattrick, however, it appears Zynga will remain largely focused on games.

"The decision really centered around focus," said Zynga COO David Ko

[Related: Zynga loses its zing with players, investors]

Mattrick addressed the company's troubles head-on in an earnings call with analysts, saying he expects the volatility that has become Zynga's unfortunate trademark to continue for another six months to one year, as the company resets and develops a new strategy.

"Getting a business back on track isn’t easy and isn’t quick," he said. "We have a lot of hard work in front of us but I believe we can succeed as a team and Zynga can do this. ... There‘s no denying we’re not where we want to be. We’ve not met our investors’ expectations, we’ve not met our own expectations and most importantly, we’ve not met our players’ expectations. But there’s also no denying that we have what it takes to get back to winning. I know we can do better."

Mattrick said he plans to spend the next 90 days conducting a top-to-bottom review of the company and its practices while assessing and resetting the product pipeline.

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