After laying off 18 percent of its employees, Zynga is cutting down on its Web-based business to hone in more on mobile. To monetize these users, the company will need to focus on retaining users with freemium-based business models.

As consumers continue to gravitate towards mobile devices, Zynga?s restructuring and cost-cutting move points to the challenges that mobile games present marketers with. Not only do they have to create compelling game content that brings users back repeatedly, but there are also challenges with monetizing a growing audience with new advertising methods.

?None of us ever expected to face a day like today, especially when so much of our culture has been about growth,? said Mark Pincus, CEO of Zynga, San Francisco in a blog post.

?But I think we all know this is necessary to move forward,? he said.

?The scale that served us so well in building and delivering the leading social gaming service on the Web is now making it hard to successfully lead across mobile and multiplatform, which is where social games are going to be played.?

Zynga did not respond to press enquiries for a direct quote.

Game on mobile
The 18 percent of Zynga employees being laid off is equivalent to 520 workers.

As a result of the layoffs and office closures, Zynga expects to cut $70 - $80 million in pre-tax annualized expenses.

Zynga?s Web-based business has increasingly sunk over time as more consumers take to their mobile devices to play games.

Additionally, mobile traffic from social media sites continues to grow with Facebook reporting that 64 percent of its users now access the site from a handset. 

With the shift from desktop to mobile, it has also become tougher for marketers and developers to create mobile games that keep the attention of consumers for longer periods of time.

?Zynga already has a mobile presence which has been slipping over the last few quarters,? said David MacQueen, London-based director of wireless media strategies at Strategy Analytics.

?The challenge for any mobile gaming company is retention,? he said.

Monetizing the shift from Web to mobile has been problematic for Zynga and other game developers.

Embracing the freemium model will be key to Zynga?s success, according to some experts.

Although persuading consumers to purchase premium content will always be a challenge for marketers, consumers are steadily becoming more comfortable buying paid apps and content if the quality is high enough.

For freemium models to work though, marketers need a substantial user base first, which is where retention becomes important for developers.

?Retention is much cheaper than buying a new user base,? Mr. McQueen said.

?By ?buying a user base? I mean either spending a lot on advertising to attract a user base ? which Zynga has done heavily in the past ? or even acquiring a user base by acquiring a company, such as OMGPop,? he said.

?Both of these methods are quite expensive, so if Zynga?s decline continues and erodes the capital the company has available to acquire new users, their problems could snowball.?

Direct billing
Direct carrier billing could also be a tactic for Zynga to use to help scale and monetize its mobile business.

According to Dr. Windsor Holden, principal analyst at Juniper Research, Hampshire, England, a direct carrier billing mechanism would help Zynga reach a wider group of consumers that are not only on one platform.

In-app advertising could also potentially help Zynga, but there will also continue to be challenges around the effectiveness of banner ads and interstitials.

Asia, for instance, is an example of a market that has cracked the nut on social and mobile monetization, per Dr. Holden.

?I would say that mobile offers tremendous monetization opportunities for Zynga,? Dr. Holden said.

?We?ve already seen how social media sites in Asia ? GREE, Mobage and Mixi ? have successfully utilized mobile to generate revenues from in-game purchases,? he said.

?Furthermore, offering the option of direct carrier billing as a billing mechanism above and beyond credit card billing gives social media gaming companies a far greater customer base to monetize.?

Final Take
Lauren Johnson is associate reporter on Mobile Marketer, New York