Apr 16, 2014 · 4 minutes

Reversals of fortunes are so common in the gaming industry that they sometimes feel like they're part of a game. Win an early round only to find things have turned against you in the next round. That's okay, because there's always another round. There's always a chance to become a winner again.

It's not just that gaming is as hit-driven a business as Hollywood movies. It's not just that consumers are unpredictably fickle about the games they like, and scornful of attempts to try to manipulate them into new titles. It's also that the platforms where people play most games keep shifting – from graphics-intensive consoles to web-based casual games to addictive mobile apps.

Somewhat predictably, Zynga has ridden the up- and down-cycles that most successful gaming companies encounter. But the volatility came quickly. And the catch is that it listed as a public company right as the inevitable down-cycle was coming. When it came, it translated into declining booking and active users – two metrics that have declined for six straight quarters – prompting investors to abandon the stock.

Zynga's stock chart looks like a visual representation of that volatile ride: Priced at $10 a share in what was then the biggest Internet IPO since Google, Zynga's stock shot up near $16 before plunging to $2 a year later, a level near where it languished for months. Last month, however, it recovered briefly to $5 a share amid hope that a new round is starting that could see Zynga rebound. It closed Tuesday at $4.01 a share.

Few are expecting Zynga to return to the leading position in casual gaming. Other companies like, first Rovio and later Supercell and King Digital, have dominated app stores that once belonged to Zynga. King's recent IPO may end up leading to to a Zynga-like trajectory of its own. But even if King's popularity wanes, Zynga will have to fight hard to win over Candy Crush Saga addicts.

It's not just that Facebook's site isn't supporting Zynga games the way it did in 2009 and 2010, it's more that Zynga was slow to adapt to the realities of mobile – a shift that Facebook made quickly, whatever the cost. The result is that Facebook now trades 50 percent above its offering price while Zynga is trading 60 percent below.

If that doesn't illustrate the importance in not delaying when following your users to mobile, I don't know what will. Zynga has finally gotten the message. Unlike previous attempts to graft popular web games like Farmville to mobile apps, Zynga is this time taking a mobile-first approach, optimizing game design for mobile usage by, for example, allowing for shorter sessions.

Zynga will be rolling out a few mobile-first games in the second quarter, including a new Words with Friends app and an updated Zynga Poker app, but analysts seem most encouraged by the new mobile version of its iconic Farmville app. Farmville 2: Country Escape has had a soft debut in Canada and Australia. While some gaming reviews have greeted it with snark, user reviews in the App Store (four-and-a-half stars) and Google Play (four stars) are encouraging, if not indicative of a blockbuster.

Last week, Morgan Stanley analyst John Egbert released a report that rated Zynga's stock as equal weight but drew notice because a close look at Farmville 2: Country Escape indicated it could reverse the decline in Zynga's fortunes. After noting that Zynga bookings fell 37 percent in 2013, Egbert forecast they would rise 10 percent this year and another 25 percent in 2015.

That's not close to the growth rates Zynga saw in its heyday, but it's enough given how low the bar has become to enable a rebound in bookings. As Egbert wrote in his report,

Farmville 2: Country Escape could potentially become the company’s biggest mobile launch to date. Zynga believes a top 20 grossing title can make between $100MM and $300MM annually, which means FV2CE could have a meaningful impact on Zynga’s 2014E bookings if it is able to crack into the top 20. We think that given its success in test markets on both the iOS and Android platforms, FV2CE has a better chance of becoming a top 20 grossing app than any title Zynga has released in the past.
Also last week, an analyst at Wedbush Securities put a $7 a price target on Zynga shares, based on the promise of its mobile-first strategy. Zynga CEO Don Mattrick has also indicated that pilot programs for real-money poker games will launch later this year, a market that Zynga has discussed before without setting down clear plans.

It may be some time before any rebound in bookings translates into a rebound in Zynga shares. Although the company is slated to report its earnings on April 23, that report will focus on Zynga's first quarter and Farmville 2 won't be rolled out widely until the current quarter. The company's new management will, however, have a chance to convince investors that the changes have been made to make a turnaround possible.

That may be the best news for Zynga investors right now: This isn't the same company it was a year ago. It has a new CEO in Mattrick and has cleaned house in its executive ranks. It's overhauled its approach to mobile games. Turnarounds are rare in tech, and when they come they are often modest in scope. The next few months will show whether Zynga can become a winner again – at least for the next round.

[Image via Wikimedia]