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zynga11Zynga has had a bad run. The social gaming titan that built itself on a slew of games ending in “ville” is now a shadow of its former self. In June, the company laid off 520 employees and shuttered its New York office.

Its quarterly earnings release this afternoon was something of a mixed bag. The good news for Zynga is that its bad news isn’t as bad as everyone was expecting. The social game maker reported a loss of 1 cent per share this quarter, which is better than the 4 cents a share loss that analysts had predicted.

The bad news is that Zynga is hemorrhaging users. The company’s quarterly report shows that its daily active users have dropped to 39 million in Q2, down from 72 million in the same period last year. Monthly active users sank 39 percent year over year, from 306 million in Q2 2012 to 187 million in 2013.

It would seem that the company has lost its mojo, as other competitors in the social gaming scene — such as King, which was name-checked by Mark Zuckerberg in yesterday’s Facebook earnings call — pick up more users in an increasingly mobile-driven casual gaming market.

Investors were holding out hope for the company to add real-money gambling to its list of offerings, but Zynga said in its earnings press release that a gambling license in the United States is currently off the table.

“Zynga believes its biggest opportunity is to focus on free to play social games. While the Company continues to evaluate its real money gaming products in the United Kingdom test, Zynga is making the focused choice not to pursue a license for real money gaming in the United States. Zynga will continue to evaluate all of its priorities against the growing market opportunity in free, social gaming, including social casino offerings.”

Seattle-based DoubleDown Interactive, owned by gambling giant International Game Technology, will certainly be looking to take advantage of Zynga’s weakening market position for its own casino-style game offerings.

Don Mattrick, the former head of Microsoft’s Xbox division and Zynga’s new CEO, said that Zynga has a long road ahead of it to get back to where it was.

“Getting a business back on track isn’t easy and isn’t quick,” he said on the company’s earnings conference call. “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.”

While Mattrick seems committed to the journey ahead, it doesn’t seem all of Zynga’s investors are ready to go with him. As of press time, the company’s stock is down more than 14 percent in after hours trading following the news.

Previously on GeekWire: Don Mattrick’s first challenge: Zynga loses social casino crown

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