CEO Update

Our Founder and CEO Mark Pincus today sent a note to employees outlining some important changes to the responsibilities of our senior team. Please find his note, posted in its entirety below.

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Team:

Today we’re announcing some important changes to the responsibilities of our senior team.

David Ko has been named chief operations officer.   In his new role, he will oversee strategy planning, international, infrastructure and operations of the company.  Since joining us in 2010, we’ve all seen Dave scale our mobile organization, grow our portfolio by 25 new games and help unite game development teams on our cross platform efforts.

Barry Cottle has been named our chief revenue officer and will be responsible for corporate and business development, distribution, strategic partnerships, advertising sales and operations, publishing and real money gaming.  Barry is a seasoned leader having built and scaled businesses for Palm, The Walt Disney Company and Electronic Arts.

Steve Chiang has been named our president of games where he will oversee all games and new IP development across web and mobile and unite all of our game teams under one leader.  We’ve all seen Steve guide the game development of Bubble Safari, ChefVille and FarmVille2 among others.  He has more than 20 years of experience in the game industry building AAA titles and teams.

I also wanted to let you know that our CFO, Dave Wehner is leaving to accept a senior position with Facebook.

Dave provided great leadership to our financial team over the past two years, helping guide the company’s transition from startup through IPO. Dave has been a great partner for me, the senior team and the whole company.  He remains a good friend to us all and we wish him success in his next endeavor.

Mark Vranesh has been named our chief financial officer.   This is a role he knows well – he was our CFO during our rapid growth as a private company.   As CFO, Mark built and ran our finance, accounting and controls functions and transitioned to the role of chief accounting officer in 2010.

These changes come at an important time.  We are positioning ourselves for long-term growth and I’m confident that we have the breadth and depth of management talent to deliver on our mission of connecting the world through games.  We are also today reaffirming our 2012 financial outlook that we communicated on October 24, 2012.

With some of our recent game success and the great work that’s being done to move with our players to mobile, we’re making progress.  We still have a lot of work to do, but it’s been great to see so many of you step forward to put us on the move again.

Please join me in congratulating David, Barry, Steve and Mark on their new roles.

Mark

Forward-Looking Statements

This blog posting contains, or incorporates by reference, forward-looking statements relating to, among other things, our outlook for full year 2012 bookings, adjusted EBITDA, stock-based expense, capital expenditures, effective tax rate, non-GAAP weighted average diluted shares and non-GAAP EPS; our efforts to position the company for long-term growth; and our future operational plans. Forward-looking statements often include words such as “outlook,” “projected,” “intends,” “will,” “anticipate,” “believe,” “expect,” and statements in the future tense are generally forward-looking statements. The achievement or success of the matters covered by such forward-looking statements involves risks, uncertainties and assumptions. Our actual results could differ materially from those predicted or implied, and reported results should not be considered as an indication of our future performance. Factors that could cause or contribute to such differences include, but are not limited to, our relationship with Facebook or changes in the Facebook platform or to our agreements with Facebook, our ability to launch new games in a timely manner and monetize these games effectively, our ability to control and reduce expenses, our ability to anticipate and address technical challenges that may arise, competition, the changing interests of players, intellectual property disputes or other litigation, asset impairment charges, our ability to retain key employees, acquisitions by us and changes in our corporate strategy or management.

More information about factors that could affect our operating results is included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Quarterly Report on Form 10-Q for the three months ended September 30, 2012, in our registration statement on Form S-1, as amended, filed with the Securities and Exchange Commission (“SEC”) on March 23, 2012 and in our Annual Report on Form 10-K for the year ended December 31, 2011, copies of which may be obtained by visiting our Investor Relations web site at http://investor.zynga.com or the SEC’s web site atwww.sec.gov. Undue reliance should not be placed on the forward-looking statements in this blog posting, which are based on information available to us on the date hereof. There is no guarantee that the circumstances described in our forward-looking statements will occur. We assume no obligation to update such statements. Please also see our discussion regarding non-GAAP financial measures, including with respect to our 2012 outlook, in our press release issued on October 24, 2012.

CEO Update

by Zynga on October 23, 2012

Our Founder and CEO Mark Pincus today sent a note to employees outlining structural changes Zynga is implementing today and providing some detail on cost-reductions that are taking place company-wide.  Please find his note, posted in its entirety below.

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Team,

Earlier today we initiated a number of changes to streamline our operations, focus our resources on our most strategic opportunities, and invest in our future. We waited to share this news with all of you until we had first spoken with the groups impacted.

As part of these changes, we’ve had to make some tough decisions around products, teams and people.  I want to fill you in on what’s happened and address any concerns you may have.

Here are the most important details.

We are sunsetting 13 older games and we’re also significantly reducing our investment in The Ville.

We are closing the Zynga Boston studio and proposing closures of the Zynga Japan and UK studios.  Additionally, we are reducing staffing levels in our Austin studio.  All of these represent terrific entrepreneurial teams, which make this decision so difficult.

In addition to these studios, we are also making a small number of partner team reductions.

In all, we will unfortunately be parting ways with approximately 5% of our full time workforce.  We don’t take these decisions lightly as we recognize the impact to our colleagues and friends who have been on this journey with us.  We appreciate their amazing contributions and will miss them.

This is the most painful part of an overall cost reduction plan that also includes significant cuts in spending on data hosting, advertising and outside services, primarily contractors.

These reductions, along with our ongoing efforts to implement more stringent budget and resource allocation around new games and partner projects, will improve our profitability and allow us to reinvest in great games and our Zynga network on web and mobile.

Zynga made social gaming and play a worldwide phenomenon, and we remain the industry leader.  Our success has come from our dedication to a simple and powerful proposition – that play is not just something people do to pass time, it’s a core need for every person and culture.

We will all be discussing these difficult changes more with our teams and as a company.  Tomorrow, Dave and I will be hosting a post-earnings webcast (details to follow) and next week we will be discussing our broader vision and strategy during our quarterly all-hands meeting.  I’m confident this puts us on the right path to deliver on the promise of social gaming and make Zynga into an internet treasure.

If you have any immediate questions, I hope you will talk directly with your manager, Colleen, or me.

I look forward to talking with you tomorrow.

Mark

Forward-Looking Statements

This blog post contains forward-looking statements relating to, among other things, our cost reduction plans and reduction in force; our proposed non-headcount cost reductions and our ability to rationalize our product pipeline and consolidate certain facilities; our launch of successful new games; the growth of the social games market, including mobile and advertising growth; building and expanding the Zynga Platform and the Zynga with Friends Network; and our future operational plans, prospects and opportunities to expand our business. Forward-looking statements often include words such as “outlook,” “projected, ” “intends,” “will,” “anticipate,” “believe,” “expect,” and statements in the future tense are generally forward-looking statements. The achievement or success of the matters covered by such forward-looking statements involves risks, uncertainties and assumptions. Our actual results could differ materially from those predicted or implied, and reported results should not be considered as an indication of our future performance. Factors that could cause or contribute to such differences include, but are not limited to, our relationship with Facebook or changes in the Facebook platform or our agreements with Facebook, our ability to launch new games in a timely manner and monetize these games effectively, our ability to control and reduce expenses, our ability to anticipate and address technical challenges that may arise, competition, the changing interests of players, intellectual property disputes or other litigation, asset impairment charges, our ability to retain key employees, acquisitions by us and changes in corporate strategy or management.

More information about factors that could affect our operating results is included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Quarterly Report on Form 10-Q for the three months ended June 30, 2012, in our registration statement on Form S-1, as amended, filed with the Securities and Exchange Commission on March 23, 2012 and in our Annual Report on Form 10-K for the year ended December 31, 2011, copies of which may be obtained by visiting our Investor Relations web site at http://investor.zynga.com or the SEC’s web site at www.sec.gov. Undue reliance should not be placed on the forward-looking statements in this release, which are based on information available to us on the date hereof. There is no guarantee that the circumstances described in our forward-looking statements will occur.  We assume no obligation to update such statements.

CEO Update

At Zynga, we are committed to engaging in a transparent dialogue with our employees, players and shareholders. As part of that effort we wanted to share the note our CEO and Founder Mark Pincus sent to employees today regarding Zynga’s Q3 2012 preliminary financial results.

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Team,

Today we announced preliminary Q3 financial results and revised our forecast for the rest of the year.  I want to add more color to the announcement and our future opportunity.

The challenges we faced in our web business in Q2 continued in Q3 and while many of our games achieved plan, we still experienced overall weakness in the invest and express category. To address this we’re further investing in other genres like casino where we already lead with Zynga Poker and blue PVP, a category we pioneered with Mafia Wars, and now have the opportunity to reinvent with the industry’s best talent here at Zynga.

While we’re disappointed with these financial results, we’re proud of the progress that our teams made on many fronts.  We continue to see the power of our player network, launching three games, each achieving top 10 status with more than 6 million daily players. Within its first six weeks, ChefVille has become a mainstay for 45 million monthly players and FarmVille 2 introduced stunning 3-D farming for the first time in a web browser becoming the most popular social game within three days of network launch.

So why are we lowering 2012 guidance?  There are a few factors contributing to a weaker than expected outlook for Q4.  The reduced performance of some of our live web games is continuing to impact results and we have several new games which are at risk of launching later than expected.

We’re addressing these near-term challenges by targeted cost reductions and focusing our new game pipeline to reflect our strategic priorities. At the same time, we are continuing to invest in our mobile business where we have one of the strongest positions in the industry. These actions support our strategy to transition from being a first-party web game developer to a multi-platform game network.

Let’s not lose sight of the bigger picture. The world is playing games, and is increasingly choosing social games.  Zynga has become synonymous with social gaming serving 311 million monthly active users, the largest player network on web and mobile.  When we offer our players highly engaging content they respond. FarmVille 2 has been our most successful launch since CastleVille. Our With Friends franchise is defining social play on mobile where Zynga represents 3 of the top 5 most popular mobile games in terms of time spent in the U.S. according to Nielsen. While we’re encouraged by our strong starting position on mobile, developing this new growth market to the scale of our web business will take time.

Over the past few weeks, we’ve been meeting with you all to check-in and answer your questions.  It’s exciting to hear how much passion you have to innovate on new ideas. We have an amazing opportunity to channel this into breakthrough new products that surprise and delight, excite and ignite our players.

Please join me and your fellow Zyngites today to discuss Q4 OKRs and our next steps.Thanks for all your hard work to pioneer social gaming. I look forward to working together to deliver on our mission of truly connecting the world through our games.

Mark

Forward-Looking Statements

This blog post contains forward-looking statements relating to, among other things, our expectations for third quarter financial results; our outlook for full year 2012 bookings; games under development and expected game launches; investments in certain game genres; building and expanding the Zynga Platform and Zynga With Friends Network; the continued success of our franchise games and our games, platform and network generally; our strategy to transition from being a first party web game developer to a multiplatform game network; potential cost reductions; and our future operational plans, prospects and opportunities to expand our business. Forward-looking statements often include words such as “outlook,” “projected,” “intends,” “will,” “anticipate,” “believe,” “expect,” and statements in the future tense are generally forward-looking statements. The achievement or success of the matters covered by such forward-looking statements involves risks, uncertainties and assumptions. Our actual results could differ materially from those predicted or implied and reported results should not be considered as an indication of our future performance.  Factors that could cause or contribute to such differences include, but are not limited to, our relationship with Facebook or changes in the Facebook platform or our agreements with Facebook, our ability to launch new games in a timely manner and monetize these games effectively, our ability to anticipate and address technical challenges that may arise, our ability to control and reduce expenses, competition, the changing interests of players, intellectual property disputes or other litigation, asset impairment charges, including any income tax impact resulting from our impairment charge related to OMGPOP, our ability to retain key employees, acquisitions by us and changes in corporate strategy or management.

More information about factors that could affect our operating results is included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Quarterly Report on Form 10-Q for the three months ended June 30, 2012, in our registration statement on Form S-1, as amended, filed with the Securities and Exchange Commission on March 23, 2012 and in our Annual Report on Form 10-K for the year ended December 31, 2011, copies of which may be obtained by visiting our Investor Relations web site at http://investor.zynga.com or the SEC’s web site at www.sec.gov. Undue reliance should not be placed on the forward-looking statements in this blog, which are based on information available to us on the date hereof. There is no guarantee that the circumstances described in our forward-looking statements will occur. We assume no obligation to update such statements. The financial information set forth in this blog reflects our current preliminary estimates, is subject to the completion of our third quarter review process, and is subject to change. Our full third quarter and full year 2012 results could differ materially from the preliminary estimates and outlook we have provided in this blog.