Zynga 2015 Annual Report Download - page 13

Download and view the complete annual report

Please find page 13 of the 2015 Zynga annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 151

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151

Table of Contents
which are still evolving and could be interpreted in ways that could harm our business. Any court ruling or other governmental action that imposes liability on
providers of online services could result in criminal or civil liability and could harm our business.
In the area of information security and data protection, many states have passed laws requiring notification to users when there is a security breach for
personal data, such as the 2002 amendment to California’s Information Practices Act, or requiring the adoption of minimum information security standards that are
often vaguely defined and difficult to implement. The costs of compliance with these laws may increase in the future as a result of changes in interpretation.
Furthermore, any failure on our part to comply with these laws may subject us to significant liabilities.
We are also subject to federal, state and foreign laws regarding privacy and protection of player data, including the collection of data from minors. We post
our Privacy Policy and Terms of Service online, in which we describe our practices concerning the use, transmission and disclosure of player data. Any failure by
us to comply with our posted privacy policy or privacy related laws and regulations could result in proceedings against us by governmental authorities or others,
which could harm our business. In addition, the interpretation of many data protection laws, and their application to the Internet is unclear and in a state of flux.
There is a risk that these laws may be interpreted and applied in conflicting ways from state to state, country to country, or region to region, and in a manner that is
not consistent with our current data protection practices. Complying with these varying international requirements could cause us to incur additional costs and
change our business practices. Further, any failure by us to adequately protect our players’ information and data could result in a loss of player confidence in our
services and ultimately in a loss of players, which could adversely affect our business.
With the move of our services to mobile devices, we are also subject to additional regulations regarding communication via this channel, such as the
Telephone Consumer Protection Act (“TCPA”). The interpretation of many of these laws, including the TCPA, and their application to current means of
communication through mobile devices is unclear and in a state of flux. These laws may be interpreted and applied in a manner that is not consistent with current
industry practices. The costs of compliance with these laws may increase in the future as a result of changes in interpretation and may greatly reduce our ability to
contact our players through this channel. Furthermore, failure on our part to comply with these laws may subject us to significant liabilities.
In addition, some concern has been expressed in Europe and in certain countries that social gaming should be regulated to protect consumers, in particular
minors and persons susceptible to addiction to social games. European regulators are also considering the efficacy of existing consumer protection laws as they
relate to protection of consumers for the purchase of virtual items in applications, including game applications. These concerns could lead to the adoption of
legislation or regulations that may impose additional burdens upon us, prohibit the offering of our games to certain users or territories, increase our costs or require
changes to our games. These concerns have already led to certain changes in Apple and Google policy and could lead to additional changes.
Also, because our services are accessible worldwide, certain foreign jurisdictions have claimed and others may claim that we are required to comply with
their laws, including in jurisdictions where we have no local entity, employees or infrastructure.
Separately, we had a partnership agreement with bwin.party to develop, test and operate certain real money online poker and casino games in the United
Kingdom which ended in February 2015.
Seasonality
During fiscal year 2015, approximately 23% of our revenue was derived from advertising and other. Advertising budgets are generally highest during the
fourth quarter and decline significantly in the first quarter of the following year, which affects the revenues we derive from advertisements and offers in our games.
Additionally, we generally experience increases in game downloads and resulting online games revenues in the fourth quarter and first quarter corresponding to
increases in smartphone and tablet purchases during the holiday shopping season.
10