Five Reasons Yahoo Shouldn't Buy Zynga

Yahoo (NASDAQ: YHOO) is rumored to be interested in a bid for Zynga (NASDAQ: ZNGA).

At least one analyst, Wunderlich's Blake Harper, believes that Zynga has officially become a possible takeover target for the firm, along with Yelp (NASDAQ: YELP) and OpenTable (NASDAQ: OPEN).

As the owner of the FarmVille brand, Zynga might seem like an attractive acquisition. If anyone could turn the company around, it's Yahoo. That does not mean that Yahoo should be ready to open its checkbook. There are many reasons why the company should forget Zynga ever existed.

Zynga? Where?

Never mind Yahoo. Most consumers are beginning to forget Zynga exists.

While the Angry Birds fad continues to thrive for Rovio, Zynga has been unable to keep its own fads -- namely FarmVille and Words With Friends -- from losing their luster.

AppData's application chart indicates that several dozen Zynga games are losing players. Far fewer Zynga games are gaining players. This is yet another sign of trouble for the struggling enterprise.

The Gambling Initiative Might be a Pipedream

Investors hope (and perhaps believe) that Zynga will one day become the leader of online gambling. However, there is no evidence to confirm this assumption.

Zynga's sketchy track record and lackluster game efforts should be more than enough to scare away potential investors, particularly Yahoo. Why should anyone believe that its gambling initiative will be any more successful?

Zynga Loses Millions of Players Every Month

Without any compelling games to inspire users to stick around, Zynga has been losing millions of players every month.

Despite the declines, Zynga is up more than 64 percent year-to-date as investors buy into the hope that the company will turn things around with a slate of gambling games. As of this writing, however, Zynga's shares are down more than four percent.

Horrible Things for Revenue

Zynga CEO Mark Pincus has admitted to doing "every horrible thing in the book just to get revenues." Who would want to buy a company from a man like that?

No Success? No Problem

Zynga has been doing so poorly that it laid off more than 100 employees, closed multiple studios and shut down several games last year.

That didn't stop the company's CEO from spending $16 million on a brand-new home.

Note: The author of this article has no position on Zynga, has never had a position on Zynga, and does not plan to take a position within the next 72 hours.

Follow him @LouisBedigianBZ