Zynga Inc.

Thank you, Danielle, and good afternoon. Welcome to all of you who are joining us today.

On behalf of the Zynga management team, I would like to thank you for spending time with us this afternoon. We have with us our Chief Executive Officer, Don Mattrick; Chief Operating Officer, Clive Downie; and Chief Financial Officer, David Lee.

Before we begin, please note that we are targeting a 1-hour call. During the course of today's call, we will be making forward-looking statements related to, among other things, strategy and expectations for future performance, our 2015 slate and outlook for Q4.

Actual results may differ materially from the results predicted. Factors that could cause or contribute to such differences are detailed under the caption Risk Factors in our Form 10-K and elsewhere in our SEC filings.

These include the ability of key games, including our top franchises, to sustain or grow audience and bookings and our ability to launch successful new games and features in a timely manner. We will also discuss certain non-GAAP financial measures during the call.

Reconciliations to the most directly comparable GAAP financial measures are provided in the press release and on our Investor Relations website. Be sure to look at these reconciliations as the non-GAAP measures are not intended to be a substitute for our GAAP results.

This conference call is being webcast on the Internet and is available through Zynga's Investor Relations website. An audio replay of this call will also be available on our website in a few hours.

With that, I would like to turn the call over to Don Mattrick, Zynga's Chief Executive Officer.

Thank you, Darren, and welcome to everyone joining us on our Q3 conference call. Today we'll be discussing our quarterly financial performance as well as providing an update on our strategy and investments we're making to position us for success in 2015.

Looking at our quarterly financial performance. In Q3, we reported bookings at the high end of our guidance range at $175 million and adjusted EBITDA near the midpoint of our guidance range at $2.2 million.

These results were driven primarily by the growth of our Casino Slots business and our advertising performance in Words With Friends. I'm encouraged by the results of the quarter as we navigate through this timely transition.

As we move forward, we aspire to improve our execution in terms of product quality and audience growth. In Q3, we achieved meaningful growth in mobile, delivering 111% increase in mobile bookings year-over-year.

This past year, we demonstrated our ability to grow our cross-platform capabilities with mobile now representing 55% of total bookings, up from 50% in Q2. The investments we continue to make to grow and sustain our franchises showed up in our results this past quarter.

Our top franchises, Casino, Words With Friends, FarmVille and Racing grew bookings 7% sequentially in total. In addition to our Q3 franchise growth, there are a number of product highlights this past quarter that represent what is working across our organization.

Starting with Casino. In June of 2013, Zynga acquired a small company named Spooky Cool Labs that was building unique products to compete in the social slots category.

Over the last year, the team has worked hard to launch Hit It Rich! Slots and iterate based on consumer feedback.

Based on their work, Hit It Rich! has become a category leader with more than 40 themed slots, and the game is currently in the top 10 grossing charts as the #3 top grossing Casino game on iPhone.

Our Slots products are fast gaining market share with an engaged consumer audience and a high product quality across web, iOS, Android and Kindle. In Q3, the team delivered double-digit percentage bookings growth, up 77% sequentially and up 35% in terms of audience across monthly active users.

We believe it's early days for our Hit It Rich! Slots game, and we're continuing to invest in the product with new branded and progressive Slots launching throughout the end of this year and early next.

Our Words With Friends franchise just celebrated its fifth anniversary, and we timed the recent launch of New Words With Friends product to this milestone. While it's only been a few weeks since our global launch, the community sentiment, global chart position and organic word-of-mouth factor is among the strongest we've seen at Zynga.

Shortly after launch, it became the #3 top free app in the Apple App Store and is currently the #1 top free game on iPhone, an exciting milestone for our company. Weeks after launch, we're starting to see positive trend lines as we stay focused on driving engagement for one of our most important game communities.

Looking at FarmVille. In Q3, our mobile game FarmVille 2: Country Escape delivered a 32% sequential lift in bookings and grew market share driven by our continued investment in event systems and brand integrations.

This quarter, we're rolling out a robust feature road map kind that focuses on event enhancements and seasonal content, which we believe will grow audience and lift engagement. This week, as a result of our seasonal content, Country Escape achieved top 10 grossing status in the App Store as the #8 top grossing game in the U.S.

on iPad. Long term, the team is dedicated to scaling this game to deepen consumer engagement and build new levels of competition and connection.

Finally, beyond products, the strength of our balance sheet remains a value driver for us with more than $1.1 billion in cash and marketable securities. Our balance sheet enables us to reinvest in the company and attract experienced senior talent.

As a team, we're continuing to build a culture of grit and persistence as we move through this transition. Now I'd like to spend some time on some of the challenges we saw in Q3.

We had a tough quarter for our Poker product. Zynga Poker is the longest-running game at the company, and over the last 7 years, the product has seen hundreds of updates across 6 different platforms.

The recent launch of New Zynga Poker was by far the most complex release in its history. The new game offered a number of key innovations, including an entirely new design and competitive features like leagues and leader boards.

What we discovered with the launch of New Zynga Poker is that some people did not like the change and preferred the traditional look and feel of our original game. Others found its performance on older devices did not work as smoothly.

To rectify that, we brought back our legacy product, Zynga Poker Classic in addition to New Zynga Poker. By offering 2 games, our Poker players now have more options to choose how they play based on their personal preference and device.

Poker Classic and New Zynga Poker allows players to easily switch between games and transfer status, profiles, play history and chips from one experience to the other. This is an important factor for our Poker community because it preserves the overall game experience and also maintains player liquidity.

We're dedicated to our Poker community, many of whom have been playing with us for the last 7 years. We missed the mark on the launch of the New Zynga Poker.

And as a result, we lost audience and let down a segment of our consumers. I want to thank our team for listening to our players and working hard to take on new challenges and reshape our product this past quarter.

Today, Zynga Poker remains the largest social poker game in the world, and we're committed to ensuring it has a bright future. We continue to believe in the Casino genre, and we're making the necessary decisions to build the best game experiences for our consumers.

Now I'd like to take a minute to discuss why our transition is taking some time and how we're seeing it show up in the shape of our business. Earlier this year, we acquired NaturalMotion for the technical and creative capabilities, which they've proven out in products like CSR Racing and Clumsy Ninja.

Their unique proprietary tools also put them in a strong position to power and create new experiences. We closed our acquisition in February, and for the last 8 months, we've been operating as one team.

In terms of our integration, we're being deliberate about the way our teams are scaling best practices while being thoughtful to preserve NaturalMotion's unique culture. Our teams are developing synergies and transferring the long-term learnings of live game operations from Zynga to NaturalMotion and the technology and small agile team process from NaturalMotion to Zynga.

We've worked hard to grow our Racing franchise and together achieved sequential growth in Q3, with CSR bookings up 23%, driven by a new multiplayer feature and world tour event. As we've stated, we're investing in their future slate and giving NaturalMotion the runway they need to nurture their new products.

As we discussed in Q2, we made the decision to move out a number of titles from 2014 into next year, which is reflected in our financial expectations for the remainder of 2014. We believe in NaturalMotion titles, and we remain confident in their long-term growth prospects.

It takes time for teams to gel and create products, particularly when they're doing things that are new and it requires patience and testing. The team, under the leadership of Torsten Reil, is focused on readying their new product launch slate, and we look forward to sharing more as we get closer to upcoming worldwide launches.

Over the last few quarters, we've been operating with purpose, but it's taking some time to transition our business. 2014 has been an investment year for us as we assembled a new leadership team, reorganized the company and reset our product pipeline.

We've made investments across a number of capabilities, including underleveraged areas like technology, visual design, marketing and machine learning. While we're making progress, deliberate investments take time to play out.

And the leadership team remains committed to executing experience with urgency in order to bring high-quality products to market and to grow audience. This year, we established new capabilities in web and mobile development as we learned how to build new experiences for mobile platforms like iOS and Android as well as build cross-platform connected experiences such as FarmVille 2: Country Escape.

Our goal is to create top hits, and we want to have the most diversified product portfolio to engage mainstream global audiences. We're building products that are the most personalized, most appealing and most connected, and you will see these themes iterate throughout our upcoming products.

To achieve this, our leaders have been rolling out a more disciplined unified approach to the way we build new games and compete in various content genres. Based on the last year of hard work, we're seeing bright spots across the company, particularly as we look at the progress of our core franchises, which grew 30% year-over-year in terms of bookings.

I'm also pleased with the momentum we've created in mobile where in terms of audience, we grew 45% year-over-year across monthly active users. On the monetization front, our average daily bookings per daily active user grew 34% year-over-year, with the majority of that growth coming from mobile.

For us, one of the most powerful measures in terms of our mobile progress is our mobile bookings mix. A year ago, mobile bookings represented only 30% of our total bookings and as of Q3, now represents 55% of our total bookings.

In closing, we are energized by the breadth and depth of our 2015 slate, and we believe we're making the right investments as we prepare for future growth. We remain committed to working together as a team to deliver long-term value for our consumers, employees and shareholders.

As we move forward in our transition and aggressively compete in an exciting market, we continue to believe that we will be well positioned to take advantage of our global scale and diversified product portfolio. Now I would like to turn it over to Clive Downie, Chief Operating Officer, to share details on our franchise progress and commitment to creating new hits.

Thanks, Don, and hello, everyone. First, I want to spend some time discussing our progress against our grow and sustain efforts, particularly as it relates to our Casino and Words franchises as well as our commitment to creating new hits that engage mainstream audiences across a number of content categories.

Starting with our Casino franchise. As Don mentioned, with the launch of the New Zynga Poker, we set out to evolve our original Poker game with an entirely new experience for mobile that includes a new design and feature set that inspires more competition and social connections between friends.

Since the launch, we've been listening closely to our players and heard from many of them that they like the look and feel of the New Zynga Poker, while others miss the classic design and play style of the original game. Another segment of consumers playing on legacy devices found the game less performant.

In response to the player feedback that we received, we made the strategic decision to offer 2 distinct products: the original Poker Classic, which we brought back to iOS last week, and the New Zynga Poker. By offering consumers the New Zynga Poker and bringing back the classic version, we are giving our Poker community the option to choose how they play their favorite game.

Launching a new product is not easy, but we believe the New Zynga Poker is the best path forward given the game's compatibility with newer operating systems versus Poker Classic, which operates better on older, legacy devices. While it is early days for the New Zynga Poker, we are seeing the team's work show up in the App Store with the game moving up the rankings to #9 on the Casino top grossing charts.

We know we have a lot of work ahead in terms of tuning and iterating our New Zynga Poker game to further stabilize the performance of the product, but we believe in the long-term potential of this game and the authentic Casino experience it delivers to our consumers. Moving on to our Slots games.

As Don mentioned, Hit It Rich! has fast become a category leader, with more branded Slots offerings than anyone else in the Social Casino category.

Today, we are pleased to share we've signed multiyear licensing agreements to bring Universal Pictures Bridesmaids and Bravo Media's Real Housewives franchise to our Hit It Rich! Slots product.

The way we are approaching our licensing strategy with Hit It Rich! is reflective of how we approach brand partnerships within our portfolio.

Our goal is to strategically align with brands that are the most appealing to our players, that seamlessly fit within the fiction of the game and that appeal to a mass audience. We believe smart brand partnerships can be an accelerant for games and offer meaningful and authentic entertainment experiences.

Looking at our Words With Friends franchise. We are pleased with our team's continued commitment to evolve this enduring franchise for our global players.

We made great progress last quarter, with the geo-lock of the New Words With Friends and the worldwide launch of the game at the start of Q4. We took a new approach for the New Words launch by holding back the worldwide release to elongate our geo-lock phase and really focus on the player feedback country by country.

What we learned in that time helped significantly influence the final product, including 3 core features that were built in response to direct consumer feedback. We learned that while our community loves the social nature of the game, they wanted the choice to play on their own, move through games faster and engage without an Internet connection.

Players wanted the optionality to play when they wanted and where they wanted. As a result, we created Solo Play, added offline mode and introduced a new Community Match feature, which helps players find more opponents at their individual skill level.

These 3 features were among the most requested by players and have been receiving the most positive feedback in our game reviews. This attention to quality and player feedback, combined with the team's nimble approach to game development, has created some exciting early metrics.

Just a few weeks after the launch of New Words, we are seeing promising engagement levels, with 58% more new games played and 32% more moves being made on average compared to the legacy product. In terms of community sentiment, new Words has received thousands of player ratings with an average 4.5 stars in the Apple App Store.

In addition to new Words With Friends, we also just entered geo-lock on a brand-new word game, Words on Tour, which is now available in select geo-locked markets including Canada, Ireland and Singapore. Words on Tour, which we expect to launch worldwide after we complete our consumer testing, is an immersive travel-themed game that marries word finding with progression-style play as consumers journey through a map of the world's most prominent cities.

Words on Tour is an adjacent product to Words With Friends and provides us with a unique opportunity to further engage not just our loyal Words community with a complementary experience but to broaden the reach of our Words game portfolio to new consumers. Moving to our FarmVille franchise.

It's been encouraging to see the FarmVille brand develop on mobile over the last 6 months. This past quarter, Country Escape had its highest chart performance, becoming the #5 top grossing game on iPad in the U.S.

I'm proud of the FarmVille team who've taken on the challenge of building cross-platform connected experiences for consumers, a first for Zynga. Over the last few quarters, the team has delivered more than 6 engaging in-game events, including the Halloween seasonal content, which this week drove a record bookings day.

Next, I would like to talk about the ways our teams are creating new games for our global audiences. In Q2, we announced our expansion in the Runner category through a multiyear agreement with Warner Bros.

Interactive Entertainment to license the Looney Tunes brand for mobile. We entered into geo-lock for Looney Tunes Dash!

in September. And while we are still in the midst of our geo-lock phase, we are already receiving valuable consumer feedback about the game.

Early qualitative input and chart rankings are reaffirming our belief that an appetite exists for Looney Tunes Runner game on mobile. The game is currently available in Canada and has broken into the top 10 games category on iPhone and iPad and the top 15 free apps on the iPhone, which was primarily generated by organic word of mouth.

Runner games are meant to be fast-paced and high energy. And in creating Looney Tunes Dash!, the team spent a lot of time talking to consumers about what they wanted in a Runner game.

What players told us is they want a Runner game that rewards progression and completion. And with Looney Tunes Dash!, we are bringing new layers of innovation and never-before-seen features of this popular category.

We continue to see positive reviews from consumers around progression features and character variety, and the team is continuing to improve the game to prepare for worldwide rollout. We expect to launch Looney Tunes Dash!

by end of the year. Turning to Sports.

As we said in Q2, we believe Sports represents one of the largest evergreen categories in entertainment. And we are very pleased with our multiyear partnership agreements with NFL and NFL Players, Inc.

As an initial step in the genre, we launched our first mobile Sports game, NFL Showdown, in September under our new brand, Zynga Sports 365. We made the strategic decision to get to market quickly and launch the game in time for the NFL season kickoff, with the intent to grow and build out the product over the course of the season.

Since the launch of the game, the team has been listening closely to our players and has developed a robust feature pipeline for the remainder of the season. We believe that the next few waves of updates will layer in more game play functionality that appeals to a broader group of sports fans.

These features include an improved game simulation mechanic, which will allow consumers to set their game strategy, call plays and sub players in real time as well as an interactive league schedule that will make it possible for players to track opposing teams and watch them play. Moving forward, we will add even more features to the game, and at the right time, invest in the promotion and marketing of this product, using both our resources as well as those of the NFL and NFL Players Inc.

We expect to embody a similar measured approach when we launch our Tiger Woods golf game, which remains on track to launch worldwide in 2015. We are pleased with the results of this purposeful strategy, and I'm proud of how fast our team worked to launch a completely new and authentic football management game.

We built this unique product as an ongoing live service that will evolve over time and that truly captures the competition and emotion of the NFL for fans worldwide. As part of our ongoing efforts in Sports, we are applying greater leadership focus in this category.

I am pleased to announce we've hired Michealine Christini Ridley [ph] as Vice President in our Zynga Sports team. Michealine [ph] will partner with the Zynga Sports 365 product leadership team as we focus on our brand strategies and partnerships in Sports.

With sports games in particular, we know that brand licenses like those we have with the NFL, NFL Players Inc. and Tiger Woods are key to delivering consumers the most authentic experience.

Michealine [ph] has a tremendous amount of experience in this area, and we look forward to marrying her expertise with the team's existing product capabilities. It's just the beginning for Zynga Sports 365, and we believe that our team's consumer, business, creative and game-making expertise will help enable us to develop the #1 sports brand on mobile over the long term.

With that, I will turn it over to our Chief Financial Officer, David Lee, to go deeper on our financial details.

Thank you, Clive, and good afternoon, everyone. In Q3, we continued to execute against our initiatives to grow and sustain our key franchises and delivered our fourth consecutive quarter of double-digit percentage growth for mobile bookings.

While we did see costs rise quarter-over-quarter as we continued to make deliberate investments for future growth, I believe the decisions we are making will bear fruit as we begin to roll out our new products globally over the next few quarters. Looking forward, we continue to be prudent with costs and focused on expanding margins.

I'd like to now take you through the details of the quarter. But before I begin, please note that many financial measures herein are expressed on a non-GAAP basis.

Total bookings were $175 million, up slightly quarter-over-quarter, driven by strong growth in Hit It Rich!, FarmVille 2: Country Escape and Words With Friends. Mobile bookings were up 111% year-over-year and 10% quarter-over-quarter to $97 million.

Web bookings were down 27% year-over-year and 10% quarter-over-quarter at $78 million. Looking at our franchises.

Casino, Words With Friends, FarmVille and Racing all grew bookings sequentially in Q3, up 7% in total. Casino grew bookings 12% quarter-over-quarter, led by a 77% increase from Hit It Rich!

and despite performance challenges with new Poker on some older devices. As Don mentioned, our teams continue to invest in nurturing New Zynga Poker in order to further stabilize the performance of the product.

The Words With Friends franchise grew bookings 24% sequentially, and FarmVille 2: Country Escape grew 32% in Q3. We also saw sequential bookings growth in our Racing franchise, driven by a 23% quarter-over-quarter improvement from CSR Racing.

In Q3, advertising bookings, excluding licensing and developer payments, grew by 20% quarter-over-quarter and 14% year-over-year. Growth was driven by an increase in demand for video advertising and deeper brand alignment with Words With Friends and FarmVille franchises.

As a result of our progress optimization initiatives, advertising bookings per DAU, again excluding licensing and developer payments, grew by 31% quarter-over-quarter and by 32% year-over-year. In terms of platform mix, mobile bookings grew from 50% of the total in Q2 to 55% in Q3, and Facebook-related bookings mix decreased from 45% of total in Q2 to 41% in Q3.

Turning to operating expenses. Technology spend declined 7% quarter-over-quarter in Q3 but was more than offset by increased people-related and marketing expenses.

People-related spend was up 7% quarter-over-quarter as we set out to be more competitive in retaining new talent after benchmarking compensation relative to peers. The company's total number of full-time employees declined quarter-over-quarter to 1,929, down 27 people.

Marketing expense also grew 8% quarter-over-quarter, coinciding with new game and feature launches. Overall, Zynga's cash OpEx spend increased 7% sequentially in Q3.

As a result, adjusted EBITDA is $2.2 million in Q3 or a 1% adjusted EBITDA-to-bookings margin the quarter. Factoring in depreciation, amortization, interest, other income and tax results in a non-GAAP loss per share of $0.01.

Turning to our balance sheet and cash flow. We continue to have a strong balance sheet with more than $1.1 billion in cash and marketable securities.

During the quarter, cash used in operations was $2.4 million, inclusive of restructuring. Factoring in capital expenditures of $2.4 million, free cash flow was negative $4.8 million.

Now let's turn to our outlook. We are reaffirming our 2014 outlook established last quarter.

In Q4, we expect bookings to be between $183 million and $213 million and adjusted EBITDA to be between $9 million and $29 million. Our Q4 outlook assumes the continued growth of Hit It Rich!, a lift in our Words franchise driven by seasonal bump in ad rates and the launch of New Words With Friends, the launch of Looney Tunes Dash!

and planned events and features in FarmVille 2: Country Escape. We also expect further stabilization of Zynga Poker on mobile.

We expect Q4 non-GAAP earnings per share to be between negative $0.01 and positive $0.01 based on a projected basic share count of approximately 894 million at a loss and a fully diluted share count of 929 million if we are profitable. On a GAAP basis, we expect Q4 revenue to be between $170 million and $200 million, net loss between $51 million and $34 million and GAAP loss per share of between $0.06 and $0.04, using a projected basic share count of approximately 894 million shares.

For Q4, stock-based expense is expected to be the range of $30 million to $33 million, and capital expenditures is expected to be $3 million. Given our accumulated tax attributes, which include net operating losses and R&D tax credits, we do not expect to pay cash taxes in the U.S.

in 2014. 2014 is a year of transition.

When I look out at our future pipeline, I believe our games will put Zynga in a strong position to compete over the next few quarters. And with that, I'd like to turn the call back over to the operator to open it up for questions.

Operator?

I guess first one just maybe on mobile, up to 55%. I think that's really good result.

I wanted to understand what we're seeing in terms of monetization on mobile versus nonmobile and how you see that trending going forward. And then maybe for David, looking through into 2015, I wanted to understand how you guys are thinking about the buyback and the authorization that remains as part of your broader capital allocation plans.

Eric, thank you. Two great questions.

Let me take them in turn. First, with regard to monetization, you'll see in our disclosures that the overall monetization for the company has sequentially grown.

We've also disclosed in the past that we do not see any structural reason why our growth in mobile would in any way preclude the same degree of strong performance financially as we've seen historically in the web. With regard to your second question, our balance sheet is a tremendous asset for the company.

It allows us to attract and retain talent during a transition, and it also allows us to evaluate organic and inorganic opportunities in an explosively growing market. That said, we continue to evaluate the best use of our capital.

And we are not, today, announcing any additional stock buyback beyond the program that expired in October.

So you talked a bit about investing behind NFL Showdown, and I believe you mentioned that the NFL may actually help on the marketing front there. Can you talk a little bit about what that would entail and how impactful that could be for audience for that particular title?

And then also after launching NFL Showdown, what was the most important lesson you took away from that as you prepare to launch the Tiger Woods game in 2015?

Chris, this is Clive. Thanks for the question.

It's a good one. So in terms of NFL Showdown, I mentioned that we are iterating that product based on forging strong relationships with NFL fans and then iterating the product through a successive phased rollout of features.

And then once we have that product to the point where we want to, we're going to invest in marketing and also bring our partners into the marketing cycle. When you have a license with someone that's as powerful as the NFL, you have the opportunity through that partnership to unlock all of their channels across all of the marketing mix.

And we look forward to doing that at the appropriate time in the future. In terms of the lessons that we've taken away from the NFL Showdown launch and how that relates to Tiger, as I've mentioned in the call, it's a phased rollout.

We're in the business of creating long-term services that extends beyond just one season and one year. And we're really taking away the fact that, that's a strategy that is, at the moment, we're happy with the performance of, and we look forward to rolling it out for Tiger in 2015.

If we look at the sales and marketing line, it's ramping up quite a bit as a percentage of revenue. I think it was among the highest ever.

How should we be thinking about that over time? Are you targeting it to specific levels?

How should we look at near term versus long term? And then separately, just on mobile, can we talk a bit about the network effects that you see there?

Obviously, early on in the company's history, there were a lot of network effects on Facebook. Are we seeing similar types of things on mobile?

How is it the same and how is it different?

Ben, this is Clive. Thanks for the questions.

So in terms of the first question and the sales and marketing, now we're in midst of transitioning the company, as we mentioned on the call, to mobile. And you're seeing that come in our growth on mobile.

A large part of that is growing our user base on those formats. And we have and will continue to invest in that growth through marketing.

I'm happy with the way we've constructed both product marketing, performance marketing, consumer marketing disciplines. But we continue to view that construction as a work in progress and look forward to optimizing all 3 of those disciplines as part of the marketing as we move through into 2015.

In terms of the network effect on mobile, again, network effect on mobile for us is -- continues to be a work in progress. We're creating a daily active user base of consumers on mobile and starting to move our consumers among product based on their different likes that we are identifying through their tastes.

And again, we look forward to doing more and more of that as we build a scalable use -- daily active user base through 2015.

So it sounds like you're continuing to sign new licensing partnerships with Bridesmaids and Real Housewives. Just wondering if you found it's easier to launch licensed games like NFL and Looney Tunes given the brand awareness and maybe if you feel the risk-reward in launching a licensed game makes more sense than developing on the IP.

And then should we expect to see more of these licensed games going forward?

Tim, thanks for question. This is Don.

We're going to continue to have a mix of Zynga and NaturalMotion-owned IP and licensed partners where we think it's a fit for our company, for consumers and for the partners that we work with. So no change in strategy, being smart about finding long-term partnerships with, at its core, something we think customers value, something we think we can do a good job of executing on as a company, and most importantly, economics that make sense for everyone.

This is Ryan Gee calling in for Justin. Looking at the web business, it looks like it declined again sequentially, and so it remains a headwind for the overall business.

I was wondering if you could outline some of the things you're seeing or some of the things you're doing that could maybe stabilize the web business or even maybe get it to grow again sequentially. At what point do we start to see that business stabilize?

We've disclosed in the past that our focus has really been migrating the company to the levels of penetration you're now seeing in mobile. That said, as our older catalog games beginning -- begin to run its course, we disclosed that the rate of decline in the web may be tempered in the future.

We've also said that we will go where the consumer needs us to go. And that will be a category and genre-specific evaluation on where we should launch and where the consumer wants to play our games.

Two areas that the performance was perhaps a little counterintuitive, at least relative to my expectations, were the average bookings per paying user of $0.073 being up in an environment where DAUs and MAUs are down. And the same type of question for ad revenue increasing in the face of DAUs being below where I thought they'd be.

So can you tell us a little bit more color on how you're driving that kind of better-than-expected performance on those 2 metrics?

I think an important driver for our in-app purchases is around engagement. And as you think about how engaged whatever audience we have in a given period, as we drive higher engagement, it results naturally in higher degrees of bookings per average user.

Your question on ad revenue is very important. It's a great question because even as we see declines in DAU and MAU in certain areas, as we created more engagement with our advertising partners, we are seeing an improvement in the rates that we are being able to develop for the audience we have.

We also, in the quarter, as we grew our ad revenue 67% quarter-on-quarter, did have a benefit associated with better contractual terms with an advertising partner. But even excluding that, we have just seen double-digit, triple-digit growth in the way in which we're developing better engaged ad revenue per DAU.

I wanted to see if you could talk about 2015 in general directional terms. It seems to me that with the quarterly increase you've had in overall bookings, that you might have hit some sort of inflection point, especially given your Q4 guidance.

But I also wonder if Q4 is up more because of seasonality and a few product launches and -- or if you think that, that might be the new level of bookings run rate, close to $190 million, $200 million. And then similarly, as you think 2015 directionally in terms of profitability, your game launches, the costs associated with those, selling and marketing, everything put together, just wanted to see if you could give us a feel directionally for top and bottom line.

Thanks for the question. We said consistently that 2014 is a transition year, where we were deliberately and intentionally investing for the growth that we will see beyond 2014.

That remains true. We're not providing quantitative guidance.

But as we've discussed with all of you in the past, we imagine a world where we're bringing to the market growth with a cost structure that doesn't scale at the same rate at the delivery of that top line growth. And in that world, regarding your long-term EBITDA margin question, there's no reason why Zynga could not be at the level of performance you're seeing at scale players deliver an EBITDA margin.

But at this point, we want to complete Q4 and not get ahead of ourselves with regard to guidance specific to F '15.

I wanted to follow up to, I think it was Ben's question on advertising spend and how you feel about the effectiveness that's been relative to your unique players declining and to contrast that with some comments that King has been making about their spend and moving spend towards television advertising. Can you just talk to me about your ad strategy, about your strategy about broadening your user base again?

Daniel, this is Clive. Thanks for the question.

So our ad spend is a mix of products in their particular life cycle at the time. And so on a quarter-by-quarter basis, we have many different products that we're looking to, either in geo-lock or in growing sustained mode or either in a growth mode.

And what we do is we cycle our ad spend accordingly. We're broadening our user base through a variety of different channels as I mentioned, in our marketing department growth earlier.

We have both product marketing, consumer marketing and performance marketing. And so what we're doing is we're investing in broader marketing campaigns and above-the-line media as well as in performance marketing campaigns, bringing consumers in, in very targeted ways through mobile advertising.

We always look to do that in an ROI-positive way. And we're finding that we're seeing very, very strong, positive signs as we increase the maturity of our marketing team.

This is Don. If there are no additional questions, I want to thank everyone for calling in today and just thank our teams.

There's a lot of great work going on both at Zynga and NaturalMotion, and I'm really pleased with the way our teams are showing up their commitment to customers, customer excellence. And again, I appreciate their great work as we move our business to the next level.

So we want to thank you for your call today, and look forward to seeing everyone over the coming months.