Will a Refreshed 'Words With Friends' App Score for Zynga?

In the most ambitious update of its popular Scrabble knockoff app since its launch five years ago, Zynga (ZNGA) earlier this month rolled out "New Words With Friends" for iOS and Android users.

The biggest new feature -- the one requested the most by gamers -- is the Solo Play option that lets players match up against a simulated opponent. Solo Play also works offline, giving smartphone and tablet owners a new diversion when connectivity isn't available. The update also includes an enhanced Community Match feature to give players more control over the random opponents that they can go up against. A Word of the Day and beefed-up dictionary will give players the ability to expand their vocabularies.

It's a hearty update. It's a welcome update. Yet it probably won't be enough.

Staying On Top Is Temporary

Things have been painful for Zynga investors. The stock has shed more than three-quarters of its value since its late-2011 initial public offering.

Zynga went public at $10, just as the popularity of "FarmVille," "Mafia Wars" and "Words With Friends" was starting to run its course. Revenue and gross bookings peaked in 2012, and even though Zynga pumped out games through 2013 and 2014, revenue fell sharply in 2013. We're starting to see sequential growth through the first half of the year, but in August, Zynga's stock took another hit after hosing down its full-year outlook. (And remember that the update is a free download, with Zynga making money on ads and premium features.)

It's not just Zynga proving that fame in social gaming can be fleeting. "Candy Crush Saga" parent King Digital Entertainment (KING) went public at $22.50 in March. Unfortunately, we've seen declines in gross bookings for "Candy Crush Saga" since the third quarter of last year. King has tried to diversify, but just like Zynga, it hasn't translated into the growth that investors were expecting. Monthly unique users, daily active users and monthly unique payers all posted sequential declines in King's first complete quarter as a public company. The market doesn't like that. Shares of King Digital have been cut in half during its brief publicly traded tenure.

Glu Mobile (GLUU) saw its stock soar this summer when "Kim Kardashian: Hollywood" raced to the top of app download charts. Now, with the game's popularity shrinking, the stock has taken a hit in recent days.

Words With Friends With Benefits

Zynga is naturally talking up the success of the "Words With Friends" franchise. Its news release for the updated app had plenty of impressive metrics. There are 55 million games taking place at any given time. A whopping 58 billion words have been played over the past five years. It's also testing a "travel-themed word-finding game" called Words on Tour.

That's great, but social gaming companies are only being valued based on what they are doing now and their prospects for the future. With King Digital and Zynga both trading well off their original IPO prices, it's clear that the market's looking for something else to play.

Motley Fool contributor Rick Munarriz and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days.To read about our favorite high-yielding dividend stocks for any investor, check outour free report.