Zynga-LogoFree-to-play games fueled by microtransactions have not been as profitable recently, and the grandaddy of them all is feeling the effects. Zynga’s profits have fallen, and the company has revised it’s outlook to an expected loss of up to $39 million. As a result, the maker of Farmville, Cityville and every -ville except Pleasantville has reported that they will let go of 18 percent of their work force, which could be as many as 520 people. There are additional reports that Zynga will also be closing their New York, Los Angeles, Austin, and Dallas studios, so many of the layoffs will likely affect these offices; however their CEO Mark Pincus has not confirmed these closures.

In response to reports of the drop in sales and resulting layoffs, Pincus said, “None of us ever expected to face a day like today, especially when so much of our culture has been about growth, but I think we all know this is necessary to move forward. The scale that served us so well in building and delivering the leading social gaming service on the Web is now making it hard to successfully lead across mobile and multiplatform, which is where social games are going to be played.”

All of this follows their quarter one drop in sales from $320 million to $263 million. Only time will tell if this trend continues. Do you think that the free-to-play bubble has burst? Let us know in the comments.

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