It is rare that a relatively large U.S. public corporation loses such a large portion of its revenue that it becomes pathetically small. Online game firm Zynga Inc. (NASDAQ: ZNGA) is headed in that direction. What used to be a $1.5 billion annual revenue run rate has become one of well under $1 billion. And there is no sign that the collapse will stop.

Zynga not only reported a 18% drop in first-quarter revenue to $264 million. It also reported, more alarmingly, that bookings, a sign of future revenue, dropped 30% to $230 million. Zynga indicated the situation would worsen in the second quarter, as it forecast revenue of $225 million to $235 million. Many analysts are skeptical Zynga can reach those numbers, mostly because its active and unique users dropped at a breathtaking pace:

• Monthly active users (MAUs) decreased from 292 million in the first quarter of 2012 to 253 million in the first quarter of 2013, down 13% year-over-year. On a consecutive quarter basis, MAUs were down 15% from 298 million in the fourth quarter of 2012.
• Monthly unique users (MUUs) decreased from 182 million in the first quarter of 2012 to 150 million in the first quarter of 2013, down 18% year-over-year. On a consecutive quarter basis, MUUs were down 10% from 167 million in the fourth quarter of 2012.
• Monthly Unique Payers (MUPs) decreased from 3.5 million in the first quarter of 2012 to 2.5 million in the first quarter of 2013, down 30% year-over-year. On a consecutive quarter basis MUPs were down 14% from 2.9 million in the fourth quarter of 2012.

Zynga has been unable to make a case that these trends can reverse themselves. Year-over-year plunges of these metrics, if they continue, will drive the company’s revenue numbers much, much lower by the end of this year.

Zynga’s market cap has fallen to $2.6 billion, and a sell-off triggered by the poor earnings could push that number less than $2 billion. Zynga’s share price recently has run just above $3, but it has traded as low as $2.09 since its initial public offering. Institutional investors often do not buy shares that have declined to that level. And if Zynga has another quarter or two of extremely bad earnings, it is not hard to image its stock will move toward $1 a share.

Zynga’s shares might not reach penny stock level, but they could get close. And its annual sales might well drop to levels Wall St. could not imagine a year ago. Zynga will not have disappeared entirely, but as a public corporation it will come close.

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