Zynga Inc’s (NASDAQ: ZNGA) turnaround prospects continue to feature at the center of investment discourses. Ever since reporting its 2013 third quarter results, which we covered, Zynga has fallen from the good graces of investors.

Earnings Recap

To revisit the earnings a little to establish context, the social game developer posted a loss of $68,000 during the third quarter of fiscal 2013. Despite still treading in the red, this loss signaled a significant improvement in view of the far greater $53 million loss it made in the year-ago quarter. Zynga’s solid improvement has prompted investors to believe that its turnaround efforts are approaching fruition. While this may be true, investors should not get ahead of themselves. Zynga may be on the right path, but it’s not yet out of the woods.

Cost Cutting Was The Easy Part

Admittedly, Zynga’s decline in losses during the third quarter was as a result of the underlying cost cutback program. In June, it not only shut down offices in New York and Los Angeles, but also showed the door to 520 workers, effectively slashing its work force by 18 percent. As a testament to the aggressive fashion in which the cost cutbacks were implemented, a number of former Zynga employees took to social media networks to pour their frustrations, including one who went to the extent of airing Zynga’s dirty linen on Reddit.

Despite the usual controversy surrounding layoffs, Zynga’s cost cutbacks were instrumental in turning ship. During the third quarter, Zynga’s earnings before income tax, depreciation, and amortization (EBITDA) came in at $7 million, indicating that it had, operationally, poked its head above the break-even point.

While the prospect of renewed growth lingers on the horizon, Zynga is only just beginning the hard part of its turnaround. There is a major wrinkle that still needs to be ironed out.

Solid Mobile Strategy Is A Must

Zynga’s 2013 third quarter sales declined 36 percent year-on-year to come in at $203 million. Daily active users (DAUs) slipped 49 percent year-on-year to come in at 30 million, down from 60 million in the year-ago quarter. On a consecutive quarter basis, DAUs declined 23 percent from 39 million in the second quarter of 2013 to the aforementioned 30 million during the third quarter. Monthly Unique Users, a metric that gives greater insight into the business’s growth, slipped from 177 million in Q3 2012 to 97 million in Q3 2013. These figures tell only one story; despite the improvements, Zynga’s business has decreased significantly.

The cost cutbacks were merely a contingency measure to restore stability. Now, Zynga needs a solid mobile strategy in order to restore market share and set on a new growth trajectory.

CEO Don Mattrick, who was appointed in July, seems to have laid the foundation for sustainable growth into the mobile world. Mattrick, who has previously worked at Electronic Arts, has flattened the organization to allow creative product leaders to report directly to him. These restructuring measures are aimed at improving communication and enhancing the advancement of consumer-centric games with a slant toward quality. However, until Zynga achieves something measurable in mobile gaming, investors should continue to watch.

Disclosure: Author represents that he has no position in any stocks mentioned in this article at the time this article was submitted.