Zynga (ZNGA) continues to cement its place as the biggest IPO failure of 2011.

The online game developer, known for its "Mafia Wars" and "FarmVille" franchises, saw shares drop 9% Monday to just $8 -- 20% below its IPO price of $10 a share.

Is Zynga getting a bad rap? After all, as Forbes points out, Zynga owns the top five games played on Facebook in terms of daily active users. About 95% of its revenue comes from Facebook, in fact. But being popular on Facebook is a far cry from having the steady, growing profit stream that investors like to see.

Check out the following video for more investor concerns about Zynga.

Post continues below.
Zynga is now trapped in a cash death spiral. Forbes' Dave Thier writes that every dollar the company makes is going to cost more than the one that came before it.

Perhaps no one is feeling the pain more than Morgan Stanley (MS), which revealed last week that it owns some 16 million class A shares of Zynga, or 16% of the company. On top of that, Morgan Stanley's mutual funds bought 5.3 million Zynga shares for about $14 each -- and probably thought they were getting a great deal.

Zynga is trying to move beyond Facebook, and last week unveiled a new word game called "Scramble with Friends." It's another title for users who love Zynga's other games, "Words with Friends" and "Hanging with Friends."

One analyst estimates that Zynga ended the year with about 5% fewer users on Facebook compared with 2010. Another bad sign.

Analyst Ben Schachter with the Macquarie Group has more bad news. Only 2.2% of Zynga's 150 million users actually pay for the games, he wrote. That doesn't bode well for a company trying to compete with new game offerings from Apple (AAPL) and other competitors.

I've heard people argue that investors just don't understand Zynga. They aren't playing "Mafia Wars" all day, and they can't see the appeal that Zynga's games have. But what investors do understand are subscriber growth and revenue trends. If they aren't going in the right direction, Zynga shares will head south and never come back.

Zynga's best days might already have passed.