Behold the Zynga Death Spiral!

Two months after its IPO, social gamemaker Zynga (NASDAQ:ZNGA) was the toast of Wall Street thanks to a 50%-plus run-up in its shares.

Then March happened. Starting early that month, Zynga began what has become a nearly 65% decline, including a recent acceleration into an all-out free-fall. Shares now are down around the $5 mark — well below its IPO price — thanks to an 11% decline by midday Tuesday.

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What in the heck happened?

Well, the most obvious culprit is the horrendous IPO of Facebook (NASDAQ:FB). The dud quickly helped investors drop their fascination with social stocks and killed the illusion of unchecked growth. After all, if a marquee name like Facebook has problems, then others — especially those that somewhat rely on Facebook — must be in even more dire straits, right?

And that’s the case with Zynga. Facebook is the biggest source of Zynga�s revenues, and the social network’s growth has slowed, as pointed out in a Wall Street Journal report out today. Facebook saw just a 5% increase in the U.S. for unique visitors, to 158 million. This compares to 24% growth in the same period last year and 89% in 2010 — a slowdown that was inevitable as Facebook reaches saturation.

No doubt, these trends have had a negative impact on Zynga. According to Cowen & Co. analyst Doug Creutz, the company has seen drops in daily active users for all its major games. The month-over-month drops were more than 20% for titles like CityVille, Hidden Chronicles and Empires & Allies.

True, Zynga makes its money from the sale of virtual items from a small number of users. But according to the company�s S-1, the DAU metric is highly correlated to monetization.

Still, another big issue is at play: mobile. Zynga’s Facebook-native games are not transferable to this fast-growing platform, and as a result, Zynga has had to develop new games for mobile that have had mixed results.

Even acquisitions have proved futile, as seen with the $180 million-plus deal for OMGPOP. Since the acquisition, the DAUs for Draw Something have plunged.

The recent trading looks like a capitulation, so an optimist might think Zynga’s shares soon will find a bottom. However, Zynga has few interesting games down the pipeline — and with no catalysts, there’s little reason to think the stock will make a move to the upside.

Tom Taulli runs the InvestorPlace blog IPO Playbook, a site dedicated to the hottest news and rumors about initial public offerings. He also is the author of �The Complete M&A Handbook”, �All About Short Selling� and �All�About Commodities.� Follow him on Twitter at @ttaulli or reach him via email. As of this writing, he did not own a position in any of the aforementioned securities.