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Is Zynga On The Way Out?


The story of Zynga is one that any burgeoning video game company should take into account. Not because they were unsuccessful, at one point they had 60 million players on Farmville, or that they were unambitious, they acquired Popcap (creators of Plants Vs. Zombies) in a pretty calculated move, but mainly because they seem to have thought they were too big to fail.

Zynga became a household name back in 2008 after being founded a year earlier in 2007. Backed by venture capitalists (see: people with money who want to make more of it by spending the money they already have), they made a deep push into the social media market – particularly Facebook – hoping to ‘bring gaming’ to an area where people were mostly posting statuses or sharing photos.

Now to say gaming on social media didn’t exist before Zynga would be a little far from the truth, but much like Rovio and Angry Birds brought media attention to iOS devices as a gaming platform – so Zynga would become the company which solidified ‘Facebook gaming’ as a real thing (stifle your sniggers ‘serious gamers’) and give help give rise the current casual gamer/pro gamer split in the industry.

Anyway, back to 2008.

Zynga launched with Texas Hold’Em Poker on Facebook, mixing gambling with gaming being a pretty successful strategy the world over. They then moved to acquire an existing social media game “YoVille” which further boosted their online users. By the time they had over 40 million players active users across their games, it was time to make their big move.

June 2010, Farmville was released.

The premise was simple. Players control a virtual farm with crops that have different times to grow. You can visit other peoples farms and help out, which speeds up the rate their plants can grow. You can also purchase items using real world currency (see: cold hard cash) to speed things up (this was one of the first indicators of the microtransaction trend which has basically changed the face of gaming in recent years, League of Legend being the second).

This was appealing on two fronts. Firstly, people love logging into their Facebook accounts throughout the day anyway – so having timed crops to check on was a tidy excuse, and increased this appeal as a “daily chore” sort of thing. Secondly, since people were interacting with their friends, which is the entire point of Facebook, they felt like Farmville was adding to their experience and the reason they were on Facebook in the first place instead of taking time away from what they would usually use Facebook for (like a lot of other games on Facebook might).

In short, it was a perfect storm in terms of the sub-optimal requirements of the system (browser games being what they are) and appealing to people in the sweet spot, their social communities. This was a very, very good call.

Zynga followed this with other popular titles which used the “ville” suffix (something which they interestingly didn’t come up with but had to acquire) including “CityVille” and “FrontierVille”. These were essentially different flavours of Farmville to widen the appeal and they did exactly that so who are we to judge.

They also went on a veritable spree of purchases, from opening additional studios to acquiring what seemed like the majority of their competition on Facebooks platform. Confident from their early victories, and hungry for more they expanded their grip on Facebook and looked ever upwards.

Here is where they started to get cocky. Statements by Mark Pincus (CEO and Founder) started circulating about how powerful the casual gaming industry was, how traditional gaming was going to die off and how in a few years the only place we would play games would be on mobiles and social media.

Not exactly the best way to endear yourself to the more traditional gaming public, although I’m sure all of the more casual-minded Farmville players never really noticed since they weren’t in the target market for console gaming to begin with.

Then in 2012 Facebook went public.

For you non-business types, this means it was finally open for investors to get their piece of the social media giant and should have marked a blood-in-the-water style bidding war like the stock exchange had never seen before.

But it didn’t. Instead Facebooks stock had a lukewarm reception, mainly because turning a largely free service into something profitable was more difficult than they made it look in The Social Network. And since Zynga had spent the last five years doing everything they could to tie themselves to Facebook as tightly as possible – any loss on Facebooks part was a loss for them.

Fast forward to now.

Zynga has posted a loss for the last two years, despite earning over $1b(illion) in 2012 they still managed to come up $209.4milion short – and $404.3 million in 2011.

Now this isn’t to say they are down and out, but it’s clear to see that without Facebook making drastic changes and escalating its population the way it did back in 2008-10, Zynga has to make some big moves in order to recapture some of the steam they had a few years back.

And they have begun to do this. They’ve closed a lot of their out of the way studios, or gaming studios acquired that they deemed no longer necessary. They’ve shut down their less popular games, even more recognizeable titles like “Mafia Wars” (finally the requests on my Facebook can end), and it seems like they have learned to be a bit more prudent in the future.

But when you are a solely social media gaming company and you are coming off two negative years in a row and a dwindling interest in social media (this is speculation by me so take it as you will), can you really keep pushing the same old ideas in sequel form (FarmVille 2 is definitely going to be a big hit... right guys?) and hope to get the same results you were getting 5 years ago?

I guess we are about to find out.

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