Zynga's Going Down.

http://silencedgood.tumblr.com/post/22547672461/zyngas-going-down

by dkrich • 14 years ago

175 107 14 years ago

silencedgood.tumblr.com

pan69• 14 years ago

"It takes nothing to produce a hot game. You merely need somebody with a computer, a good idea, and the ability to make a game. Making a game is not rocket science."

Actually. Making a game that makes money IS rocket science (or at least as close as it can get to it).

incongruity• 14 years ago

I completely agree that it's a lot harder than the author makes it sound – but is the comparison apt in at least one way?

Namely – most rocket science out there requires the work of a reasonably large number of contributors to actually produce a working, reliable end-product... whereas a winning game really can be made by a small number of people (or even one person) who either have the right stroke of genius, luck or skill to pull it all together.

That, of course, doesn't mean it's easy, but instead it means that the law of large numbers comes into play and more winning games will be produced because it takes fewer people/resources to make a gaming company than a rocket company. Ergo, gaming is an industry that is inherently much more difficult in which to establish a defensible competitive advantage.

Or, maybe the author really is just minimizing it all to make their point...

suby• 14 years ago

I think it doesn't matter how hard it is. The barrier to entry is very low, and the social game market is already crowded and extremely competitive. You're going to have a varied number of people releasing hits, so the point is that you can't possibly buy out every shop that gets lucky with a hit, nor should you.

jfoutz3• 14 years ago

Making a game is sort of like making music. It's so much fun, people do it for free. It's not a big deal if you have a few dozen programmers making some roguelike. If you have 10k college sophomores making games, chances are pretty good one of them will be pretty fun, and take off. The key here is, they would do it anyway. there is not free carwashing service because someone likes washing cars. there are however tons of free games, because making games is fun.

forrestthewoods2• 14 years ago

That statement couldn't possibly be more wrong.

The majority of games are created by large teams of highly talented and well paid individuals. There are certain types of games that could be created by a single college sophomore or a teeny tiny team. Most games can not. A team size of 20 is considered quite small.

Both your statement and the link's author's is incredibly wrong and incredibly insulting.

RobAtticus• 14 years ago

I actually do think it's a coincidence that the stock price is down 38% since purchasing OMGPOP. It had a nice run up based on positive news related to the Facebook IPO, so when the market began to contract in late March/April, people took their profits. There hasn't been much positive news since then, so it hasn't rebounded. In fact, the whole technology sector is down about 32% since late March (it was +20% on the year, now its only +13.9%)[1]. Basically, I don't think the OMGPOP acquisition has had much of an effect on the stock price.

[1] http://www.google.com/finance?catid=66529330

dsirijus• 14 years ago

Zynga's decline has nothing to do with purchases they made and everything with Facebook killing viral channels - a year and a half ago!

cletus• 14 years ago

This story (Draw Something losing ~5M customers/month) annoys me. It's an example of not knowing the difference between causation, correlation and coincidence. In at least some cases people are making that "mistake" for link-bait reasons and to push an agenda (eg they hate Zynga).

The idea that 5M/month Draw Something care about the Zynga purchase is ludicrous. It seems Zynga has made some annoying changes to the game, at least for those that use Facebook to login, but even so.

I think the only story here is that Zynga overpaid for something that was peaking. They may purchased OMGPOP just in case it turned into something huge. There's plenty of that going on (cough Instragram cough).

I've tried Draw Something. It's amusing and I can see the appeal but from all usage patterns I've seen the game has a pretty short shelf life. A game with a short shelf life is going to lose lots of customers once it peaks. It's inevitable.

As for how easy it is to make a game, that's actually hard. I believe you should also separate "normal" games from "social" games here as both are radically different.

Normal games are like blockbuster movies. You want people to buy up big. You deliberately build up the hype. There is very little in the way of long tail in revenue in most cases (other than sequels). I consider this a fairly "honest" or ethical practice because you pay the sticker price and you have your fun.

Social games are more like TV shows. You're trying to build a persistent audience and you're all about the long tail. The part that bothers me is the psychological trickery that goes into this. Social games are really about manipulating the psychological triggers for addiction and I don't really see a distinction between this and, say, gambling addiction.

Some people spend an awful lot on these games (I believe Zynga calls people who spend over $10k "whales" [1]). Zynga and similar companies like to whitewash this with "maybe they're just rich". I believe they know better. They are (IMHO) preying on the weak and those arguably with mental health problems ("it's not unethical, it's funethical!").

Successful social games are all about Big Data. Figuring out what works, what doesn't, analyzing your customer usage and adjusting to maximize revenue and retention.

They're not even "games" really. They're just exercises in repetition.

Anyway, rant aside, I don't like Zynga either but please don't confuse the OMGPOP purchase with a short shelf-life peaking purchase.

[1] http://www.businessweek.com/magazine/zyngas-quest-for-bigspe...

kiba• 14 years ago

Remind me of The Curse of the Cow Clicker at http://wired.com/magazine/2011/12/ff_cowclicker/all/1

jcc80• 14 years ago

The Forbes article definitely isn't praising Zynga. But, I also didn't read that it stated the loss of users had anything to do with Zynga. The article writer actually infers that the loss of users would have happened regardless.

"but they must know that if they had waited just one more month to sell, they wouldn’t have been able to command anywhere near that price after losing so many users."

It just references the omgpop acquisition because it was very recent which makes the story more interesting.

sb1752• 14 years ago

Spot on. Nowhere did it read that users left OMGPOP because of Zynga.

physcab2• 14 years ago

Your comparison between normal and social economic models within these games is interesting, especially how you equate it to ethics. But if you're going to gripe about people who spend enormous amounts of money who may not have it (ie. addicted players) you also have to consider people who spend enormous amounts of time as well.

Because if you're going to go there, then its equally as harmful spending time away from your friends and family in front of a computer screen, especially when you consider the fact that you don't need any money to do it.

"Yes StarcraftII, I will gladly give you $50 and hundreds of hours of my life away, but thank god you're way more ethical of a game than that one that takes up 2 minutes of my bus ride and cons me into spending $1.99 on my way to work"

Addiction is everywhere. Its a sad fact of life. There are people who are addicted to shopping, but Macy's doesn't turn away repeat customers. There are people addicted to food, but Olive Garden/ McDonalds doesn't turn away morbidly obese people. There are people addicted to drinking, but Safeway doesn't do a health scan and deny these people from buying liqour. Similarly, I wouldn't expect Zynga or Blizzard to be like "hey, you've spent $10k/1000 hours on my game, why don't you go see your family or put your money to better use".

pyre2• 14 years ago

The bottom line is: People don't like being manipulated. "Not turning an addict away" is different than actively seeking addicts (or purposefully turning people into addicts). McDonald's R&D doesn't attempt to solve the question "how can I convince someone to eat every single meal of the day at McDonald's."

Schwolop2• 14 years ago

Actually, I always thought it was good of Blizzard to have as one of the in-game tips "Invite your friends to Azeroth, but make sure to spend time with them in the real world too!"

The cynic would retort that they said this and then did nothing...

primatology2• 14 years ago

> As for how easy it is to make a game, that's actually hard. I believe you should also separate "normal" games from "social" games here as both are radically different.

Valid, but I think the author's point still stands. "You merely need somebody with a computer, a good idea, and the ability to make a game." That's true. Look at Tiny Wings. Andreas Illiger happened to be incredibly good at game design, and was a capable iOS programming. Granted, it's a rare combination. And perhaps it IS rocket science to make multiple successful games. But when you've got tens of thousands of young developers who enjoy making these games, probability dictates that occasionally one of them will strike gold.

I don't think social gaming is inherently more predatory. Long-shelf-life games are every developer's dream. Why make hundreds of little games when you can make a few big sellers? So every game developer loves features that keep users coming back, whether discovered intentionally or accidentally. Adding social capabilities to a game makes it infinitely more fun. (Remember when we played board games? It's really a return to the days when games were social endeavors.) Social capabilities are just another feature that keeps users coming back. It's just such a big draw that you can get users spending thousands of dollars. I fail to see how that's much different from hardcore console gamers spending thousands on the latest Xbox + PlayStation + games.

Drbble2• 14 years ago

You are not distinguishing between "socializing" social like board games or TF2 and "spammy addictive manipulative" social like Zynga's wallspamming virtual onion selling . The $$$ and most of the press is about the latter.

benihana• 14 years ago

The part that bothers me is the psychological trickery that goes into this. Social games are really about manipulating the psychological triggers for addiction and I don't really see a distinction between this and, say, gambling addiction.

Calling the reward systems in games psychological trickery is a bit much. Gameplay have long been based on the psychologically rewarding system of 'do something good, get positive feedback; do something bad, get negative feedback.'

The first arcade games had theses reward systems - do well and put your initials on the leaderboard; do poorly, pay another quarter to keep playing. The fact that it's psychologically enjoyable to play these games isn't trickery - it's basic human-environment interaction. That some people have addictive responses to these mechanisms doesn't mean it's insidious trickery, it just means some people are more likely to become dependent on the rewards these games offer.

bryne• 14 years ago

He's referring specifically to social games which, as a category, are generally much less transparent about their addictive gameplay mechanisms and extrinsic reward.

wpietri5• 14 years ago

You misunderstand the experience.

Go to Vegas sometime. Watch the people who are playing the slots for hours at a time. They are not enjoying anything. What you're seeing is compulsion and addiction, not fun. That those people are there is not some wacky accident. It's the point.

I believe that Zynga is pursuing exactly that cycle of addiction. They're a metrics and viral marketing company, not a games company.

Strallus• 14 years ago

I play games because they are enjoyable.

You know the awards/achievements that seem to be included in every single game these days? I completely ignore those.

jblow• 14 years ago

As a professional game designer of 16 years, I disagree. The designers of these games are not following the traditional idea of game design wherein you are trying to make something fun or interesting. They are deliberately trying to engineer addictive cash syphons.

mkr-hn• 14 years ago

The 5 minutes I tried Farmville was a non-stop rollercoaster of cute little boxes trying to guilt me into clicking buttons. More "come back and click the button in 30 minutes or we'll kill this bunny and tell your friends how neglectful you are" and less "finish Mute City in under 30 seconds and get a special trophy."

Social games are completely unlike the tacked-on rewards systems in an ordinary game.

tlogan• 14 years ago

I'm not sure but Zynga seems as a classical example of Christensen disruption.

With mobile and new social network games Zynga is basically disrupted and they are trying to keep they dominance by acquiring new mobile gaming companies. They want to think that social games are more like TV shows, but unfortunately social games are more like YouTube - much less control over users, returns are not predictable, ...

oellegaard• 14 years ago

Good indication that the social media bubble won't last forener. Maybe a .com bubble 2.0?

moocow014• 14 years ago

I'd say Zynga's problem is that they are a big fish competing in an environment that is much better suited to lots of nimble little fish. With fickle customers and increasing offerings in their segment, its going to be increasingly difficult and expensive to produce sure fire hits. The alternative is to acquire the small fish when they have a hit but that can be an equally dangerous game as proven by the OMGPOP acquisition. I just don't think being in the app/casual game business is a great spot for large public companies - there is not a lot you can leverage or ability to lock down revenue streams in any long term manner by being big. I'd be much more positive on Zynga if they had a core product that the whole company was iterating on but from what I can see that is not their model.

potatolicious2• 14 years ago

I'd venture that Zynga's problems are more critical than that - and not unique to Zynga. IMO social gaming (in its current format and incarnation) is a space that exists only temporarily while consumers figure things out.

Notice the explosion of FarmVille when it first came out, how everyone was playing it, and its subsequent death. It exploded into the mainstream very suddenly, and faded into niche obscurity just as quickly.

The "glorified slot machine" format of social gaming (which IMO is a perversion of the word, there's nothing social about this sort of gaming) does not have a permanent, mass-market future. It will fade and become a niche (profitable, perhaps), but it will not justify the market cap that investors have saw fit to pour into Zynga et al.

If anything, the industry in which Zynga plays has more in common with the Tamagotchi than it does with WoW.

justinhj• 14 years ago

Farmville is the number 7 game on facebook in May with 5 million daily users.You can buy Farmville yhemed cups in 7/11. A level of obscurity to dream of.

gallerytungsten• 14 years ago

Which companies will be the most spectacular flameouts of internet boom, 2.0? I don't think it's much of a stretch to predict Zynga has a good chance of making the list.

uptown• 14 years ago

Groupon

underwater2• 14 years ago

> And yes, it is completely ridiculous for a company that is losing close to a billion dollars a year to occupy a multimillion dollar office building that looks like a children’s museum.

Where does a billion dollars a year come from? They lost 86 million last quarter. Is he equating operating costs or reduced market capital with loses?

moocow014• 14 years ago

He gets it probably from extrapolating the average of this past quarter and and the quarter before. In the quarter before the last, net income was around -435 million although I doubt their annual net will be -1B

underwater2• 14 years ago

That makes sense. You can't extrapolate from two data points though. I could just as easily claim that their profit is gaining 350 million a quarter an they'll end up with half a billion in profit for the year.

nextstep• 14 years ago

Tech stocks (in aggregate) have declined about 32% in the same time period. What this article fails to mention is that Zynga's stock price was at an all-time high when Zynga acquired OMGPOP. The stock has since floated around it's post-IPO price. OMGPOP is most likely unrelated to these fluctuations.

What is relevant is Facebook. Zynga's stock grew rapidly once Facebook's S-1 filings revealed that Facebook derives 12% of it's revenue from Zynga. This news cause a flurry of interest in Zynga, but the excitement has since waned, and both Facebook and Zynga have been scrutinized heavily since. This is to be expected, but I also expect that both company's stocks will perform well after May 18 and into next quarter.

Last, and possibly most important, is the misconception about how easy it is to launch a profitable mobile app to millions of users. Zynga now hosts about 80% of their games on their private cloud (the zCloud). This infrastructure separates Zynga from a group of 15 hackers who want to make the next Angry Birds. Zynga releases games in dozens of foreign languages; they have games on every social network and in dozens of countries, as well as in many emerging markets. The point is, it's easy to take pot-shots at Zynga's business model and claim it's a house of cards, but I think the reality is that Zynga is a well established company, with far vaster resources than many of their competitors. Mobile and social games are a clear-cut example of economies of scale.

primatology2• 14 years ago

Fair. But Zynga's games still suck. Perhaps their infrastructure is sound, but I run screaming every time I see their latest badly-programmed, ad-infested game take over my newsfeed.

A skilled independent dev actually puts time and effort into a beautiful UX. Zynga seems more concerned with churning out the next addictive rip-off, since they know their games have no staying power.

moocow014• 14 years ago

I don't think mobile and social games/apps are clear-cut examples of economies of scale. Accessibility to the cloud and scalable computing resources isn't exclusive to large companies but it may indeed be somewhat cheaper according to size. But even if it is cheaper, it doesn't automatically make mobile and social games more competitive according to the size of their creator's resources. Most economies of scale apply to segments where competitors are all selling equivalent products and can only compete on price or in markets that require extremely expensive infrastructures (billions). Most of the mobile and social games market is defined by small shops climbing to the top of the charts for a short lived but huge shot of revenue. Honestly the whole mobile and social app market strikes me as the furthest thing from an economy of scale IMHO.

sehugg• 14 years ago

> Last, and possibly most important, is the misconception about how easy it is to launch a profitable mobile app to millions of users. Zynga now hosts about 80% of their games on their private cloud (the zCloud). This infrastructure separates Zynga from a group of 15 hackers who want to make the next Angry Birds.

Sorry, I don't buy it. You don't need to host your own infrastructure to schlep virtual cows around. Zynga probably saves some money in self-hosting but that isn't going to make or break a title.

whopa• 14 years ago

Yeah, zCloud only came into fruition late last year. Before that they were using AWS, and handling the same scale they do now. Private cloud is saving them money, but some other company could use AWS just as Zynga did before and handle millions of users absolutely fine.

adventureful• 14 years ago

Zynga is under-performing the Nasdaq by around 37% over the last 90 days. So no, tech stocks in aggregate have not declined 32% at all. The Nasdaq is around 2.5% below its 6 month high (off about 78 points).

A small list of major tech stocks not down substantially during ZNGA's public time frame: AAPL, INTC, HPQ, DELL, CSCO, MSFT, GOOG, ORCL, IBM, SAP, CRM, AMZN, RAX, BIDU, EBAY, EMC, and so on.

edit: just ran ZNGA against that list of stocks, and it's under performing all of them by a wide margin, and on average is below that group by roughly 35% over the last 90 days. It's blatantly specific to ZNGA, and given the date the plunge began, it is about the market questioning ZNGA's business as prompted by the OMGPOP acquisition. The only other big league disaster in tech on par with ZNGA right now is Groupon's stock.

Irishsteve• 14 years ago

The author gives the game away at the end of his post. That is he's been predicting the demise of Zynga for years. So really the fact that the stock price has dropped gives the author some belief that they were correct.

Id imagine the drop in price is linked to the FB IPO. Not sure if anyone remembered when FB announced their plans, anything in that space increased.

ckdarby• 14 years ago

Find it priceless this guy talks about knowing that the company was going down in flames but didn't sell short at all on the stock.

micahgoulart• 14 years ago

Exactly. Put your money where you mouth is. Especially if you'd make a lot of profit out of it. But of course, he didn't.

extesy• 14 years ago

"I have been predicting Zynga’s descent for a couple of years"

Oh, I know this trick. I also can predict descent of any company, but just not the timeframe. Eventually I will be right.

steve-howard• 14 years ago

How does that saying go? "Anyone can predict rain, but the real prophet builds an ark."

capsule_toy• 14 years ago

With these types of predictions, I think the reasoning must be included and evaluated. Timing is incredibly difficult to nail down even if your analysis is completely correct.

jda285• 14 years ago

Don't want to get into Zynga's business model but it's one sided to reference this "failed" acquisition without referencing the "with friends" franchise which has been a pretty incredible acquisition for them.

dave1619• 14 years ago

It's hard to bet against Zynga with Marc Pincus still in charge. Pincus is a smart cookie. :)

mattmaroon• 14 years ago

"It takes nothing to produce a hot game. You merely need somebody with a computer, a good idea, and the ability to make a game. Making a game is not rocket science. Making matters worse for Zynga is that it does not and never will control the distribution channels."

Yes, that's why everyone with a CS degree has made millions of dollars. This is offensive to everyone that makes games.

StavrosK• 14 years ago

"It takes nothing to win the lottery. You merely need to buy a lottery ticket."

learc832• 14 years ago

His point isn't that everyone can do it, obviously that's not true, but that there is nothing about it that requires a multi-billion dollar company. To wit, the barrier to entry is low.

>You merely need somebody with a computer, a good idea, and the ability to make a game

jdkilby• 14 years ago

> To wit, the barrier to entry is low.

... but the barrier to success on the scale of FarmVille or Draw Something is very high. That's when a company with massive amounts of money that can be spent to hire game developers and market to users has a distinct advantage.

bad_user• 14 years ago

The barrier to entry is low from the perspective of sunken costs other than development time, being a purely creative endeavor that you can work on with mostly free software tools.

However, the talent required to pull off a quality game and the time it takes are huge and only grow exponentially. That in recent years we've got a couple of indie games that were successful, that's only because on mobile devices the expectations for CGI quality are for the moment low. Plus, with these app stores, the budget required for marketing has decreased, if you're lucky enough to have your app featured.

And while you can create indie games for the desktop and be successful, as Minecraft shows, the expectations for quality CGI are much higher and so it takes an insane amount of creativity to fill the blanks.

Now, of course, Zynga games are not really on the same level as what id Software or Blizzard are releasing and you can certainly picture yourself pulling off games of the same quality, as Zynga games are nothing special, except for the social-network effects.

However you shouldn't underestimate the effort required to build a game from scratch. I consider it to be by far one of the most challenging fields in software development, as not only it requires great feats of engineering, but it also requires creativity and design. E.g. developers by themselves can barely pull it off without the help of a good artist that can draw.

tomjen3• 14 years ago

No it is offensive to those who think to highly of themselves.

Game design is not a science. Try enough times and you will create a hit.

Drbble2• 14 years ago

The quants at Zynga beg to differ about game design being a science. It literally is a scientific endeavour : experiment, collect data, iterate.

nhebb• 14 years ago

Since this article is about Zynga as a publicly traded company, I interpreted the author's statement in terms of capital investment, not capability. To put the author's statement in perspective, compare Zynga to Valve. Both have been successful creating and selling games, but Valve is actively working to control its distribution channel. Which business model would you invest in?

drawkbox• 14 years ago

Not to defend Zynga much but please take into account the broader market when doing any kind of stock analysis, all stocks have been shaky since late March/April. Also it is typical for stocks to lose value after large acquisitions. Zynga could have even timed this more or known that the market would be going on a typical late spring/summer correction (from lower volume) and bought during that (Facebook launching in a low volume window is strange but that is another story).

OMGPOP wasn't just Draw Something. They have actually been around for a while since 2008 at least. They have had decently successful web games before and probably have a fair amount of assets that Zynga could use with Draw Something being the big icing.

Take a gander at OMGPOP.com and see what they have. They used to be called 'iminlikewithyou' http://www.crunchbase.com/company/omgpop This wasn't really a one hit wonder, it was a one BIG hit wonder but a pretty solid gaming community before and the people and tech created Draw Something. So there was something there... It is hard enough finding good developers, then there harder to find good teams, then harder to find good teams that can make hits, when you find one or the systems used to build it then it is valuable.

Let's face it there were plenty of pictionary like games available before (isketch.net comes to mind, or Doodle or Flipbook at Benetton Play have been around for ages: http://www.benettonplay.com/toybox.php), but they got the right juice. That might be what they bought.

tatsuke95• 14 years ago

The NASDAQ is down 4%, the past month. Zynga is down 30%.

The social gaming space has plateaued. It got incredibly big incredibly fast, but those days of growth are over. Zynga has built a dominant position, but isn't making money yet. I'm not sure what that means, but it isn't good.

cocoalovethax• 14 years ago

"Videogame development is not rocket science." These people obviously have no idea what it takes to make a game.

jlgreco• 14 years ago

Let's be fair though, there are far more organizations capable of building games than can build rockets. Teenagers in basements can and do kick-start game companies but so far it seems as though rocket building is still in the domain of governments and dot-com millionaires. That is the difference that is relevant; barrier to entry.

kin• 14 years ago

The story is too easy to write about and I'm going to have to disagree here. I think it was pretty obvious that Draw Something wasn't going to last forever. And Zynga, with extremely similar games like Words With Friends, Hanging With Friends, and Scramble, knew that Draw Something was going to have the same fate.

Yes, the purchase was a little steep, but it had to happen. It had to happen because the game was formatted and structured EXACTLY like Zynga's games. With its popularity, Zynga did not want Draw Something to threaten the Zynga brand of social mobile games.

So here we are and Draw Something lost 5M users. You think Zynga didn't see that coming? Is someone really surprised? It makes sense that the drop in stock reflects the loss. I wouldn't say it's fact but it's highly probable. But, they're not dumb. The way the company works, I expect another amusing addicting social mobile game to be released in the near future to silence these stories and like other stocks it'll go where it goes, but not rock bottom.

srslythink• 14 years ago

Surprised no one has figured out why they paid so much. 20m dau at the time of acquisition means they had 20m+ user accounts (likely 3x that). All of these people are "socially obligated" to stay connected for some amount of time. How much would your company pay to acquire ~60m customers? That's not including the revenue they were bringing in. I don't dispute they paid too much, but apparently it was worth it to them.

dudeguy999• 14 years ago

I view Zynga's economics like a tv network. Their primary asset is their audience, and acquisition is a way for them to increase that. There are two different kinds of acquisitions they can do: shows that already have a following (low risk, low payoff, high cost) and promising small shows, which have opposite characteristics. The stuff they produce in-house tends to be highly targeted, less innovative stuff.

ayu2• 14 years ago

Zynga is making a gaming platform. I'm pretty sure Pincus is aware simply churning out social games isn't a good long term vision.

richardw• 14 years ago

Zynga's fine. They correctly figured out that once you're the biggest on Facebook, it's very easy to stay there. It'd take a competitor insane money to buy up the advertising necessary to introduce a game, whereas it takes Zynga an intro to their 'try these games' bar. When a smaller competitor happens to beat the odds and get to the top for one game, Zynga must make a copy-or-buy decision. Copy if you think the competitor can't leverage (or be used as leverage by a bigger competitor) the game's temporary eyeballs, or buy if you can make good use of those temporary eyeballs to cross-sell your other games.

Draw something is a fad on fire. So rather than build (and cross-sell existing Zynga users who you 'own' already), buy the fad, cross-sell hopefully new users, cut off anybody who could have done the same. Extra points if those new users are a different type of user who wouldn't normally be caught playing X-ville junk.

Now if in six months Zynga is raking in tens of millions of dollars a month on Draw Something I will eat crow. I have a feeling that isn’t going to happen.

Zynga don't have to. Zynga doesn't care which if their games you play once you're in the system. They care about the total customer lifetime value of each user, not the 1-game value.

dutchbrit• 14 years ago

It wouldn't surprise me if Facebook snaps up Zynga eventually. But Zynga is definately heading in the wrong direction.. But basing this off Draw Something is silly. It's one game, and people could of seen this coming a mile away. People get bored of games eventually.

varelse• 14 years ago

When I think of Zynga, I think of two words: options clawback.

Gordon Pincus is obviously very smart or he wouldn't have taken Zynga as far as it has come, but I can't see myself ever working for a company willing to confiscate options from at-will employees.

As for Zynga going down: maybe, but not anytime soon. Their business model is easy to replicate on the surface, but underneath is an awful lot of solid engineering to keep it from collapsing in on itself.

byrneseyeview• 14 years ago

I reasoned that there is no greater strategy at play by the Zynga geniuses in the war room of their ridiculous company headquarters.

Whenever I find myself thinking this way, the klaxons start going off. I'm basically saying "My mental model of a clearly smart person, surrounded by clearly smart people, who has made more money than I have and raised money from other smart people who have also made more money than I have--is that he's an idiot."

And then we get to:

So here Zynga finds itself, sitting atop a group of popular games and bracing itself for the next Draw Something to come onto the market so it can swallow it up...So the matchup is Zynga against the field, the field being every person in the world who knows how to, and has the will to create a social game.

Another way of looking at this is that Zynga is building a competitive advantage in social game monetization: if you have a given audience, Zynga can do more with it than you can. Meanwhile, giant deals like OMGPOP create a tournament dynamic, where everyone wants to build the next Draw Something. If Zynga is making their raw material cheap while putting their competitive advantage at a relative premium, that's great for their future.

It's also a more solid theory than just assuming that Pincus doesn't know what he's doing.

majani• 14 years ago

Sometimes I suspect many hackers of being anarchists. It's not always that a big company is going down, or that a certain industry needs to be disrupted from behind. It's like some of you secretly want to see the world as we know it, burning down in flames around you!

TomGullen• 14 years ago

Once they convert Zynga Poker into an actual online paid poker site they will make an absolutely phenomenal amount of money.

sabat• 14 years ago

Buying up games as they become hot is not a sustainable strategy. It takes nothing to produce a hot game.

I'm no fan of Zynga, maybe, but this statement is false. It's typical for large companies to begin doing corporate buyouts as a strategy as they transition out of the growth-company phase. (Think Oracle.)

If it took "nothing" to produce a hot game, then we'd be flooded with new gaming millionaires. Certainly there are a few, but how many social games that your aunt plays are coming from tiny shops? And, if they're actually making money, how many of those shops would turn down a big buy-out offer from Zynga?

Zynga's Going Down.

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