Love & Hate for Zynga

LOVE & HATE FOR ZYNGA by Scott Budman


Remember when television was the main way we all used to get our news and entertainment?  We’d gather around the set, sit back, and take it all in.  Back at the studio, TV executives would also sit back, and take it all in .. as in, the huge advertising dollars that rolled in.  Then, the internet happened, and thanks to Yahoo, Google, Hulu, Twitter, etc., etc., we’re now used to getting our news and information from a smaller computer screen.  As I write this, the traditional media world is struggling to deal with this new world order.  But it’s not the only one.



Video games traveled a similar path, only faster.  Once they caught on, video games, and the consoles you played them on, found their way into just about every house you knew.  No longer was there one “cool” family in the neighborhood with an Atari/Commodore/Nintendo, now every other house comes equipped with a PlayStation 3, XBox 360, or Wii.  And the games themselves, even those you can still play on your computer, cost about $60 each.  Recently, I found myself at a Game Stop in Silicon Valley, talking to people who were lining up to spend just that on “Call of Duty: Modern Warfare 2.”  As titles go, this was a grand slam home run, soon to be in contention as the best selling video game of all time.  But what other games did the queue buy this year?  Almost to a person, they had cut way back.  Sure, money played a role, but so did something else:  Once again, the internet has claimed a victim.
Social networking, you already know, is red-hot.  All ages are on Facebook these days, but what you may not know is that these people aren’t just looking up old friends.  They’re playing games on the social networking platform, with numbers that would make a soldier in “Modern Warfare 2” impressed.  Zynga, based in San Francisco, is probably the leader in the social networking game space.  With titles like “Farmville,” “Fishville,” and “Mafia Wars,”  Zynga hauls in 100,000 gamers a month.  And the games are free.  Let’s see, addictive new content you can share with your friends + free = another ‘net win.  And the big guys are noticing.  Shortly after announcing a disastrous financial quarter, complete with thousands of layoffs, Electronic Arts, the world’s largest video game software publisher, did something rather astonishing:  It announced plans to spend nearly half a billion dollars to buy a video game company.  
You can probably guess where this is going.  EA will buy Playfish, maker of games for social networking platforms.  Like Zynga, Playfish gives its content away, but also like Zynga, makes oodles of money when users decide to upgrade their games, or when advertisers, eager to tap into the social audience, line up to spend.  It’s a dramatic shift in what had been a comfortably successful genre: Big video game makers, losing money on expensive titles, trying to buy their way into the smaller, cheaper, internet model.
Even though it’s still independent, Zynga may turn out to be the most successful of its genre when the dust clears.  Tech-watchers are already predicting a billion-dollar IPO in the future, and its growth is off the charts.  As I walk into the company’s San Francisco office (complete with several dogs running around – this is, after all, a Silicon Valley tech startup), it’s easy to see that, even though it’s doubled since the last time I was here it’s also bursting at the seams.  They’re looking to move, even as they look to hire hundreds of new employees.
Zynga is the company behind “Mafia Wars” and “Farmville,” and Mark Pincus is the man behind Zynga.  With an already impressive resume, including the once-hot social networking pioneer, Pincus is a bundle of energy always looking for the next step up.  He greets his employees (and their dogs), schmoozes with Zynga benefactor (and former EA CEO) Bing Gordon, and discusses growth plans all without missing a beat.  He’s willing to talk about his plans to grow the social networking gaming empire – get ready for “,” a way to gradually assert its independence from the Facebook platform, and he’s also willing to admit to a not-so-squeaky-clean past.
The video of Pincus admitting to a Berkeley business audience that he did “every horrible thing in the book” to generate revenue has become a YouTube and TechCrunch staple.  Pincus cops to it, along with admitting that he, and his company, has to do a much better job of vetting their advertisers.  Facebook briefly dropped the game “Fishville” from its site after claims of “scammy” ads from upset users, and both Zynga and Facebook have been named in a class-action lawsuit relating to such ads.  Pincus’ response? “We have to handle this better ourselves,” he says, “It’s up to us to make sure the experience is a good one.  We’re responsible.”  
Not to excuse on-line scams of any kind, but the Zynga story, at least so far, is fairly common in the Silicon Valley.  Successful entrepreneur comes up with a great idea, sees hyperspeed growth, stumbles a bit on the ethical side, and then cleans up for the greater good of the business, not to mention to keep the money pouring in.  There is still, I’m happy to say, a little bit of Wild West spirit alive in the Valley today, and Pincus is one of its current gunslingers.  Like the poker game his own company puts out there, Pincus is clearly not done gambling, and there are still, no doubt, cards he has yet to show.


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