Wednesday, October 31, 2012

Zynga Bazinga !



In 2007 when Marc Pincus founded Zynga with the mission of "Connecting the world through games", social gaming was a relatively new phenomenon. Five years later Zynga has emerged as the biggest maker of social games, with 300mn monthly active users, five of the most popular games on Facebook, several acquisitions, and a revenue of USD 320mn. 

In today's post I will be highlighting Zynga's strategic move of creating its own API -- 'Platform to Play' service -- via which third party game developers can develop games using Zynga's network to connect gamers even outside one's Facebook page. I believe this is significant to our first week's discussion on strategy, as it will highlight a young company's move to re-position itself not just as a content producer but also as a platform and service provider in an industry of diminishing returns, where there are low barriers to entry and where it is soon losing its dominant position.

Zynga's new platform is a 'social atmosphere' consisting zFriends, live chat and messenger that is available not only on zynga.com but also on mobile platforms such as the iOs and Android besides being available on Facebook, Google+ and other social networking sites. A player can start a game on her iPhone and then continue playing the same on Facebook or on her desktop. Players can invite each other in the 'network' to play a game. Given the fact that customer stickiness is key to propelling its growth, developing this kind of an integrated environment is important to Zynga as it will increase customer stickiness. Another dimension of viewing this would be the diversification of Zynga's revenue stream. Before the advent of its platform, several insiders and industry pundits criticized Zynga's business model and doubted its viability stating that it was 'over dependent on Facebook and other partner businesses.' In its latest news feed Zynga reports 100mn connections already between friends with 250mn clicks being registered on zynga.com.

In my view, Zynga lacks innovation in its games which can be easily mimicked. It tries to entice users by adding small improvements to its 'Ville' games which are just not enough to create longtime user satisfaction. At a time when it is being touted as Facebook's tail and facing ailing stock prices, Zynga's decision to release a social gaming mobile platform cannot be better timed. As the world increasingly turns social and mobile and small seemingly useless but entrancing games are the norm of the day, Zynga has painted an exciting landscape.

A third dimension to Zynga's story is its prevalent, heavily criticized corporate culture which enforces competition over collaboration, where internal teams compete to outperform each other and create an insanely stressful environment. Each team owns a game and is measured by how popular and successful one's game is when compared to another thus inculcating a culture of  'fierce unhealthy internal competition' as the employees picture it; 'meritocracy' as Marc Pincus pictures it; 'recipe for failure' as I picture it. 

My conflict lies in these two distinguishing strategies. The hope and promise this company gives us by creating what is being called the 'holy grail' of cross-platform gaming and the attitude it adopts towards its employees by laying them off, hassling them and moving to copy-cat strategies. I believe Zynga will win the race in the short term but will 'stress' itself out and fall in the long run. What do you think?

References:
  1. http://www.forbes.com/sites/tomiogeron/2012/06/26/zynga-builds-out-cross-platform-gaming-strategy/
  2. http://www.wired.com/business/2012/06/zynga-unleashed/
  3. http://techcrunch.com/2012/06/26/zynga-network-adds-social-lobby-for-users-across-all-devices-zynga-with-friends/
  4. http://www.businessinsider.com/zyngas-mobile-ambitions-2012-6

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