When you’re building a social game platformed on Facebook then for the last three years Zynga has looked like the 800-lb gorilla. But yesterday’s office closures were a heads-up on the recent trend of Zynga headed straight toward 97-lb Gorillaville.
Some of the commentary yesterday paired Groupon with Zynga — the flashy growth spike, the too-soon IPO, the brilliant-but-unprofessional CEOs — and that may be an interesting parallel. Both of those companies certainly feed my desire to keep the faith with solid, patient, revenue-driven companies with products that have happy long-term customers.
While I think there’s still huge upside for the social gaming universe I seriously doubt that Zynga will be a core contributor for much longer. My four reasons for thinking this are:
1) Facebook leveled the playing field — yes, Facebook brought them into the world and Facebook can take them out. Zynga games were built as Facebook apps and depend hugely on the Facebook’s “first level network effects”. Except, Facebook has been steadily changing the rules and most of the stunts Zynga used to pull to get free social lift are being clawed back by Facebook in their own struggle to improve the “editorial quality” of their publication. Timelines and feeds full of requests for tractor fuel from addicted friends? Gone. When Facebook’s runaway #1 advertiser looks like it has a shaky business model, what else can a social network do?
2) Serious competition — also gone are the days where Zynga would regularly *own* the top 5 MAU spots on the Facebook games list. Last year, however, they didn’t have a single entry in the annual top 5. What? They certainly gamed Facebook early and pioneered data-driven game development on that platform but they didn’t have any real defensible advantage, especially now that their special deal with Facebook is kaput. That was a big deal.
3) EA in the DNA — by all accounts the downsizing yesterday was handled as an arms-length corporate exercise. Nice. One of the comments was that this is the cultural downside of Zynga poaching so many EA employees. Ya think?
4) Waiting on gambling — even though the Pincus talking points are all about “mobile” I don’t really believe that. The market and investors may want to hear that, and Zynga may even want to be a mobile-first company but I’m not seeing any proof of their crazy mobile growth, Words With Friends notwithstanding. My guess is that Zynga is singing “mobile mobile” with everyone else while secretly betting big on legalized gambling in the US. If that’s true then it’s a horrible strategy in my opinion — probably another whole post worth of commentary there (spoiler: social games work better with social currencies). Even if gambling is legalized it will come too late for a company that lost its Facebook mojo, got brittle too fast, and will surely face insane competition.
These ruminations come in the wake of the B3TZ team this week doing a big think on our own relationship with Facebook. As a social game the advantages of platforming on Facebook used to be compelling. Less so now, especially if you’re trying to include sponsors as first-class citizens in your games. In fact, finding the right distance from massive social graphs is going to be key to us keeping everyone happy and is a core competency we’re growing. Zynga is starting to look to me like the latest in a long line of cautionary tales about the tears of sadness that flow from outsourcing a strategic function.
I doubt Zynga will disappear totally, although it wouldn’t surprise me to see them get eaten up by a Yahoo or firesaled Digg-style once the strongest EA jumpers evaporate. More likely ZNGA will zombie-shuffle for a few years before any major inflections or tombstones. But part of me is looking for a history rhyme here, where Pincus gets whacked soonish and comes back in a few years with just a little more grown-up in his leadership mix to some kind of Jobsian triumph.