Zynga

Posted on April 25, 2016 by Rebecca Duke

by REBECCA DUKE

[1] Zynga logo

OVERVIEW

In 2007, Mark Pincus founded Zynga, the first social gaming company. Named after his dog Zinga, the company was created in order to make gaming more accessible and turn it into a more interactive, friendly experience [2]. Zynga has created some of the most successful social games to date, including Words with Friends, FarmVille, and Zynga Poker. Over one billion users have played Zynga games and connected via the company’s franchises.

[3] A sampling of Zynga games

Additionally, in 2009, Pincus formed Zynga.org, a 501(c)(3) non-profit organization that allows the success of social gaming to give back to those in need by connecting revenues from gamers to other non-profits around the world. One of Zynga.org’s biggest projects was the creation of co.lab, a gaming development technology program that gives underprivileged San Francisco kids the opportunity to learn about game design hands-on.

INDUSTRY

The creation of Zynga spawned the entire social gaming industry, an industry of which Zynga continues to be a leader. According to IBISWorld, the industry has grown rapidly ever since its conception in 2007 [4]. Growth peaked during the 2008 recession, when many companies were downsizing and left unemployed Americans with more leisure time. In recovery from the recession, customers are slowly investing more and more in social games in order to unlock achievements and progress more quickly in the game (for example, while playing FarmVille, a user could pay a few dollars to expedite the growth of their crops and thus move on to bigger and better tasks).

[5] FarmVille 2: Country Escape

Before social gaming, those interested in playing interactive games were required to own some form of external console, such as an Xbox or PlayStation. With Zynga, users can play games and connect with other gamers all across the globe as long as they have an internet connection and an account on a social networking site. The number of broadband connections in households has grown steadily each year, widening the potential market of social gamers. The social network aspect of gaming has introduced new customers that were not previously active gamers, namely females over 40.

KEY EXECUTIVES

[6] Mark Pincus – Founder and Executive Chairman of the Board

[7] Frank Gibeau – Chief Executive Officer and Board of Directors Member

Earlier in March, Mark Pincus stepped down as CEO of Zynga and was replaced by Frank Gibeau [8]. Pincus still sits as the Executive Chairman of the Board and oversees the company. Frank Gibeau is a 20-year veteran of Electronic Arts, one of Zynga’s leading competitors, so he is expected to bring positive change and expertise to the company and allow it to progress financially.

FINANCIALS

Zynga is a publicly traded company, listed on the NASDAQ under the ticker ZNGA. The stock price currently sits at 2.48, a relatively high number since averaging 2.15 over the past three months [9]. Zynga stock took a tumble in early and mid-February after the publication of a disappointing fourth quarter and annual report. After bringing in $185 million in revenue, the company’s operating income and net income amounted to losses of $55 million and $51 million, respectively. These numbers were a stark contrast to the third quarter, when Zynga brought in $10 million more in revenue and net income was $3 million. Zynga has two main revenue streams: advertising, namely video and banner ads, and the sale of “virtual goods” from in-game purchases [10].

[11] NASDAQ – ZNGA

One big change for Zynga that will bring in more cash flow is its future sale of real estate. Currently, Zynga operates out of a 670,000 square-foot office in Silicon Valley, a space that is now too large for its 2,300 employees [12]. Downsizing and liquidating their current office space could lead to a $300 million profit, given the astronomical increase in San Francisco properties since 2012.

[13] Zynga Headquarters

CURRENT PROJECTS

In January, Zynga announced a partnership with The Rubicon Project in developing SponsoredPLAY, a new form of native advertising that allows political candidates to take advantage of what mobile ads have to offer [14]. SponsoredPLAY beta ads have seen six times the engagement rate of normal mobile advertisements, a metric that is incredibly important in today’s age of distracted consumers. With these ads, players connect with brands through mini games that incorporate a piece of the brand’s image. Specifically, The Rubicon Project introduces political candidates as the brands, and encourages the candidates to use the technology to engage voters in a fun and educational way. The SponsoredPLAY ads are also linked to Twitter to create a social buzz around the political issues that the user finds compelling. Ads are expected to be finalized and placed in the games later this year, just in time for the presidential election.

[15] SponsoredPLAY Mockup

One of the two new Zynga games that launched on March 31, 2016 was Willy Wonka & the Chocolate Factory Slots. This was the first game of many to be licensed from Warner Bros. Interactive Entertainment, thanks to a multi-year agreement signed in mid-2015 [16]. The partnership allows for a realistic representation of the characters, sounds, and visuals from the original film. Willy Wonka Slots provides the player with nine different slot machines to begin, in addition to a special “High Roller World” with more levels that unlock after the player has earned over 24 million credits. The basic format of the game is similar to other Zynga games, where the user can play completely for free but has many opportunities to progress further with small increments of in-app credit purchases. The game can be downloaded for free on iTunes, Google Play, and Amazon or played on Facebook.

[17] Willy Wonka & the Chocolate Factory Slots

The second game that debuted at the end of March is Crazy Cake Swap, a variation on the wildly popular Match-3 genre [18]. Crazy Cake Swap is a mix of Candy Crush and Diner Dash, taking place in a bakery and offering different sets of goals for each level. The essentials are similar to other Match-3 games; of course, there’s the concept of matching three or more identical cakes to gain points. A player also only gets five lives and must wait or pay for more when they run out, and a similar wait-or-play model when the end of each “world” is reached. However, it provides a fun element of personalization by allowing users to upload their own photos or avatars, and has more of a storyline than other similar games. Crazy Cake Swap is distributed through the same outlets as Willy Wonka Slots and is free to play with the exception of optional in-app purchases.

[19] Crazy Cake Swap

FUTURE PROJECTS

Zynga has been promising investors two high-development games for awhile, CSR2 and Dawn of Titans, that are finally set to debut later in 2016 [20]. These games could bring in major revenue for Zynga if they become anywhere near as popular as Words with Friends or FarmVille. A recent trend with Zynga has been the overall decline in players, but huge increase in bookings for some of their popular games [21]. Essentially, this means that while there are fewer players, these players are spending a lot of time gaming. If Zynga can successfully recruit more of these avid gamers and grow their user base back up, they will continue to be a force to be reckoned with in the social gaming world.

[22] Dawn of Titans

SOURCES

[1] “Zynga Logo.” Pop Culture Blog. Dallas Morning News, 3 June 2013. Web. 25 Apr. 2016.

[2] “Zynga Leadership.” Zynga. Zynga, n.d. Web. 22 Apr. 2016.

[3] “About Game Cards.” Zynga. Zynga, n.d. Web. 25 Apr. 2016.

[4] “Social Network Game Development.” IBISWorld. IBISWorld, n.d. Web. 22 Apr. 2016.

[5] “Farmville 2: Country Escape.” Google Play. Google, n.d. Web. 25 Apr. 2016.

[6] “Mark Pincus.” Catchafire. Catchafire, 25 Sept. 2013. Web. 25 Apr. 2016.

[7] “Frank Gibeau.” Live Geek or Die. Disqus, 29 Mar. 2013. Web. 25 Apr. 2016.

[8] Takahashi, Dean. “Mark Pincus and Frank Gibeau Talk about the Future of Zynga and Social Mobile Gaming.” Venture Beat. VentureBeat, 2 Mar. 2016. Web. 20 Mar. 2016.

[9] “Zynga, Inc. (ZNGA).” Yahoo Finance. Yahoo!, n.d. Web. 24 Apr. 2016.

[10] Gobry, Pascual-Emmanuel. “How Zynga Makes Money.” Business Insider. Business Insider, 28 Sept. 2011. Web. 24 Apr. 2016.

[11] “Zynga’s Opening Day.” Gigaom. Knowingly, 16 Dec. 2011. Web. 25 Apr. 2016.

[12] Bruno, Alessandro. “ZNGA Stock: This Is Why the Bears Are Wrong on Zynga Inc.” Profit Confidential. Lombardi Publishing, 26 Feb. 2016. Web. 20 Mar. 2016.

[13] “Zynga Headquarters.” Games.com. AOL, 12 Nov. 2012. Web. 25 Apr. 2016.

[14] Pakula, Kelly. “Zynga & Rubicon Project Announce New SponsoredPLAY Custom Mobile Advertising Product for Political Campaign Advertisers.” Global Newswire. Nasdaq, 7 Jan. 2016. Web. 24 Apr. 2016.

[15] “Zynga Mockup.” Adweek. Adweek, 7 Jan. 2016. Web. 25 Apr. 2016.

[16] Shaul, Brandy. “Zynga Launches Willy Wonka & the Chocolate Factory Slots on Facebook, Mobile.” Social Times. Adweek, 31 Mar. 2016. Web. 24 Apr. 2016.

[17] “Willy Wonka Slots.” Zynga Blog. Zynga, 31 Mar. 2016. Web. 25 Apr. 2016.

[18] Allen, Jennifer. “Crazy Cake Swap Review: Sweet, Familiar, and ‘Friendly’.” Gamezebo. Gamezebo, 5 Apr. 2016. Web. 25 Apr. 2016

[19] “Crazy Cake Swap.” Google Play. Google, n.d. Web. 25 Apr. 2016.

[20] Morris, Chris. “What Will It Take To Turn Zynga Around?” Fortune. Fortune, 11 Feb. 2016. Web. 25 Apr. 2016.

[21] Nusca, Andrew. Here’s Why Changing CEOs Won’t Fix Zynga. Fortune. Fortune, 2 Mar. 2016. Web. 20 Mar. 2016.

[22] “Dawn of Titans.” NaturalMotion. NaturalMotion, 5 Mar. 2015. Web. 25 Apr. 2016.

Zynga

Posted on November 20, 2013 by Caroline Mahony

Zynga, Inc.
699 Eighth St
San Francisco, CA 94103

Phone Number: (855) 449-9642
Fax Number: (302) 636-5454
Website: http://www.zynga.com

Zynga, Inc. was founded with the mission of “connecting the world through games” It is a leading provider of social game services for the web and mobile worlds, and it boasts franchises such as FarmVille, Words With Friends, and Zynga Poker. As of September 30, 2013, the company had 133 million monthly active users enjoying its games. Zynga games are available on Facebook, Zynga.com, Apple iOS, and Google Android. [1]

Zynga was founded in 2007 in San Francisco, California by Mark Pincus, Eric Schiermeyer, Michael Luxton, Justin Waldron, Kyle Stewart, Scott Dale, Steve Schoettler, and Andrew Trader. Mark Pincus’ American bulldog Zinga serves as the inspiration behind the name and logo of the company. [2]

As of July 1, 2013, Don Mattrick is the current CEO as well as the member of its board of directors, after serving as President of the Interactive Entertainment Business at Microsoft. Also on the board of directors are L. John Doerr, who also serves on the board of Directors for Google, Inc.; William “Bing” Gordon, who has a background in venture capitalism; Reid Hoffman, who served as Chairman of the Board of LinkedIn Corporation; Jeffrey Katzenberg, who also serves as Chief Executive Officer and a member of the board of directors of DreamWorks Animation SKG Inc; Stanley J. Meresman, who has directed several private and public companies, Sunil Paul, who also has a background in venture capitalism; and Ellen Siminoff, President and CEO of Shmoop University, Inc. Board members contribute to the company with fresh and diverse experiences, having been appointed as recently as April of 2013. [2]

Zynga also has an impressive leadership team that works on projects for social good. For example, since 2009, Zynga has raised over $15 million dollars for non-profits by connecting their over 1 million players with fifty different organizations. In 2013, Zynga partnered with NewSchools Venture Fund to improve the quality and radius of learning games and mobile applications by creating an education technology accelerator. [3]

On October 24, 2013, Zynga announced its Third Quarter Financial Results for the quarter that ended on September 30. Zynga saw revenue of $203 million, which was down 36% year-over-year. It also saw bookings of $152 million, down 40% year-over-year. The company experienced a net loss of $68 thousand dollars, and, before interest, tax, depreciation, and amortization, saw earnings of $7 million. In response, CEO Don Mattrick seemed confident:

Our teams are working hard to compete more aggressively on the web, move to mobile and develop new hits, and I am happy with the early progress we have made…I am confident that Zynga is rewiring itself in a meaningful way that will strengthen the core of our business and put us back on track to achieve significant long term growth and profits.

Mattrick seemed confident, despite the fact that his companies “rewiring,” or restructuring, cost them $17 million dollars in office closures and acquisitions impairments. [4]

Zynga did take some hits this past year. Their results also showed a general decrease in usership from the third quarter of 2012 to the third quarter in 2013. Daily active users decreased 49% to 30 million users, monthly active users decreased 57% to 133 million, monthly unique users decreased 45% to 97 million, and monthly unique players decreased 46% to 1.6 million. On the bright side, average daily bookings per average daily active user increased 17% to $0.055. [4]

During the third quarter of 2013 alone, Zynga launched Fairy Tale Twist, Ninja Kingdom, and Hit it Rich on web platforms. [5]

For mobile platforms, in the third quarter of 2013, it launched 1 Word (KiK Messenger App) and CastleVille Legends. New Scramble with Friends, Baseball Slam (3P), and CityVille KRE-O are also new hits that Zynga released. As of the end of the third quarter of 2013, Zynga had 3 of the top 10 games on Facebook, the ever-popular FarmVille 2, Zynga Poker, and Words With Friends. These results are based on the daily active user count reported by Facebook Application Programming Interface. [5]

Zynga is a company publically traded on the New York Stock Exchange. As of November 20, the stocks are priced at $4.11 a share [6], and have been impressively strong lately, due to themes/events of the past month that drew momentum behind the company. Under Don Mattrick, the new CEO, Zynga has shifted its focus. Originally, the company wrestled with the idea of real money games to create a loyal and ever-growing user base, as well as a chunky revenue stream, but after licensing problems, they ditched the idea. Instead, Zynga is focusing its attention on the mobile gaming market in order to decrease their dependence on the social market [7]. For example, Zynga originally earned 90% of their bookings from Facebook, but that has decreased to 76%. This can be partially attributed to Facebook charging a 30% revenue share agreement. Perhaps if online gambling becomes legal, Zynga may decide to reshift their focus once again.

In November of 2013, Zynga won a high profile lawsuit against Mattel’s Scrabble. Scrabble sued Zynga for using the name “Scramble with Friends,” which they claimed was too similar to its own trademark. [8]

High Court Justice Peter Smith dismissed the claim that the name was too similar, but motioned that Zynga change the way it displayed the name. More specifically, of one the “M”s in “Scramble” is displayed in a corkscrew style, which the judge ruled “gives the impression that the word is Scrabble when one looks at it quickly and has the propensity to confuse.” Once the logo is changed, Zynga is good to go, and will continue distributing the game in the United Kingdom. [8]

Zynga has caught the eyes of technology buffs, stock market observers, mobile app designers, and game players alike. Within the past year, the company has reported revenue losses and the loss of two top executives. However, with new CEO Don Mattrick, the company is exploring new and innovative ways to continue the success it has seen even in such infancy. Projected revenue for the final quarter of 2103 is between $175 million and $185 million, with net loss estimated between $21 billion and $31 million. The future of the company looks bright, but only time will tell.

Sources

[1] Zynga background information

[2] Zynga’s key players

[3] Zynga leadership team

[4] Zynga Third Quarter Financial Results

[5] New Zynga games

[6] Zynga stock information

[7] Zynga’s new mobile strategy

[8] Scramble with Friends vs. Scrabble