July 10, 2012
“We believe play – like search, share, and shop – would become one of the core activities on the Internet.”
— Mark Pincus
While playing Zynga’s popular online game FarmVille, “good farmers” tend to their virtual plot of land with care and reap the fruits of their labor. And in the real world, the creator of this blockbuster game, Mark Pincus, has done the same thing with the company he founded in 2007. Over the last five years, the tech entrepreneur has taken Zynga up the ranks to rub shoulders with the likes of Mark Zuckerberg, Sergei Brin, and Larry Page.
Still, Pincus’ ride to Silicon Valley’s “A-list” did not happen overnight. The Harvard MBA worked in the area of financial services and venture capital before he tried his hand at establishing technology-based enterprises. Pincus, though, was fortunate to launch his businesses in the heyday of social media start-ups.
Internet broadcast service Freeloader, his first business, was sold for $38 million in 1995. His second venture, business software maker Support.com, was taken public five years later, while the third, Tribe.net, a social network, was established in 2003. The ambitious businessman also made investments in Facebook, Twitter, Napster, and Brightmail around the same period. While some of Pincus’ businesses were considered successful, he always wanted to launch something new; something which he felt would “connect people.” Out of this vision was born The Zynga Game Network in 2007.
And the online social gaming space has never remained the same ever since.
Launched originally under the name Presidio Media, the San Francisco-based company was renamed Zynga after Pincus’ bull dog Zinga in 2008. After Facebook, the online social network that made the world a smaller place and Twitter, the global public forum without boundaries, here was an online destination that enabled friends and family to play together online.
Zynga, arguably the world’s most sought after social gaming company, is known for its innovative games that are available free, across social networks such as Facebook as well as on mobile devices like iPhone, iPad, and Android. Zynga’s business model, which is closely aligned with its bigger cousin Facebook, stands out in the crowded online marketplace where it is hard to earn a dime. The display on the high-traffic Facebook site gives Zynga’s games the much-needed visibility and promotion.
“ We generate substantially all of our revenue and players through the
Facebook platform and expect to do so for the foreseeable future.”
- Zynga’s IPO filing in 2011
While Zynga games are offered for free, the players have the option to buy virtual goods, which they can use to enhance their gaming experience. For instance, a player can use his credit card to buy virtual tractors, seed, and other farm equipment, which help the gamer get a good harvest and gain an upper hand in the Farmville game. While these make-believe goods cost a mere few dollars to buy, the sheer volume of players the site attracts makes these purchases the main source of revenue for Zynga. So, every time a Zynga game user wants to buy his “goodies” online, he is directed through Facebook’s payment system, Credits. Zynga gets to pocket 70 percent of each dollar spent, while the rest goes to Facebook. Advertising, in a limited way, also contributes to the company’s coffers.
Zynga’s balance sheet, which shows revenues of above a billion, and its user base now estimated by the company to be around 240 million per month, is proof enough that Pincus really means business. The phenomenal growth story has attracted investors, which include Netscape founder Marc Andreessen and Google, to pump in around $520 million into the gaming company, a huge sum even by Silicon Valley standards.
Nevertheless, Zynga’s over-reliance on the Facebook platform could turn out to be a big risk, as the company itself stated in its IPO prospectus prior to going public in December 2011. In fact, according to a New York Times article, traffic to Zynga games witnessed a sharp drop when Facebook restricted the number of automated message updates sent to the players’ friends on Facebook. At one point in time, questions were also raised about the company’s business ethics as critics pointed out that some of the ads placed alongside its games were misleading. But Zynga has already showed signs of exploring new possibilities, deciding now to tie up with Yahoo! and announcing the launch of FarmVille on Apple’s iPhone4.
The popularity of other games from the company’s stable such as CityVille, Mafia Wars, and Words with Friends, demonstrates the sea change in social habits where stressed out people unwind by playing their favorite online game. Despite the occasional grumbling against social gaming, Zynga’s spectacular success seems to have taken the multibillion video game industry by storm. As a New York Times report points out, the changing dynamics of the industry were spotlighted in 2010 with the $400 million acquisition of Zynga’s smaller competitor Playfish by gaming company Electronic Arts.
Indeed, the 46-year-old “aging whizkid” says he always thought that there should be something more to the Internet than a “search engine or a portal,” perhaps a slight dig at Google and Yahoo! Pincus once told the New York Times that the founding of Zynga was part of his larger vision to create a “digital skyscraper.” He recalls that his passion for gaming goes back a long way to his school days when he used to play games such as charades with family and friends. Even as he grew up, the love for gaming remained with him, aptly captured in Zynga’s catch line, “Let’s play.”
The entrepreneur might have rewritten the rules of the online gaming space, but Pincus, mostly seen in his Silicon Valley dress code of jeans and T-shirt, may find the going tough as new firms make their entry and the booty to be shared runs thin, exacerbated by the Electronic Arts’ Playfish acquisition. In its next chess move, the company is working to launch a new basket of mobile games to reach out to a wider audience. After all, Zynga is captained by a seasoned player like Mark Pincus who believes that entrepreneurship is all about trying out different game plans until one succeeds.
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