Desperate, but not yet dead? The industry responds to Zynga's downward spiral

Mobile Gaming Mavens talk job cuts

Desperate, but not yet dead? The industry responds to Zynga's downward spiral

The PocketGamer.biz Mobile Mavens is our panel of experts drawn from all sectors of the mobile gaming industry.

This week, the Mavens suggested their own topic, and there was only one issue our industry luminaries wanted to talk about: The latest job cuts at social gaming giant Zynga.

The firm has slashed 520 jobs – equal to 18 percent of its work force – in a bid to rebalance its business, which also resulted in the closure of Draw Something developer OMGPOP, acquired by Zynga for $180 million just 15 months ago.

So, what future is there for Zynga? How has it found itself in this position, and what does it mean for the wider mobile industry when a big player begins to sink like a stone?

David MacQueen, Strategy Analytics
I always said "investing in Zynga is like investing in a record label that only does cover versions".

Tiny Tower/Dream Heights? The Sims/The Ville? Copy it, spend a load on advertising to attract users to your version, and then profit.

Or maybe not, because if your version isn't any better than the original developer's (or anyone else's) version, what's keeping your users there?

Zynga is paying the price for its focus on acquisition and lack of thought to retention. Zynga basically spent all its money on advertising to attract a user base, or acquiring a user base by acquiring a company, such as OMGPOP.

This is expensive. If you can't retain a user base in freemium gaming, then your revenues are going to decline extremely rapidly. Maybe if it hadn't produced copycat games then it would have some unique aspects to the gaming they offer, which would help the firm retain users. Retention is much cheaper than buying a new user base.

I feel sorry for the people involved losing their jobs, and I'm sure lots of them had great creative ideas that probably never got implemented. Investing in some of those original ideas would have been a better use of money in the long run.

If Zynga's decline continues and erodes the capital the company has available to acquire new users, its problems could snowball. Maybe the studio's next release is entitled Zynga's Vicious Circle.

For the sake of the remaining staff, I hope that this is not the case, and that the company realises the media industry's winners are the originals, not the copycats. Who sells out stadiums – The Rolling Stones or The Rolling Clones?

Dave Castelnuovo, Bolt Creative
Zynga is not in a good position - it's desperate and making questionable decisions.

Cutting its workforce is unavoidable in its current situation, but it doesn't have the right executive team in place to bounce back. Even knowing that these layoffs were coming, the firm recently decided to double executive salaries and hire new board members.

These moves will encourage more large scale, short term thinking that is out of touch with what they need the most… a hit game.

Zynga would be much better off trying to poach developers that have a proven track record for releasing hit games that monetise well and shielding them from the executive level and board members.

Don't pull off an expensive acquisition - just hire game designers, producers, and managers that have that track record and give them access to the people you are laying off.

In addition to that, prevent Mark Pincus from going anywhere near the teams. Zynga needs to reinvent itself and radically change its thinking, not do more of the same.

The problem with Zynga is that it's desperate. It started big on Facebook and, for the last four years, has been on a slow downward decline that it's been fighting by throwing money at user acquisition and using overly aggressive monetisation strategies in its games.

Both these elements are like a drug that will be impossible to kick by doubling down on the executive level.

Unfortunately, the side effect of the drug is Zynga is failing to get loyal users. Users are tricked into checking out the game, spending some money on it, and then spamming their friends. They walk away with a bad taste and never come back.

One of my fears with Zynga (and other larger companies that run out of steam) is that its desperation will affect the mobile games market in general. Firms like this are cheating the game by pouring money into user acquisition and overly aggressive monetisation strategies.

Their games are not high ranking because of merit, they are buying their way to prominence and because many companies are doing that, the top grossing and free charts are squeezing out games that have the potential to reinvigorate the mobile gaming audience.

I ran into the art director for FarmVille 2 recently at a party. I said I thought Candy Crush was a great game but it was incredibly aggressive in its monetisation.

He looked at me like I was joking. He then told me that Candy Crush was nothing compared to what Zynga games do and that I should at the very least incorporate an energy mechanic that stops the user from playing after five games without paying money or waiting an hour.

This is their current mentality and the reason why Zynga won’t bounce back.

Christopher Kassulke, HandyGames
I am sorry about the lay offs, but are they a surprise to anyone?

Dave, being a copycat worked in the past and it will work in the future. Everyone get inspired by other games. You cannot reinvent the wheel all the time.

Back to the topic. Zynga still has a lot of cash, but money is not everything. Don't write them off completely. We will see a huge consolidation in the gaming world on all fronts soon.

Those companies which are agile, produce great quality products based on own IPs, hired and outstanding team and monetise wisely will stand out.

As Ilkka [Paananen, CEO of Supercell] mentioned some time ago. Small is the new big. You don't need a team of 250 members for a single title.

Dave Castelnuovo, Bolt Creative
I don't mean to suggest that copycatting will stop working in general. What I mean is, if all Zynga does is subsidise second rate clones by throwing money at user acquisition, it will fail at creating long term bonds with their customers.

That means Zynga will either continue its slow decline, or be forced to pay even more for user acquisition. Either way, it will end up losing in the long term.

However, if Zynga decides to do something bold by creating new IP, it has e a chance to win people over and breed the type of loyalty it needs to succeed.

Zynga doesn't need to invent a new genre to do this. Candy Crush didn't invent the match 3 puzzle, but it brought polish and balancing to a level that no other match 3 has seen before. That’s what Zynga needs to do.

Also, Subway Surfers borrowed heavily from Temple Run but it also added a new dimension of game play and the feel is among the best of that genre.

Will Luton, Doctor Monolith
The speed of mergers and acquisitions was pretty crazy. Yet, lots of people seem to ove look the other benefits of acquisition beyond future revenue: Users, talent, technology, ideas, killing a competitor, investor mindshare, press etc.

I'm sure it was as clear to Zynga as it was its investors that most of these acquisitions wouldn't work, but I'm not sure if they were all bad business decisions.

Zynga, like lots of companies that raced early on, is now over stretched. It needs to pull back, refocus and start making great content again. Fire the biz guys, get great creatives. I think there's more to come from Zynga.

Oscar Clark, Applifier
When FarmVille/CastleVille were originally hits, Zynga was riding a wave that was genuinely disruptive.

They may have been close approximations to previous titles, but for the audience at the time they definitely added something new and in a way which was genuinely accessible.

But that kind of growth comes at a cost, and I think the inertia that comes with size and floatation works against most companies - doubly so when the market expectations are as high for Zynga.

It also slams the breaks on any innovation, no matter how many designers or developers you hire.

The scale of the revenues Zynga must still have coming in must also blind it from the severity of the situation. More than that it blinds you to what other people are doing in the market and its no wonder that it has missed the direction their audience is going.

No amount of data can tell you what the audience will do next; only what they did last. No wonder Zynga still think the energy mechanic is the only tool in the box!

I'm sure Dave is right to say that Zynga is desperate - more than that, I think it has spooked everyone about online social games, particularly investors.

So what will be interesting to see will be those new studios that rise from the redundancies. I'm sure that when the dust settles, we will see some new indies popping up who will have learned the monetisation lessons and will be small enough and hungry enough to do something new and disruptive.

Brian Baglow, consultant
I thought Zynga's move around a year ago to start working with third party developers was a very smart move and, given its cash reserves at that point.

Becoming a digital only publisher made a lot of sense and could arguably have helped a great many developers find an audience and get their games to market.

Turns out I was incorrect. Zynga's main focus was still cloning successful games. Has that opportunity passed? I'd say it probably has.

In the last year Zynga's not really made any real effort to distance itself from their original business model, or embrace any sort of new content. I think it'll have a very hard job pivoting now.

Dave Castelnuovo, Bolt Creative
I don’t think publishing would be a bad idea - it could be an opportunity for Zynga to find some fresh content without having to acquire another company.

The problem is whether it applies the Zynga spin to it and diminish the appeal.

Battlestone was released through a publisher style arrangement and had a lot of promise, but it somehow managed to 'Zynga it up' by adding an energy mechanic (really?) and trying to make a mid-core mechanic appeal to the mass market.

The actual play mechanic is actually pretty cool but I think it should have kept some of the depth to draw the mid to hardcore base and find a more creative way to monetise.

Warhammer Quest is actually monetising pretty well with a paymium model and a hard-core mechanic. With Zynga’s user acquisition ability, I’m sure it could find a lot of success with a similar monetisation model and a high quality game – and, in the process, have people feel better about its games in general.

Keith Andrew, PocketGamer.biz
Drawing the focus back a bit specifically to OMGPOP, I could never understand that acquisition.

Similar to the analogy David opened with, at the time I compared Zynga buying OMGPOP on the basis of Draw Something alone akin to a record company offering a one hit wonder a five album deal.

It just doesn't happen, and when it does, it ends in tears.

Of course, Will's right in that there's more to many acquisitions than simply buying successful studios. I know my boss, Jon Jordan, is of the view that Zynga needed to be seen to be making acquisitions at the time in order to keep investors happy – it couldn't simply sit on its capital.

That said, I've never been a fan of Zynga's business. Running that kind of operation – cross-promoting one short-scale hit after another and constantly needing to have the next one in the pipeline ready to go would drive me mad.

It also means that, as some of you have suggested, the firm is in panic mode trying to stabilise things.

It's whole business was built on quick decisions, quick games, quick moves, so it's no surprise everything is happening quickly now.

But I have to wonder that, when you take away the gloss of hits gone by, what Zynga actually stands for now, what games the company that's left is likely to produce, and whether it ultimately has much of a future.

Expect Zynga to prove me wrong over the next few months, then.

Keith Andrew
Keith Andrew
With a fine eye for detail, Keith Andrew is fuelled by strong coffee, Kylie Minogue and the shapely curve of a san serif font. He's also Pocket Gamer's resident football gaming expert and, thanks to his work on PG.biz, monitors the market share of all mobile OSes on a daily basis.