
Zynga 'losing $150 on every new paying customer' - evo_9
http://www.develop-online.net/news/39555/Zynga-losing-150-on-every-new-paying-customer
======
TobiHeidi
Obvious mistake made in the calculation. From "We also know that they had 3.4
million unique payers in the September quarter, which is up from 3 million at
the end of December 2010." lead them to "In other words, they added 400,000
additional payers and they spent $120 million to acquire them.”

This is an obvius mistake, as not all of the 3 Million from Dec 2010 continued
to be a customer in Sept 2011. I roughly assume they lost 800.000 customers in
that span (i think its more), then the newly aquired customers triple to 1.2
Million. Thus Zynga makes 50$ profit per customer.

~~~
acgourley
Exactly!

I'd go farther, if players stick around 12-15 months historically, and they
had 3M users, then in 9 months they could lose 60%-75% so 1.8M to 2.25M
players! This of course depends on distribution of lifespans, and assumes that
the 12-15 month figure remains accurate.

If that's true, they're getting users for as cheap as $50 each, and making
$100 on each.

~~~
RuggeroAltair
Oh, come on, guys... You all are over simplifying a complicated calculation.
Have you considered that you don't know the distribution of the 3M players?
How many of them had just joined compared to how many had been around already
for a while? (this could push both ways) Also, have you considered how many
new users they were expect to get just by word of mouth and no investment?
What is the percentage of regeneration of users that quit in 12-15 months but
maybe also brought in other users to play with them? Without knowing the
details you can't say anything. I'm not saying that I agree or not with the
article, but I assume that every person working as an analyst learns on their
first day what you were suggesting above. So, it could be that the analysis is
wrong (and it does look wrong), but the calculation that an analyst should do
is much more complicated that you guys seemed to think from what you wrote
(and two wrong analysis won't make a correct one).

I would have spent at least part of those $120M in funding startups to develop
new games (and later bring them in, in case...). I'm pretty positive the
return might have been better...

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pg_bot
The biggest problem I have with Zynga is that they do not have any creativity.
The games they churn out are just another [insert random noun]'ville or a
ripoff of a popular existing game (scrabble, hang man, poker, etc). A video
game's shelf life doesn't usually last for more than 12 months, and if they
can't come up with any unique new product that can capture the attention of a
mass number of users they may be up a certain creek without a paddle.

~~~
teej
This is endemic of the games industry as a whole. SW:TOR is just World of
Warcraft with lightsabers. Modern Warfare 3 is an expansion packaged as a
sequel. Angry Birds is just Castle Crashers with a different firing mechanic.
We've become so efficient at extracting money out of the hits, it becomes hard
to truly innovate.

~~~
Fargren
I think you are confusing Castle Crashers with some other game. Castle
Crashers is and old-school beat them up with very nice art.

Also, the problem you describe exists in all entertainment industries. I don't
think we've innovated much in literature since Shakespeare or in cinema since
Hitchcock. But there's always some work that stand above the rest in their
originality. And then a lot of other works that improve on them or at least
try. I don't think that's bad.

~~~
ido
He is thinking of Crush the Castle:

<http://armorgames.com/play/3614/crush-the-castle>

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nostromo
Anyone know where Zynga spends its marketing dollars? Is it mostly Facebook?
$13mm a month stikes me as huge considering I don't think I've ever seen one
of their ads.

~~~
patio11
Primarily Facebook (they're FB's #1 advertiser IIRC), but they also had big-
budget offline promotions with the likes of 7Eleven, where you could
(bastardizing the heck out of this) buy a bag of branded chips and get a free
thing of special potato seeds in-game.

~~~
trotsky
Don't forget paying Alec Baldwin to get kicked off a plane while informing
everyone who listened that he just couldn't put down words with friends.

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extension
_Our concern is [whether or not it's worth] spending $300 to get these
customers when people are spending $150_

Good god. My concern would be whether they will still be able to milk people
for $150 after there are 12 step programs and "just say no to Zynga" PSAs.

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X-Istence
How about the free users that are simply playing the games but aren't making
them any money. I personally play Words with Friends, it's kind of fun and
addicting, but I use the free version of their app, I don't ever click their
ads nor do I care to (and when I am on my home network those ad servers are
blocked =)). I use resources in that they have to spend server time to keep
track of my moves to send them to my opponents. Where is the win in that?

~~~
kevinh
Ad networks generally pay mobile developers for impressions, not for
clickthroughs, so you are making them money.

I have to say that I'm very disappointed that you block ads. Certainly it
wouldn't hurt to simply ignore the ads, given that you're using their service.

~~~
X-Istence
I block ads because I hate being bombarded by random crap I am never going to
consider buying. You can hate me for it (hell, I monetize some of my own sites
with ads) but I really don't care.

For a lot of services whose ads I block it is mainly because I am already
paying a fee to get access and yet I still have to be bombarded with ads. Hulu
is the worst offender in that department.

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jamesredman
The only thing that can save Zynga and demand its current valuation is online
poker.

~~~
joering1
agreed but for how long? further, playing poker for cash is slightly different
than feeding your cows and selling sunflowers. I am sure not everyone will
switch.

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acgourley
Do they really make $150 per acquired user, or just acquired user that opens
their wallet at all? I'm curious if those numbers on acquisition cover free
users at all.

~~~
mpeg
they make $150 per paying user, most likely

because I can assure you conversion costs on FB games are way less than
$300/user

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slouch
Zynga, whenever you are ready to charge me for an ad-free Words With Friends
for Android, I am ready to buy.

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yahelc
That headline may be the only thing that could actually persuade me to become
a paying customer of Zynga's.

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bmaeser
[quote]“That's our math; that's not what the company says,” [/quote]

sounds like crystal gazing to me.

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kellyreid
is this what they mean by monetizable pain?

