
Why Zynga is failing - gridscomputing
http://blog.sfgate.com/techchron/2013/06/04/why-zynga-is-failing-in-basic-napkin-math/
======
vessenes
Although there are compelling changes in the gaming ecosystem described in the
article, there's a pet theory of mine I wish to forward: people can become
resistant to skinner box addiction. We get bored with just simple mechanics,
eventually.

I see this with my kids (all under 12), they crave more interesting gaming
than they did a few years ago; they do still play skinner type games
occasionally, but more often they are searching for higher quality content.

This is cool! It makes me hopeful for gaming.

~~~
jusben1369
This only downside here is that your sample size is maturing and we'd expect
them to crave more interesting, complex games. So not sure we can agree with
your conclusion based on your data set. Not saying you're wrong......

~~~
vanderZwan
"It's like testing with a moving target."

(overheard in a recent interview with Alan Kay on testing out new interfaces
with users, which is problematic because they get keep getting familiar with
it! The remark was by the interviewer, actually)

------
acchow
Napkin math?

Math. I don't think it means what he thinks it means. All I see here is "proof
by picture" with some stretched definition of "proof". The only relevant part
of this entire piece was this:

>Because when something is easy to build and sell — and appears to make money
— a lot of people are going to gold rush the market and drive your margins
into the ground. Now there are a million alternatives.

The low-cost gaming industry makes money off one-hit-wonders. You can't
consistently manufacture one-hit-wonders.

~~~
mayank
Sounds like the "gold rush" going on now for RSS readers, which are easy to
build and which apparently people will pay for.

~~~
pjmlp
I never got it, given that most browsers and email clients already provide
readers.

------
obviouslygreen
While I love the snark... _is_ Zynga "failing?"

My initial reaction is that this is the same kind of knee-jerk reaction that
says Facebook is somehow doomed and irrelevant.

I think this is good and worth reading, but the title is hyperbole, and if
they're actually concluding that Zynga is done, it's premature. The term
"right-sizing," used in another article quoted here, is at best manager
bullshit; however, it's not necessarily wrong in this case.

I dislike many of the things they do and have done, but "napkin math,"
particularly prefaced by "basic," is pretty much Tarot card valid. Like so
many unsavory companies and ventures of questionable value before them, Zynga
has a serious user/cash/revenue base, and it entirely remains to be seen
whether they're just hemorrhaging value or whether they're actually making
moves that will keep them solvent and push their business forward.

~~~
ripter
Title is link bait, but he never claims Zynga is dying.

> I don’t think Zynga fades into the sunset. They are going through tough
> times, but they’re not done. Zynga still makes money. (In fact, they could
> do a smart pivot and get into the data center game, though that is another
> race to the bottom.)

I read all the knee-jerk reactions to Facebook and Zynga as the next
IBM/Yahoo/etc. They not the monsters they used to be. Now they have to find a
way to exist in a world that no longer revolves around them.

------
alizaki
I think this misses the point entirely. Zynga is not failing because their
products are cheap to recreate. Plenty of companies, in tech and beyond, have
easily recreatable products but do just fine. Zynga is "failing" (if you can
call it that) because they depended on cheap user traffic from Facebook - both
through free virality and later cheap ad buys. Facebook is maturing as a
business and ad prices are going up. And Facebook realized that all that game
spam was just not worth the 30% vig they charged (probably the hard way -
through testing for user engagement). Take away those temporary advantages and
Zynga is just like any other gaming company.

This is a right sizing of the company and its revenues to reflect the games
they own, once you take away the cheap/free traffic.

~~~
mattmaroon
I don't know that it's so much Facebook ad prices going up (they haven't gone
up much really) as it is Zynga having burned through all of the potential cow
clickers. When you run a Facebook ad, the price per user increases as you
saturate the market, even if the overall network's prices remain steady, due
to clickthroughs dropping.

Zynga games are typically low-RPU, mass appeal, which as you mentioned relies
on cheap traffic (mostly from other Zynga games.) You can only keep shuffling
people internally from one game to another for so long until they all leave
for Candy Crush Saga.

~~~
alizaki
You're probably right, FB prices went up for Zynga more so than others because
they saturated their market (which just took longer cause it was bigger).
However, anecdotally, I've seen FB prices rise 25 - 35% over the last 18
months.

------
jcampbell1
Supercell makes two social games that generate more revenue than all of Zynga.
Had Zynga created these hits (or bought Supercell early), then the story would
completely opposite.

I am not sure why Zynga is struggling, but I am certain it is not because
social+in-app games is a failing business model.

~~~
yen223
It's not that social games is a failing business model - although I can see it
dying out - but that it's a failing business model _for Zynga_. The barrier to
entries is so low, that the market which used to be dominated by Zynga is now
getting divided up among a million developers, including Supercell.

------
swivelmaster
One issue with Zynga that I haven't seen explored enough is that the cost of
making a Zynga Facebook game has increased dramatically, while the potential
revenue from the same Facebook game has not. Zynga tried to apply their own
version of AAA quality to games like CastleVille, and the result was that they
spent a ton of money and still didn't make as much as they did with FarmVille
(a game which took six weeks to create). Same problem with Mafia Wars 2 and
FarmVille 2.

None of the surprisingly profitable breakout games mentioned here have been
particularly expensive to make - Kixeye's three released games were supposedly
built with very small teams, same with Supercells' enormously successful Clash
of Clans and Hay Day.

Zynga is still making money. Lots of it. They just got too big too fast and
had unrealistic expectations of their market's ability to sustain their games.
Granted, user acquisition costs are much higher than they were before,
partially as a result of Facebook making their viral channels more difficult
to use... but IMO Zynga would have had these problems regardless.

------
ErikAugust
I think the key point is that the Zynga formula was easy to recreate, and so
competition entered and started to splinter the market pie up. Basic market
economics principle.

~~~
__--__
Except that's not what happened here. Zynga dominates the facebook games
market and always has. Everybody else, including any newcomers looking to
become "the next Zynga" all fight over the small piece of the pie left by
Zynga. I can't remember who here said it, but nobody's going to be a better
Zynga than Zynga.

The problem is the market itself was never as lucrative as it was made to seem
and it's shrinking fast. I can't say a whole lot about that last part, but
let's just say Zynga isn't the only social gaming company laying off staff to
refocus on mobile...

~~~
saalweachter
Part of the point of the article was that maybe everyone doesn't want to be
the next Zynga. If you are a two-man development studio, a tiny piece of the
pie goes a lot further than if you're 3000-employee Zynga. And there are a lot
of two-to-ten-man studios to take a lot of small pieces of pie...

------
staunch
I think they're just too damn big. Zynga should be a 100 or 200 person
company. They'd be a _very_ successful company with that kind of overhead.
They simply scaled up far in excess of what their long-term business could
support.

------
fmavituna
_"Social games didn’t cost much to build. In fact, once you had the underlying
code and frameworks — provided the game’s play and goals were roughly the
same; earn points/money/whatever — you could turn “Sorority Life” into “Mafia
Battles” by just switching the graphics and text, a staggeringly cheap process
called “reskinning.” (Doable in a weekend) Bam, another product to push. "_

I love it when non-technical people underestimates the task of pushing /
building a new product. (or technical people who consistently super
underestimate the tasks in hand).

Good luck with "reskinning" a game in a weekend.

~~~
hatu
This is just plain wrong anyway. Creating a social game is much more expensive
than a iOS title for example. Sure it's still cheaper than most AAA console
games but really cheap game making is thriving - in indie companies and
actually interesting new products they make.

In a social game, the back-end has to scale for insane growth, your users
might be going from 100 users to millions of users in days.

------
swalsh
Zynga had always felt like a fad to me. I just never saw any long term value.
Oculus Rift though, there's a gaming company i'd actually put some money in.
They have creative people, some kind of barrier to entry, and a real passion
for the industry as opposed to a pirate mentality Zynga always seemed to
exhibit.

~~~
cshesse
What games are the Oculus Rift guys making?

------
vanderZwan
I wonder what the corporate culture is like at Zynga, and if it promotes
creativity and innovation with its developers. I suspect it doesn't, and that
that is the real reason it is failing at creating good new casual games.

~~~
steveklabnik
I can't find the article right now, but I'm pretty sure I remember something
about Zynga's CEO explicitly saying "I don't pay you to be creative."

That said, a citation or refutation would be useful, I could be remembering
wrong.

------
pbreit
Hmmm...I don't know. I look at Zynga and feel like it is/was in a position to
really continue succeeding. Games may be easier to build but it's still
difficult to get users. Zynga should have been the best at building cross-
platform. Zynga should have moved much more forcefully off Facebook (I never
really understood the idea of going to Facebook to play Farmville). Zynga
should have been snapping up/copying cool new games before they got too big.
True, it is a hits business to some extent but there is a lot more you can do
with data and an installed base/captive audience.

~~~
radnom4
>(I never really understood the idea of going to Facebook to play Farmville)

You clearly don't understand why Farmville was a success then.

------
elorant
Virtual goods are a small byproduct of the gaming industry. You can’t expect
to make serious money from them. Even World of Warcraft with tens of millions
of dedicated _hardcore_ gamers makes little money from virtual goods. And
those are people who pay to buy the game and also pay for a monthly
subscription, not the average freetard user of Zynga.

If they had created an MMORPG or something like Eve Online which would evolve
through time then maybe they would stand a chance with this model of income.
But then again you can’t make that kind of games on Flash.

~~~
quaunaut
This opinion is pretty behind the times. Like, two or three years behind the
times.

Just a few examples of games that make the majority of their funds from
virtual goods:

League of Legends(the most played game worldwide right now) DotA 2/Team
Fortress 2 Maple Story Planetside 2

It's actually generating a huge amount of cash. WoW just wasn't ever set up
for it, and still to this day sells around a total of 15-20 virtual goods
products IN TOTAL. Most services that rely on it for revenue have that many
_at release_ , let alone years down the road and long into maturity.

~~~
thisisnotatest
Indie game Kingdom of Loathing is entirely supported by optional item
purchases (a new unique, powerful, funny item every month).

------
hkmurakami
Social gaming still has plenty of life in it, with Pocket Gems games, Puzzle
and Dragons, and other games continuing to do well.

Until the entire category of social games dies globally, I'm not going to
entirely count Zynga out (as much as the misanthrope in me would love to see
Pincus bite the dust).

Besides, Zynga still has the online gambling play coming up for them, which
could be a serious game changer if adopted in the States.

~~~
bad_user
I think Zynga will continue failing simply because they were wrong about human
nature and user needs.

I've seen my acquaintances on Facebook, playing less and less games, sending
less and less invites. I'm connected to a lot of regular non-technical folks
on Facebook and I barely see any traces of games in my feed, whereas 1 or 2
years ago, my stream was chocked by games.

Zynga games seemed like fun. Users stayed for a while for whatever reason.
However advancing the game by pressing buttons to increment counters is simply
not fun. Once the novelty passes, you start realizing what a stupid game it
is.

There's also a new breed of games on iTunes. Games that require slightly more
skill, but after the first level or 2, they become next to impossible to
advance unless you pay up or spam dozens of your friends. Again, at some point
users realize that the game is not at all about skill or fun, but about
willingness to pay up.

Basically this new breed of games is depending on _new_ users for survival. At
some point the market will get saturated by people that tried these games out
and that have grown tired of them.

Also, what the hell does _social_ mean anyway? 10 years ago, social meant to
play CounterStrike or StarCraft with your high-school buddies, games that are
still played by groups to this very day. Does _social_ mean spamming your
friends with annoying invitations? Or does it mean multi-player games where
you and your friends can have fun together? I'm asking because I'm seeing a
lot of the former and not much of the later ;-)

~~~
chaz
I don't think your acquaintances are a good representation. Social games are
still doing well. Maybe not the Zynga-style games, but check out
<http://www.appdata.com/>. #1 is Candy Crush Saga, which is kinda like a
social Bejeweled. I'm getting requests from people I didn't even knew played
games. King seems to be doing well lately. But note that Zynga's games still
reach 171 million users per month. That's huge.

Zynga may have too many games, employees, and expenses, but the category has
plenty of life yet.

~~~
neutronicus
My fifty-something aunt plays that candy crush thing.

------
tn13
Articles like this are generally useless. Once and event has happened people
can come up with all kind of explanations citing why the product failed. There
is no wisdom in it.

This is not to say the article has nay false assertions but liking them to
Zynga's failure may not have any lessons for you and me.

------
return0
Zynga did not steal away casual gamers from other platforms. They tapped the
endless realm of social dynamics. As soon as facebook's growth started
stalling, they should have created their own gaming network.

------
morkfromork
Zynga never did that well to begin with. It was all hype and misleading
numbers. They only go down from here.

------
mattmaroon
This is a gross mischaracterization of both Zynga's troubles and the industry
as a whole.

~~~
Confusion
Care to give, or point to, a correct characterization of those?

------
e3pi
Failing? the hell, this napkin math is going to be huge. Two words, Mr
Hoffman, `napkin math'.

