What is relevant is Facebook. Zynga's stock grew rapidly once Facebook's S-1 filings revealed that Facebook derives 12% of it's revenue from Zynga. This news cause a flurry of interest in Zynga, but the excitement has since waned, and both Facebook and Zynga have been scrutinized heavily since. This is to be expected, but I also expect that both company's stocks will perform well after May 18 and into next quarter.
Last, and possibly most important, is the misconception about how easy it is to launch a profitable mobile app to millions of users. Zynga now hosts about 80% of their games on their private cloud (the zCloud). This infrastructure separates Zynga from a group of 15 hackers who want to make the next Angry Birds. Zynga releases games in dozens of foreign languages; they have games on every social network and in dozens of countries, as well as in many emerging markets. The point is, it's easy to take pot-shots at Zynga's business model and claim it's a house of cards, but I think the reality is that Zynga is a well established company, with far vaster resources than many of their competitors. Mobile and social games are a clear-cut example of economies of scale.
Sorry, I don't buy it. You don't need to host your own infrastructure to schlep virtual cows around. Zynga probably saves some money in self-hosting but that isn't going to make or break a title.
A skilled independent dev actually puts time and effort into a beautiful UX. Zynga seems more concerned with churning out the next addictive rip-off, since they know their games have no staying power.
A small list of major tech stocks not down substantially during ZNGA's public time frame: AAPL, INTC, HPQ, DELL, CSCO, MSFT, GOOG, ORCL, IBM, SAP, CRM, AMZN, RAX, BIDU, EBAY, EMC, and so on.
edit: just ran ZNGA against that list of stocks, and it's under performing all of them by a wide margin, and on average is below that group by roughly 35% over the last 90 days. It's blatantly specific to ZNGA, and given the date the plunge began, it is about the market questioning ZNGA's business as prompted by the OMGPOP acquisition. The only other big league disaster in tech on par with ZNGA right now is Groupon's stock.
Yes, that's why everyone with a CS degree has made millions of dollars. This is offensive to everyone that makes games.
>You merely need somebody with a computer, a good idea, and the ability to make a game
However, the talent required to pull off a quality game and the time it takes are huge and only grow exponentially. That in recent years we've got a couple of indie games that were successful, that's only because on mobile devices the expectations for CGI quality are for the moment low. Plus, with these app stores, the budget required for marketing has decreased, if you're lucky enough to have your app featured.
And while you can create indie games for the desktop and be successful, as Minecraft shows, the expectations for quality CGI are much higher and so it takes an insane amount of creativity to fill the blanks.
Now, of course, Zynga games are not really on the same level as what id Software or Blizzard are releasing and you can certainly picture yourself pulling off games of the same quality, as Zynga games are nothing special, except for the social-network effects.
However you shouldn't underestimate the effort required to build a game from scratch. I consider it to be by far one of the most challenging fields in software development, as not only it requires great feats of engineering, but it also requires creativity and design. E.g. developers by themselves can barely pull it off without the help of a good artist that can draw.
... but the barrier to success on the scale of FarmVille or Draw Something is very high. That's when a company with massive amounts of money that can be spent to hire game developers and market to users has a distinct advantage.
Game design is not a science. Try enough times and you will create a hit.
The idea that 5M/month Draw Something care about the Zynga purchase is ludicrous. It seems Zynga has made some annoying changes to the game, at least for those that use Facebook to login, but even so.
I think the only story here is that Zynga overpaid for something that was peaking. They may purchased OMGPOP just in case it turned into something huge. There's plenty of that going on (cough Instragram cough).
I've tried Draw Something. It's amusing and I can see the appeal but from all usage patterns I've seen the game has a pretty short shelf life. A game with a short shelf life is going to lose lots of customers once it peaks. It's inevitable.
As for how easy it is to make a game, that's actually hard. I believe you should also separate "normal" games from "social" games here as both are radically different.
Normal games are like blockbuster movies. You want people to buy up big. You deliberately build up the hype. There is very little in the way of long tail in revenue in most cases (other than sequels). I consider this a fairly "honest" or ethical practice because you pay the sticker price and you have your fun.
Social games are more like TV shows. You're trying to build a persistent audience and you're all about the long tail. The part that bothers me is the psychological trickery that goes into this. Social games are really about manipulating the psychological triggers for addiction and I don't really see a distinction between this and, say, gambling addiction.
Some people spend an awful lot on these games (I believe Zynga calls people who spend over $10k "whales" ). Zynga and similar companies like to whitewash this with "maybe they're just rich". I believe they know better. They are (IMHO) preying on the weak and those arguably with mental health problems ("it's not unethical, it's funethical!").
Successful social games are all about Big Data. Figuring out what works, what doesn't, analyzing your customer usage and adjusting to maximize revenue and retention.
They're not even "games" really. They're just exercises in repetition.
Anyway, rant aside, I don't like Zynga either but please don't confuse the OMGPOP purchase with a short shelf-life peaking purchase.
Because if you're going to go there, then its equally as harmful spending time away from your friends and family in front of a computer screen, especially when you consider the fact that you don't need any money to do it.
"Yes StarcraftII, I will gladly give you $50 and hundreds of hours of my life away, but thank god you're way more ethical of a game than that one that takes up 2 minutes of my bus ride and cons me into spending $1.99 on my way to work"
Addiction is everywhere. Its a sad fact of life. There are people who are addicted to shopping, but Macy's doesn't turn away repeat customers. There are people addicted to food, but Olive Garden/ McDonalds doesn't turn away morbidly obese people. There are people addicted to drinking, but Safeway doesn't do a health scan and deny these people from buying liqour. Similarly, I wouldn't expect Zynga or Blizzard to be like "hey, you've spent $10k/1000 hours on my game, why don't you go see your family or put your money to better use".
But even beyond that, there was just recently an article on how McDonalds is introducing snack wraps because they perceive that the best way to grow now is to convince people to eat at McDonalds BETWEEN meals as well. The article was basically centered around "where does the biggest fast food chain go from here?" (looking for link and will edit shortly if I find it). If you look at the advertising behind these new additions, they are trying to train people that they should eat these snacks in-between their other existing meals, "on the go". So basically, you're hypothetical is actually not devious enough: they've already been so successful at convincing their target market to eat all their meals at McDonald's that they now need to create new meals in order to grow!
Edit: I believe this was the article: http://management.fortune.cnn.com/2011/08/23/why-mcdonalds-w...
It's about 0.045g sodium per 354mL can. That's about 1/50th of a healthy daily sodium intake. What effect that has on thirst I do not know, but calling that a "ton" is simply false.
Check up on the facts to avoid repeating propaganda.
"Most people who consume caffeine, however, ingest it daily. Regular users of caffeine have been shown to develop a strong tolerance to the diuretic effect, and studies have generally failed to support the notion that ordinary consumption of caffeinated beverages contributes significantly to dehydration, even in athletes."
Here are the references:
 ^ a b c Maughan RJ, Griffin J (December 2003). "Caffeine ingestion and fluid balance: a review". J Hum Nutr Diet 16 (6): 411–20. doi:10.1046/j.1365-277X.2003.00477.x. PMID 19774754.
 ^ O'connor, Anahad (2008-03-04). "Really? The claim: caffeine causes dehydration". The New York Times. Retrieved 2009-08-03.
 ^ Armstrong LE, Casa DJ, Maresh CM, Ganio MS (July 2007). "Caffeine, fluid-electrolyte balance, temperature regulation, and exercise-heat tolerance". Exerc Sport Sci Rev 35 (3): 135–40. doi:10.1097/jes.0b013e3180a02cc1. PMID 17620932.
 ^ Armstrong LE, Pumerantz AC, Roti MW, Judelson DA, Watson G, Dias JC, Sokmen B, Casa DJ, Maresh CM, Lieberman H, Kellogg M (June 2005). "Fluid, electrolyte, and renal indices of hydration during 11 days of controlled caffeine consumption". Int J Sport Nutr Exerc Metab 15 (3): 252–65. PMID 16131696.
> McDonalds used to ask you to supersize, which is
> clearly a proactive position
2. Eating a few more fries and drinking a bit more soda is not an encouragement of addiction. The extra bit of food and drink is not going to be the deciding factor in whether or not you end up so addicted to McDonald's that you have to keep coming back for more. (Note: I'm not saying that it's healthy)
3. French fries and soda are huge profit centers for McDonald's, which is why they encourage you to pay them more for a bit extra. There was no evil McDonald's marketing meeting where it was decided that adding "super size" as an option would keep people coming back to McDonald's like heroin addicts. McDonald's keeps people coming back by: 1) having food with a pleasing taste -- not necessarily healthy -- 2) via branding, and 3) consistency -- people can count on McDonald's food to taste the same anywhere within the same country.
> they've already been so successful at convincing
> their target market to eat all their meals at
A few minutes work at the Googles will show you how this pervasive philosophy started with all of the kids menu items and advertising, and has continued onward with the McCafe and other additions.
The goal is for you to eat three meals a day at McD's. Make no mistake about it.
I actually have no problem with any of this. They're just making a product for people to enjoy. Just because they're running data sets, tests, and using social "science" (bah) to maximize products... so what? What makes that worse than building a product based on your intuition that happens to appeal to people as well on these lines?
I think Zynga is a foul company. I think their product has a net societal cost, and I think the crap they pulled on some of their employees prior to IPO is unconscionable. But I think this aversion to using psychology to optimize your product is misplaced. Nobody is getting hypnotized here. They are just using every tool in their arsenal to make their product perform as well as possible. They do this in an unashamedly metric-based way. Every product you encounter in life attempts to influence and manipulate you. The scientific approach just happens to be very good at optimizing processes.
Last point in this rant... I do believe Zynga makes most of their money off the weak and the crazies who will put thousands of dollars they can't afford into their farmville farm. I do believe that is morally repugnant, and it's well within their power to stop that (which I'm sure they'll never do). I just don't think the design of their games is an issue... it's their billing.
The cynic would retort that they said this and then did nothing...
They did build in a rest mechanic where you became rested by spending time logged out which then increased your xp gain. It was at least a nod to playing casually.
"but they must know that if they had waited just one more month to sell, they wouldn’t have been able to command anywhere near that price after losing so many users."
It just references the omgpop acquisition because it was very recent which makes the story more interesting.
Valid, but I think the author's point still stands. "You merely need somebody with a computer, a good idea, and the ability to make a game." That's true. Look at Tiny Wings. Andreas Illiger happened to be incredibly good at game design, and was a capable iOS programming. Granted, it's a rare combination. And perhaps it IS rocket science to make multiple successful games. But when you've got tens of thousands of young developers who enjoy making these games, probability dictates that occasionally one of them will strike gold.
I don't think social gaming is inherently more predatory. Long-shelf-life games are every developer's dream. Why make hundreds of little games when you can make a few big sellers? So every game developer loves features that keep users coming back, whether discovered intentionally or accidentally. Adding social capabilities to a game makes it infinitely more fun. (Remember when we played board games? It's really a return to the days when games were social endeavors.) Social capabilities are just another feature that keeps users coming back. It's just such a big draw that you can get users spending thousands of dollars. I fail to see how that's much different from hardcore console gamers spending thousands on the latest Xbox + PlayStation + games.
With mobile and new social network games Zynga is basically disrupted and they are trying to keep they dominance by acquiring new mobile gaming companies. They want to think that social games are more like TV shows, but unfortunately social games are more like YouTube - much less control over users, returns are not predictable, ...
Calling the reward systems in games psychological trickery is a bit much. Gameplay have long been based on the psychologically rewarding system of 'do something good, get positive feedback; do something bad, get negative feedback.'
The first arcade games had theses reward systems - do well and put your initials on the leaderboard; do poorly, pay another quarter to keep playing. The fact that it's psychologically enjoyable to play these games isn't trickery - it's basic human-environment interaction. That some people have addictive responses to these mechanisms doesn't mean it's insidious trickery, it just means some people are more likely to become dependent on the rewards these games offer.
Go to Vegas sometime. Watch the people who are playing the slots for hours at a time. They are not enjoying anything. What you're seeing is compulsion and addiction, not fun. That those people are there is not some wacky accident. It's the point.
I believe that Zynga is pursuing exactly that cycle of addiction. They're a metrics and viral marketing company, not a games company.
And seriously, go to Vegas and spend a couple of hours watching people play slots. Craps players are visibly having fun. The people who spend hours at the slot machines visibly aren't.
I rarely play any floor games, but one time I was waiting for some friends to wake up and I wandered down to the casino to play some video poker. I ended up winning $1500 on a royal flush at a nickel machine. What am I supposed to do, start running around the casino in excitement? It was around 8:30 in the morning and the places was pretty quite. Had my friends been there, I'm sure we would have had some hi-fives or something like that, but if I'm just sitting there playing by myself, I'm not going to have any sort of substantial showcase of emotion.
I think you're correct in that a lot of people sit at the slot machines for hours, losing their paychecks in the process, and it's destructive for them. They may be looking miserable at the machines. The people playing craps who are in the process of losing their paychecks are equally as miserable, they're just showing different outward emotions. The addiction isn't any healthier because the person appears to be having fun.
I discovered that some were fun and some were compelling. The two traits are definitely correlated, but there were plenty of games that were only one or the other. There were a number of compelling games that I fucking hated by the time I was done; they had stopped being fun long before they had stopped being compelling.
On the other hand, maximizing revenue means you get to feed feed your family, and ensure continued existance.
I m sure this goes down to "greed". But "greed" is the basic tenant of the corporation, of which most big budget games are made in. I m not sure there is an answer to this, other than gov't legislation, and I personally don't like gov't legislation.
Social games are completely unlike the tacked-on rewards systems in an ordinary game.
You know the awards/achievements that seem to be included in every single game these days? I completely ignore those.
Actually. Making a game that makes money IS rocket science (or at least as close as it can get to it).
The majority of games are created by large teams of highly talented and well paid individuals. There are certain types of games that could be created by a single college sophomore or a teeny tiny team. Most games can not. A team size of 20 is considered quite small.
Both your statement and the link's author's is incredibly wrong and incredibly insulting.
M2 research says it's $10m to do a AAA title on a single platform, whereas it's 5k-20k to do a mobile title.
TUAW's figures show that there are approximately 42,000 iOS titles produced, which dwarfs the 18,000 console titles that have been produced in all of history . So as for backing up the claim "the majority of games are created by large teams of highly talented and well-paid individuals" it's simply wrong--very wrong.
Now if we're normalizing per dollar (that is, considering how much industry $ are going to triple-AAA vs appstore crap, instead of number of titles), the argument is overwhelmingly in favor of the AAA titles, even when considering only the latest generation of console titles--about $60b to $40m, by my back-of-the-napkin arbitrary-cutoff estimate.
But that's exactly what jbri said  and an argument you rejected .
In general, the etiquette here is that if you're having an argument about facts, you bring facts to the table, and you don't respond by calling the other person "insulting" or "incredibly wrong", especially when you quote no sources and the available evidence contradicts your position. These types of replies add nothing to the discussion.
Let's take the $5K cost and break it down.
A competent young programmer, making $80K/year, would be paid $5K in 3.3 weeks.
However, games don't just need programmers, they also require art, so let's take $1K to pay for the artist's time. That leaves us with only 2.6 weeks of the programmer's time. Let's also say that we have a game designer who we pay $1K. That leaves us with only 2 weeks of the programmer's time.
Having been a professional mobile game developer for 7 years, I've never seen a game take only 3 people and only 2 weeks. The minimum, in my experience, is about 2 months and around 5 people, or roughly $60K, for a very simplistic game. I'd even venture to say that it is impossible to create a quality finished product in 2 weeks.
Pointing out that AAA-games are expensive to develop in a discussion about social games is missing the point a little, I think.
Sure it's possible for one person to develop a successful social game. But how many of those people can develop two successful social games? 5? 10+? The only name that comes to my mind is Zynga.
Zynga can make it work either by continuing to develop successful games on their own, or by backing down from Instagram silly money on their buyout offers. But they can't make it work by pretending to be the gateway middleman for a distribution network they simply don't own.
In my defense, i'd like to point you here. http://www.inc.com/magazine/20101001/how-i-did-it-john-veche...
Also, i meant 2 dozen programmers each making their own roguelike, like Toady One. Not dozens working on a single game. you should get graphics for a 3 million/year burn rate.
These may (or may not) be the quality that you would expect, but to say that people don't like to build games for fun, and that some would be fun and possibly take off, couldn't be more wrong.
Namely – most rocket science out there requires the work of a reasonably large number of contributors to actually produce a working, reliable end-product... whereas a winning game really can be made by a small number of people (or even one person) who either have the right stroke of genius, luck or skill to pull it all together.
That, of course, doesn't mean it's easy, but instead it means that the law of large numbers comes into play and more winning games will be produced because it takes fewer people/resources to make a gaming company than a rocket company. Ergo, gaming is an industry that is inherently much more difficult in which to establish a defensible competitive advantage.
Or, maybe the author really is just minimizing it all to make their point...
Notice the explosion of FarmVille when it first came out, how everyone was playing it, and its subsequent death. It exploded into the mainstream very suddenly, and faded into niche obscurity just as quickly.
The "glorified slot machine" format of social gaming (which IMO is a perversion of the word, there's nothing social about this sort of gaming) does not have a permanent, mass-market future. It will fade and become a niche (profitable, perhaps), but it will not justify the market cap that investors have saw fit to pour into Zynga et al.
If anything, the industry in which Zynga plays has more in common with the Tamagotchi than it does with WoW.
Id imagine the drop in price is linked to the FB IPO. Not sure if anyone remembered when FB announced their plans, anything in that space increased.
Oh, I know this trick. I also can predict descent of any company, but just not the timeframe. Eventually I will be right.
Yes, the purchase was a little steep, but it had to happen. It had to happen because the game was formatted and structured EXACTLY like Zynga's games. With its popularity, Zynga did not want Draw Something to threaten the Zynga brand of social mobile games.
So here we are and Draw Something lost 5M users. You think Zynga didn't see that coming? Is someone really surprised? It makes sense that the drop in stock reflects the loss. I wouldn't say it's fact but it's highly probable. But, they're not dumb. The way the company works, I expect another amusing addicting social mobile game to be released in the near future to silence these stories and like other stocks it'll go where it goes, but not rock bottom.
Where does a billion dollars a year come from? They lost 86 million last quarter. Is he equating operating costs or reduced market capital with loses?
Gordon Pincus is obviously very smart or he wouldn't have taken Zynga as far as it has come, but I can't see myself ever working for a company willing to confiscate options from at-will employees.
As for Zynga going down: maybe, but not anytime soon. Their business model is easy to replicate on the surface, but underneath is an awful lot of solid engineering to keep it from collapsing in on itself.
OMGPOP wasn't just Draw Something. They have actually been around for a while since 2008 at least. They have had decently successful web games before and probably have a fair amount of assets that Zynga could use with Draw Something being the big icing.
Take a gander at OMGPOP.com and see what they have. They used to be called 'iminlikewithyou' http://www.crunchbase.com/company/omgpop This wasn't really a one hit wonder, it was a one BIG hit wonder but a pretty solid gaming community before and the people and tech created Draw Something. So there was something there... It is hard enough finding good developers, then there harder to find good teams, then harder to find good teams that can make hits, when you find one or the systems used to build it then it is valuable.
Let's face it there were plenty of pictionary like games available before (isketch.net comes to mind, or Doodle or Flipbook at Benetton Play have been around for ages: http://www.benettonplay.com/toybox.php), but they got the right juice. That might be what they bought.
The social gaming space has plateaued. It got incredibly big incredibly fast, but those days of growth are over. Zynga has built a dominant position, but isn't making money yet. I'm not sure what that means, but it isn't good.
Whenever I find myself thinking this way, the klaxons start going off. I'm basically saying "My mental model of a clearly smart person, surrounded by clearly smart people, who has made more money than I have and raised money from other smart people who have also made more money than I have--is that he's an idiot."
And then we get to:
So here Zynga finds itself, sitting atop a group of popular games and bracing itself for the next Draw Something to come onto the market so it can swallow it up...So the matchup is Zynga against the field, the field being every person in the world who knows how to, and has the will to create a social game.
Another way of looking at this is that Zynga is building a competitive advantage in social game monetization: if you have a given audience, Zynga can do more with it than you can. Meanwhile, giant deals like OMGPOP create a tournament dynamic, where everyone wants to build the next Draw Something. If Zynga is making their raw material cheap while putting their competitive advantage at a relative premium, that's great for their future.
It's also a more solid theory than just assuming that Pincus doesn't know what he's doing.
Draw something is a fad on fire. So rather than build (and cross-sell existing Zynga users who you 'own' already), buy the fad, cross-sell hopefully new users, cut off anybody who could have done the same. Extra points if those new users are a different type of user who wouldn't normally be caught playing X-ville junk.
Now if in six months Zynga is raking in tens of millions of dollars a month on Draw Something I will eat crow. I have a feeling that isn’t going to happen.
Zynga don't have to. Zynga doesn't care which if their games you play once you're in the system. They care about the total customer lifetime value of each user, not the 1-game value.
I'm no fan of Zynga, maybe, but this statement is false. It's typical for large companies to begin doing corporate buyouts as a strategy as they transition out of the growth-company phase. (Think Oracle.)
If it took "nothing" to produce a hot game, then we'd be flooded with new gaming millionaires. Certainly there are a few, but how many social games that your aunt plays are coming from tiny shops? And, if they're actually making money, how many of those shops would turn down a big buy-out offer from Zynga?