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Zynga: How Social Gaming Is Done…But Where is Xiangqi?

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Last year GWC visited Zynga on our G-Trip to Silicon Valley.  I talked about our visit to Glu already, so I want to take a bit to talk about them as well as some other things the guys have been up to lately.  Because of the December IPO, we weren’t allowed to talk about the company, but enough time has passed.

Who is Zynga?

I am generally anti-“social games” myself, but Zynga fills that one dark corner of my soul that will allow me to play such games – mainly Words with Friends, a scrabble variant, and Chess with Friends, a chess app, and a little poker thrown in when I feel the itch.    Zynga was founded in 2007 and has pretty much set the standard for how social games are done ever since.  For better or for worse, but more on that later.

The main offices of Zynga are located in San Francisco, but the company has 15 other offices located around the world serving various purposes.  Currently, Zynga is employing over 2,000 people which is not too shabby given the highly volatile gaming industry.  At the head of the ship you’ll find Mark Pincus (CEO), Cadir Lee (CTO), and Dave Wehner (CFO).

Quick Facts:

  • Designs games for both iOS and Android.
  • Over 148 million unique users per month logging in from 166 different countries.
  • CityVille, CastleVille,Texas HoldEm PokerFarmVille, and Empires & Allies, are among the most widely used game applications on Facebook.
  • CityVille having over 54 million monthly active users.
  • The “With Friends” series of games was not created by Zynga, but rather acquired after they bought out Newtoy, Inc. in December of 2010.
  • Zynga  sold  38,000  virtual  goods  per  second  and  the  annual  revenue  from  virtual  goods  reached  $  575  million.
  • Zynga  gained  only  $  22.8  million  from  adverMsing,  a  figure  decreased  by  36%  compared  to  2009.
  • In December 2009, Yuri Milner’s Digital Sky Technologies bought a $180 million share of Zynga.
  • 2010: a combined $300 million from Softbank and Google were invested in Zynga.
  • Zynga filed with the SEC to raise up to $1 billion in an initial public offering on July 1, 2011.
  • December 16, 2011 Zynga began trading.
  • Check out the SlideShare at the end this article for more on Zynga and the other companies we visited.

Zynga and Facebook Sitting In A Tree…

Zynga rose to prominence on the back of Facebook.  Without Mark Zuckerberg’s little internet sensation, Zynga would have never happened.  One of the first companies on the scene once Facebook opened up its platform to allow game apps, Zynga quickly capitalized on the new virgin territory.   Facebook brought users to Zynga in the begining, but the reverse began happening as Zynga’s games grew in popularity – though not at the level of the former.

The introduction of Facebook Credits, Facebook’s attempt to get a 30% slice of the sales transactions taking place, cut into Zynga’s profits, but Zynga had already obtained market domination, so unlike the smaller startup companies that were still fighting to stay alive, this did not phase Zynga too much.  They even signed an exclusivity agreement with Facebook as mentioned in the facts above.

This past October, Zynga announced that it will be launching its own game platform (though it will still be tied to Facebook in some ways) which marks its first attempt to break away from Facebook since its inception.

Money For Nothing And Chicks For Free

The business model Zynga uses with its games follows two paths.  The first is the tradtional advertising route.  Like many other, especially in the Android market, Zynga makes a tidy profit off of selling advertising real estate on their apps to interested companies.  This comes in the form of implanted ads into the game’s UI or banner ads.  This avenue has been shrinking in recent years as it gives way to their other path.

The second path is through the sale of virtual goods, or freemium.  Virtual goods sales account for more than 90% of Zynga’s revenue at this point and it is on the rise.

Virtual goods come in the form of addons, additional customization options, powerups, etc. sold at price level that is hopefully low enough to encourage “impulse buying” from the players.  For the unaware, yes, people will pay actual cash to change the color of their avatar.  Only 3-5% of players end up spending cash on virtual goods, but it adds up – Zynga banked $575 million in just one year’s time.

The Dark Side Compels You

No look at a company would be complete without taking a look at the cracks that exist, and Zynga has its fair share.  The biggest complaint coming out of the rest of the industry is that Zynga is a copycat.  And I’ve got to admit, I agree.  Practically every single game that Zynga makes is a quick turn around rendition of someone else’s idea.  Mob Wars vs. Mafia Wars, Cafe World vs. Restaurant City, Tiny Tower vs Dream Heights, the whole “[Insert Name Here]ville” series is unoriginal…

…But here’s the thing, most games are unoriginal.  The Warcraft series by Blizzard?  Combine Warhammer and Dune II to see where that idea came from.  The “We crush movie box office records 10 fold” Call of Duty series by Activision?  Medal of Honor or Wolfenstein 3D, pick your copycat starting point.  The Sims?  Take a look at your daughter’s Barbie collection.

I think you get my point.  Let he who hath not sinned cast the first stone.  Only occasionally do we get truly fresh concepts that rock the gaming world.  I can’t fault Zynga entirely since they are just doing what everyone else does.

The one thing I do not like, though, is the mindlessness of the social gaming current state – hardcore games have generally honed some portion of the mind whether it be spacial thinking, hand-eye coordination, analytically thinking, long and split second decision making in contrast.  This isn’t Zynga’s faults, it’s just society at its best.  Georgia Tech Professor, Ian Bogost created Cow Clicker to voice this sentiment.

Missing A Market: 1.XX Billion Chinese And No Xiangqi?

Okay, so now for the inspiration behind this article.  Xiangqi (Chinese Chess).

Last week, Jay Lee of Sandbox (There’s your shout-out, Jay) sent me a message saying she had just learned Xiangqi and wanted to know if I’d be up for it.  Being my archnemisis (with the appropriate British accent to boot) who won my Xiaomi phone off me in a pitted battle of wits in Words With Friends, how could I say no?

But we soon faced a problem.

The Xiangqi app we were using had a multiplayer option, but since we both work, we don’t have time to be online at the same and play an entire game.  This particular app demanded that.  We needed an app that would save our progress and let us play a few moves a day.  Jay’s first response to the issue was “I bet Zynga has one…” — but in some major oversight, they don’t.

So Zynga, what’s up with that?  You’ve got a clone of practically every other traditional board game.  Are you going to let Tencent dominate the Xiangqi market?  Sure you’ll probably never have the numbers they do, but heck, even a small fraction of the the Xiangqi market can be massive.

Maybe it’s time you reverse the copycat flow across the Pacific and show them two can play at this game.

Please forward 0.001% of all Chinese Chess With Friends revenue to my bank account and we’ll call it even.  Just make sure it has a Chinese language option – let’s at least show we’ve learned a little about localization over the past decade.  Thanks!

TL;DR

Zynga makes social games.  Zynga may fall prey to the “seven year itch” with its relationship with Facebook.  Zynga copies game concepts.  Zynga makes lots of money.  I lost my Xiaomi to a girl.  Chinese Chess With Friends, please?

GMIC RoadShow Report

 

 

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