Many know what Zynga is now and days and for those of you who donÔÇÖt, they are a ÔÇ£freemiumÔÇØ game developer that started out on Facebook and spread into the mobile application market. Zynga has taken a recent plunge in share price and has been on the downward slope playing catch up for some time now. How did this viral company that brought softcore gaming to the average user go down? There are 4 strong reasons for the decline and possible death of Zynga.
Lack of Softcore Gamers
Zynga made its play in a time where games were viewed as something for hardcore gamers. Gaming started out with super easy arcade games such as Pong or Pac-Man, each gaining a large following. As the machines and consoles became more powerful, the games they played became more advanced. This moved many of the games beyond the average user.
When Facebook introduced what was basically a game console to millions of non-gamers, Zynga saw opportunity. With simple games with simple tasks like Farmville, Zynga introduced softcore gaming to the masses. This ultimately lead to the average person becoming a more adept gamer and wanting a bit more complexity in their games. Most popular games right now are still simple, but strategy simulator mobile applications are starting to attract many of the softcore gamers.
Facebook ads were a great resource for Zynga to reach out to the masses. The problem is that in 2008 many brands were not yet interested in Facebook ads so the cost per click was low. The game development company took great advantage of the low cost per click, answering for as much as 10 percent of the total revenue of Facebook.
Since then more brands, advertisers, and companies have begun using the ad system and the price per click at least tripled. This means that it cost Zynga much more to get what they had been out of the Facebook ads. Instead they would have to rely on organic results.
Spam on Facebook
FacebookÔÇÖs news feed and app platform combined to create the ideal organic environment for Zynga. Through what is no called game spam they were able to reach out even further to Facebook users. As other companies started to adopt similar strategies users quickly found their news feeds overran with game spam. Facebook didnÔÇÖt like that these posts were detracting from the user experience and made it so only game players would receive the spam, leaving those that donÔÇÖt care and dislike the games from seeing it all over their feeds. Another hit to Zynga.
Introduction of Mobile Application Games
As mobile technology became more advanced and the demand for mobile application games rose, fewer users were interested in the simple Facebook driven games. Even Facebook started to take a cut from the developer sales on its engine. The shift to mobile caught many by surprise and Zynga was no exception.
When Zynga made its move into the mobile environment it did so by buying Newtoy for its hit mobile application, Words With Friends. While this viral mobile game was a huge hit, it didnÔÇÖt bring in money the way Zynga would have liked. So already things are not happening according to plan. Their next step was to purchase OMGPOP who created Draw Something at the height of its popularity. This ended in a loss for Zynga as they lose half again what they paid for the company.
What I Think
Zynga was a great company through their efforts on Facebook. Their strategy doesnÔÇÖt necessarily translate to mobile applications however. They made some serious progress and I myself loved Words With Friends, but it seems like Zynga just needs to rethink their methods and try something different. Their stocks have dropped from $10 a share down to $2.48. They are not down and out, but in the mobile market you have to roll with the punches. The mobile application world is an ever-changing environment that favors innovation and user habits.
Zynga is a great company that introduced casual gaming to a large amount of users around the world. They made some great money with their early ventures, but have started to hit a decline. This may not spell out the death of the company, but they are at a low point. They have some changes to make to get back to their former glory, but there is an important message to learn from their ventures. Especially in mobile, you need to be fluid and be able to change as a company in the direction that is proper. When dealing with mobile application┬áthat trend for about a month before dropping off, you cannot rely on a single game to get you there, nor a single style of game. Be flexible.