LieutenantRedPanda4027
In 2017, Zynga not only struggled to remain relevant in the gaming…
In 2017, Zynga not only struggled to remain relevant in the gaming industry but fought to seem attractive to investors. During the previous four years, the company had a new CEO almost every year. In 2013, the founder Mark Pincus stepped down and handed the charge to Don Mattrick, a 15-year employee of Electronic Arts expecting to turn the company around. In April 2015, Don Mattrick left the position, and Pincus returned as CEO for the second time. Just a year later in March 2016, Zynga announced the replacement of Pincus by the new CEO Frank Gibeau, another 20-year employee of Electronic Arts, again expecting to turn around the company. Zynga’s lack of consistent leadership has been critical to not formulating an effective turnaround strategy that might have led to progress. Throughout the revolving door of CEO replacements, Zynga has not developed a substantially successful new game. Consequently, its revenues have been falling over the past years accompanied by consistent net losses. Though Zynga’s revenue rose by $53 million by the end of 2015, it still posted a net loss of $121 million for the year. The primary reason for the increase in 2015 revenue was a surge in the number of mobile users, accounting for 73 percent of the company’s revenue in 2015.1 However, year-over-year decline in revenues has been primarily attributable to the innovative product pipeline, which Mr. Gibeau has tried to turn around by focusing on development of high-quality mobile applications that had helped to shrink the net losses in 2015. In response to the wildly successful Clash of Clans by SuperCell, Zynga released a new mobile game, Dawn of Titans, at the end of 2016. Dawn of Titans features highquality graphics and options to play with other users in real time. The 3D strategy game also allows users to create their own fantasy kingdoms and develop strategy to stay ahead of the other players. Prior to the introduction of Dawn of Titans, the company had launched a new version of Zynga Poker, which includes a sophisticated design and feature set that inspires more competition, authenticity, and social connections between players. Zynga also launched NFL Showdown at the beginning of the NFL season with the intention of adding new features based on customer feedback and play patterns. However, the new product-driven growth was not able to reverse declines in the existing online games.
Zynga’s Background At the time it incorporated in October 2007, Zynga had become a dominant player in the online gaming field, almost entirely through the use of social media platforms. Located in San Francisco, the company was named by CEO Mark Pincus to pay tribute to his deceased beloved pet bulldog Zynga. Although this might have seemed whimsical, Zynga was actually a quite powerful company. Exemplifying Zynga’s prominence, Facebook was reported to have earned roughly 12 percent of its revenue from the operations of Zynga’s virtual merchandise sales
The Products With an abundance of software developers, the ability to distribute online games increases by the day, and the demand to play them is equally high. However, while any people find these online games fun and, better yet, therapeutic, others can’t understand the hype. The best way to understand the sudden infatuation is to view online gaming as simply a means of relaxation. In the movies, at least, large executive offices are often shown with putting greens, dartboards, or even a bar full of alcoholic beverages. These amenities are all meant to serve the same purpose: to relieve stress during a hard day’s work. We’ve all been there and looked for a way to cope. However, few of us have the opportunity to use such things as putting greens to unwind at the workplace. And even if we did, how long could we afford to engage in such an activity before being pulled back to our desks? Stress reduction at work is one of the many purposes that virtual games fulfill: no need to leave our desks; no need to make others around us aware of our relaxation periods; and, better yet, no need to separate the task of relaxation from sitting at our computers while we work. The ability to play these games on office computers and “relax” now and then as the day goes by makes online gaming enticing. This, of course, is just one of many uses for the games. Some people play them after work or at the end of a long day. With the onset of smartphones, people of all ages play these games on the go throughout the daysitting on the bus, in the waiting room of a doctor’s office, or at the Department of Motor Vehicles. Diverting game play is readily available with the click of a button.
Market Size Compared to other game developers with games present on the Facebook platform, Zynga had once been a dominant force, but by 2016 it failed to surface in the top 5 virtual gaming rankings. The King Company appeared to rule with its numerous popular games, including the billion-dollar Candy Crush Saga. Zynga’s virtual games provided the opportunity for constant buildup and improvements, offering users virtual goods and services to increase their gaming experience. These items could be purchased using a credit card and were often needed to accomplish fast progressions in the games. These goods were advertised throughout the games and the user was enticed by price cuts for larger purchases. Zynga’s virtual games could be played both remotely and through social media platforms, most commonly Facebook. Five of Zynga’s games, FarmVille, CityVille, Empire and Allies, CastleVille, and Texas HoldEm Poker, were among the most popular games on Facebook. CityVille had over 100 million active monthly users within months of its release in late 2010.5 On July 1, 2011, Zynga filed with the Securities and Exchange Commission with intention of raising up to $1 billion in its IPO, and its stock began trading on NASDAQ December 16, 2011.6
Background of Competitors RockYou was founded by Lance Tokuda and Jia Shen. Their first product was a slide-show service, crafted to work as an application widget. RockYou was one of the companies invited by Facebook to participate in the F8 event, in which Facebook announced the start of an open platform that would allow third parties to develop and run their own applications on Facebook. RockYou then shifted toward producing more in-depth social application games, such as Toyland, Zoo World, Hero World, and MyCasino. Its most played game, Zoo World, was a free social media application whereby users tried to build the best zoo they could. The company underwent a phase of major layoffs but continued to work on new and improved games. GameHouse, based in Seattle, Washington, was a developer, publisher, and distributor of casual games. GameHouse was acquired by RealNetworks for $14.6 million cash and about 3.3 million shares of RNWK common stock, which had an estimated value of $21 million at the time.8 Prior to its acquisition, GameHouse generated an impressive amount of revenue through the sale of games on its own website, www.gamehouse.com.
Background of the CEO Mark Jonathan Pincus was the entrepreneur behind Zynga. He was also the founder of Freeloader, Inc., Tribe Networks, and Support.com. In prior years, Mark was named CEO of the Year in the Crunchies awards,as well as Founder of the Year.
Intellectual Property and Ethical Issues Nissan has claimed that its trademarks were used without consent in Zynga’s game Street Racing. Zynga consequently changed the thumbnail images and renamed all the cars that were branded Nissan and Infiniti to “Sindats” and “Fujis.” Zynga was criticized on Hacker News as well as other social media sites for filing a patent application involving the ability to obtain virtual currency for cash on gambling and other gaming websites. Many said that the concept was not new and that in fact significant prior art for the concept already existed.The unveiling of the game Mafia Wars generated a lawsuit from the creators of Mob Wars. An attorney of the parent company of Mob Wars said that by making Mafia Wars, Zynga “copied virtually every important aspect of the game.” The lawsuit was later settled out of court for an amount between $7 million and $9 million. California-based web developer SocialApps brought Zynga to court seeking damages for alleged “copyright infringement, violation of trade secrets, breach of written contract, breach of implied-in-fact contract, and breach of confidence.” SocialApps claimed to have entered into an agreement with Zynga, allowing Zynga access to the source code for SocialApps’ Facebook game MyFarm in exchange for an undisclosed compensation. According to the suit, Zynga was given the code, but failed to pay SocialApps. SocialApps claimed that MyFarm’s source code was the foundation of Farmville, as well as many of Zynga’s similar games. Following Zynga’s release of the game Hidden Chronicles, Forbes’ Paul Tassi wrote that Zynga “refuses to innovate in any way, and is merely a follower when it comes to ideas and game design.” Ethical issues, though less tangible and definable than intellectual property, were equally troubling in assessments. of Zynga’s operations. A former employee of the company revealed firsthand quotes from CEO Mark Pincus, such as: “You’re not smarter than your competitor. Just copy what they do it until you get their numbers.” One contractor said he was presented with freelance work from Zynga related to imitating a competitor’s application and was given precise instructions to “copy that game.” Other past employees, even those at the senior level, spoke out about the corrupt ways that Pincus had apparently decided to operate the business. One quoted the banter of employees in the office, “Do Evil,” a twist on the Google motto, “Don’t Be Evil.” A former high-level Zynga employee provided an insight into the company’s culture, as regarding any emphasis on creativity and originality. According to the employee, a group of designers brought a new and innovative idea to the table, only to have it turned down by Pincus because of his wariness toward a new idea that didn’t fit the “tried-andtrue” mold of other successes. Zynga was accused of taking advantage of its end customers, pertaining to a lack of security and safekeeping of consumer information.
Zynga Going Forward Although Zynga game users tend to be pleased with Zynga’s games, many note there seem to be recurring obstacles that limit that pleasure. Many Zynga users complain of lag time while playing the games. Even more complain that when problems arise, Zynga support staff are nowhere to be found. The company has no customer service initiative and forces users to resort to sending their claims through e-mailwhich many believed is ignored, or never read. Further, many believe that the company makes it too difficult for users to make real strides in the games without spending ridiculous sums of money. Based on their experiences, many users believe that Zynga is all about revenue generation and that everything else comes second
Follow Case Template
Case Study Template
Issues: Identify at least seven issues you see in the case
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What is the Key issue you see in the case: __________________________
What facts pertain to the case: Identify at least three important facts that pertain to the case
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What assumptions do you plan to make in your analysis: None is an acceptable answer
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You are writing the case from the perspective of which person or organization: ______________
What tools of Analysis would you use in this case: You only need to identify them and explain what information each will give you that you feel is important.
Based upon the above information – provide three alternatives.
Alternative 1 is the Status Quo or to do nothing different that the current situation.
Identify at least three arguments in favor and three against this approach.
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Alternative 2 ____________________________________________________
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Alternative 3 ______________________________________________
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Recommended Alternative
Given the information above select your recommended alternative and explain why you feel it is the best alternative: This should take five to seven paragraphs and be based upon the information presented in your case. The recommendation is made to the decision maker you identified. You need to justify why this is the best alternative. (I have no preselected alternative and what I am looking for is your ability to support a given recommendation.)
