The Mafia are a notoriously deadly foe, and vampires are even worse, but as social games maker Zynga learned this week, economic reality may be the toughest enemy of all.
If you’ve ever been on Facebook and seen status updates such as “Brenda just got a new puppy in PetVille!” or something similar, you’ve encountered Zynga. The San Francisco-based company managed to enter the market at a near-perfect inflection point, offering fun, easy-to-use online games on a social media service that was just picking up steam.
After a highly promising IPO in 2011, however, Zynga’s stock has been pummeled in recent months. Just before the new year, it began shutting down many of its games, both online and within app stores. Nearly 11 titles have been cut, including PetVille, Mafia Wars and Vampire Wars. It also closed down a facility in Japan and laid off workers.
According to Piers Harding-Rolls, senior principal analyst with IHS Screen Digest in the U.K., it is inevitable that the gold rush of PC social network games and mobile apps will result in casualties, but not necessarily because you can’t create a successful business in this space.
“Let's not confuse the distribution channel with the business model. Zynga has suffered because it has been unable to fully translate its PC-based success to the mobile platforms. This is very related to Facebook's inability as well,” he said. “Zynga also made some misssteps around its choice of game genres. It chose to double-down on heavily saturated content areas, while competitors sought out fresh opportunities and exploited them.”
In some ways, Zynga has acted like a Hollywood studio that produces a blockbuster hit and then can’t stop churning out endless sequels. FarmVille, FishVille, ForestVille . . . you get the idea. Another analogy might be bubblegum pop music, a genre also known for producing one-hit-wonders whose massive popularity is quickly forgotten.
“Social games have a quick turnaround time, so companies have a short time span in which they grow exponentially, then fizzle out as a result of changing gamer tastes,” explained Nikoleta Panteva, senior analyst at IBISWorld headquartered in Melbourne, Australia. “Competition for consumers’ attention and discretionary dollars is high among these types of companies, which also contributes to the fast growth and decline.”
Unlike a board game or even something you have to dig out a console of some kind to play, however, social gaming is integrated into the fabric of what, for many people, is now a daily set of social media activities. That means that while Zynga’s decision probably makes good business sense, it will be wrenching for the thousands of people who have been playing and enjoying these games for free. The company may be able to win them back – Zynga still has some 30 titles or more – but it will have to reconceive what gaming in the 21st century could look like. It’s a blurry picture at the moment, but it’s almost certainly an experience that brings together a wildly diverse community across a range of device types, where some of the value is not merely in scoring points but achieving some other kind of recognition.
In the meantime, Zynga needs to stop cloning its own product line – and making sure it doesn’t have to pull the plug on any more games – before a good portion of its audience decides it’s SplitsVille.