If there’s one company who turned the social networking phenomenon of the 21st century into a milking cow, it has to be Zynga. The San Francisco-based social gaming company has leveraged the social reach of Facebook along with the market reach of Android and the iPhone to become a $1.1 billion company from developing online games. Its most popular games such as FarmVille and CitiVille, along with ChefVille and the recent Zynga Poker are played by an estimated 265 million online social gamers as of January 2013. Roughly 80% of its revenues comes from Facebook.
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But not all is well with Zynga. After it started trading on NASDAQ in December 2011 with an IPO of $10 per share, Zynga’s share prices has plummeted to reach $2 per share in 2012. It appears that investors have become cautious about the company’s shaky business model as its revenues failed to meet analyst forecasts as early as the 2nd quarter of 2012.
So what went wrong and what marketing lessons From Zynga can we get from this? Firstly, it now appears that social gaming has a fluid and short retention factor where casual gamers soon lose interest in the games. Players on its Farmville have been diminishing by the millions every month. Studies have shown that social games retain only 38% of their users after a month and 14% before the 6th month. This makes it important for a social gaming company like Zynga to introduce new games without let-up. Indeed, Zynga’s strategy has been to put more game titles to catch those leaving older games. The company has become a Pacman gobbling up small social game developers. Unfortunately, investors are not impressed. While newer and presumably more exciting social game titles can promise more markets, Zynga is actually just moving their social from one title to another and it has yet to impress investors that its market value is well worth investing into.
But perhaps the most serious problem is that Zynga does not own its main distribution channel – Facebook. Not owning the platform that its customers use to play its games has put Zynga at a long-term disadvantage. It’s at the mercy of the social network leader. The tumultuous relationship between Zynga and Facebook is well known. No one knows what will happen to Zynga once its contract with Facebook expires a month from now. It may be a bit late in the game that Zynga has made a gaming presence with other social network sites like Google+. Spreading its online gaming muscle across more social network sites is something it should have done earlier. As it is, Zynga has put almost all its proverbial eggs in one basket. That’s like getting only one store to sell your products.
Opening the road from online gaming to gambling
One area where Zynga has made significant repercussion is in the online gambling world. Zynga’s ‘s Poker may just be a game where you buy loads of fake money with real money online. But this has caught the attention of serious online gambling kingpins who have been struggling for years to get more people to gamble online. 30 million online poker gamers each month is not something they can overlook. What was Zynga doing that they were not doing? It’s social media. Online gamblers have failed to capitalize on a ready market. If and when the US Congress finally gets its act together for a comprehensive online iGambling law, it only takes Zynga to replace its Poker game’s fake money with real one to become the king of the hill in online gambling.
From its inception in 2007, Zynga achieved its status as the #1 online gaming company in so short a time thanks to Facebook and the power that social networking has in creating the proverbial market reach and brand awareness advertisers have been eternally pinning for. On hindsight, Facebook users can remember how annoying those FarmVille solicitation incessantly appearing in news feeds and posts. But the annoying truth is, it worked extremely well for Zynga. It didn’t take long to say “let me see what this Farmville is about” and you clicked the ads. After that, you were hooked to the game.
Hitching an unknown product to a rising star confirms what just about everyone know but rarely practices. It is more widely used in politics. At a time when Facebook was just in its infancy from a 2004 launch, Zynga latched its future on what it saw was a promising sunrise business in cyberspace. The period saw the golden age of social networking when advertising was free and going viral for any advertising message on a massive scale was fast and easy.
Zynga took advantage of this and entered into a preferential symbiotic relationship with Facebook that gave them first hand information on how best to make their online games fit into the evolving Facebook technology. It a;lso allowed them to exploit the emerging social media distribution circuit. This effectively created a barrier to future entrants in online social games. The rest, as they say, is history.
A lot has been said extolling the value of social networking that went from a mere campus trend into the global phenomenon that has defined 21st century online landscape. More significantly, social networking has spawned a new way to market new products and services in what is now called Social Media Marketing. Zynga’s market success is about social media marketing. Consider what they did with it