How Zynga is Failing and How They Might Turn it Around

Zynga, the social and mobile game juggernaut behind Farmville, announced deep cuts and closures this week, including layoffs of almost a fifth of its total staff, some 520 employees.  It came as little surprise for people that have been monitoring the company closely and have seen it foundering, its profits diminishing, and its games slipping off the charts.  So what happened?

While the markets that have long been Zynga’s bread and butter continue to expand (sales of digital products on mobile devices are projected to grow 32% this year and exceed $1 billion by 2015), they’re also becoming increasingly crowded and competitive.  While Zynga enjoyed the advantage of coming very early to Facebook as a gaming platform, they’re struggling to keep pace on tablets and smartphones already overflowing with games and apps.  A company with over 2000 (at it’s largest in 2011, 2846) employees, Zynga faces competition from studios whose staff numbers stick to single digits, or even individual game creators. 

Zynga succeeded, in large part, by keying into a massive market that wasn’t being served in an innovative way.  They also implemented an addictive formula: introduced gameplay that’s engaging and rewarding at first and then, when it reaches the point of repetitive tedium, offer players shortcuts in exchange for real world money. 

But success breeds competition, especially in the gaming industry, and hot on the heels of Zynga’s hits came clones, spin offs, and iterative improvements from a massive number of other companies looking to penetrate the social gaming market.  Casual players proved how fickle they can be and flew in droves from one hot property to another, leaving Zynga struggling to keep pace.  As one of the worst perpetrators of this sort of mimicry, Zynga probably should have seen this coming. 

In response to rapidly shifting market conditions and the caprice of social and mobile gamers, Zynga hopes to pivot towards “mid-core” content.  The aim is to keep players invested in their games longer by developing properties that, according to senior VP of games Steve Parks, “blend the depth of hard-core games, traditionally played on a PC or console, with the approach ability and accessibility of casual games.”  To this end, new Zynga releases like Battlestone and Game of Thrones Ascent include long term hooks like RPG elements in the hopes of providing deeper experiences. 

The company is also making a play in the virtual casino genre.  One of its steadiest, most popular properties has long been its Texas Hold Em Poker game, and the company has recently begun dipping its toes into real money gambling games in the UK.  How well Zynga is able to adapt and evolve in these new areas will be critical in determining whether the company can survive now that it’s lost its critical, first-in edge.