Comment by teej | Hacker News Reader

Comment by teej | Hacker News Reader

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Disclaimer: I was previously a Zynga employee and I am presently a holder of Zynga stock. I have no knowledge of Zynga's current internal state - the following is entirely speculation.

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There are many forces at work here that need to be brought to light.

* Macro Trend #1 - Facebook's web traffic is in decline[1]. These users are shifting to mobile as their primary consumption channel for Facebook. No facebook app developer has presence on the mobile app.

* Macro Trend #2 - Zynga's game launches are smaller than ever. For many reasons, it's getting harder to launch a 5M+ DAU game.

Zynga is responding to these trends in several ways.

* Leverage their warchest[2] to make acquisitions. This lets them launch a higher volume of games and help them get a foothold in mobile. Zynga has made a LOT of acquisitions this year[3].

* Further monetize their existing base. They've been pushing partner deals really hard recently, doing deals with Lady Gaga[4], Amex[5], and Capital One[6]

Zynga's games are more high quality than ever. Gone are the days of "fuck innovation", two of Zynga's most recent releases are the best they've ever built. The issue is that the market for FB games is in decline - the next big wave is mobile. If Zynga can become a player by launching a hit or acquiring a large chunk of the space, they'll be doing better than ever. But so far, Zynga's mobile releases have flopped.

TL;DR - Zynga's profits are a sign that they have doubled down on acquisitions to counter-balance a market shift from web to mobile. Their future prospects lie in their ability to generate hits on the iPhone.

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[1] - http://www.insidefacebook.com/2011/06/12/facebook-sees-big-t...

[2] - http://www.insidemobileapps.com/2011/08/11/zynga-credit-1-bi...

[3] - http://mashable.com/2011/05/18/zynga-dna-games/

[4] - http://mashable.com/2011/05/10/zynga-gaga-gagaville/

[5] - http://www.zynga.com/about/article.php?a=20101130

[6] - http://blog.games.com/2011/09/19/farmville-cityville-pioneer...

>TL;DR - Zynga's profits are a sign that they have doubled down on acquisitions to counter-balance a market shift from web to mobile.

That is not the right summary. Aquisitions are not expenses. They are spent from the 'capital/capital reserves'. So the act of acquiring doesn't hurt the company's profitability directly. However if all the acquired companies are making losses, those losses will now become zynga's losses. So right now the cost of running zynga is huge and that is not too good a thing as compared to its revenues

You forgot to mention that Zynga is one of the major reasons why Facebook is starting to decline in the U.S. People hate Farmville and Mafia Wars and the associated spam.

That said, Words With Friends is an excellent implementation of Scrabble and it's actually social, not alienating like that Farmville garbage. It's quite well-polished. I respect the attention to detail.

You forgot to mention that Zynga/FarmVille was also one of the reasons Facebook picked up (and kept) so many users so fast.

It's digital crack manufactured by Zynga's bench of psychologists, but it brought in the users.

The original Words With Friends app was, of course, developed before Newtoy were acquired by Zynga. Fortunately, the social DNA (and polish) of the game has remained intact.

Why down vote this? While the spam from these games was turned off for non-subscribers, I heard Tim Train from Zynga say at a presentation that they are still experiencing the backlash from the legacy of spam.

Why would non-Farmville-playing users leave Facebook because they are tired of it's spam when they could just hide posts from it?

Consider the majority market of Facebook users, many don't know how to "hide posts" and will often be turned off whent their facebook wall begins to look like their hotmail account.

Don't always assume the average user has the know-how you do and don't always assume they're interested in solving the problem either.

And even if you know how it seems like every time I log into facebook (admittedly rarely) there's a handful of new spam games making the rounds. It's a little frustrating that there's no blanket option of block all of the stupid game spam, or switch from a blacklist to a whitelist. I'd much rather un-block specific games than have to block every game ever made.

Probably time to block a few of your friends.

It's still a sign of the decreasing signal-to-noise ratio. I could get a Tivo and fast-forward through commercials on TV, too, but it's not worth it.

That should be false. Games bring back millions of users to facebook. Remember that while facebook attempted to hide games some time ago, they reintroduced viral features like a scrolling side ticker to spark up the traffic. Why would they do that if they would not benefit from it?

Wow, I actually hate Words with Friends — its ugly design, its noises, its super-slimy full-screen no-close-button ads, the way some games end in stalemate that the system does not recognize, etc.

I agree with all of these strongly. I wouldn't say Zynga is a complete failure in mobile though, Zynga Poker has consistently been a top grossing app on iPhone. I do agree that in order to continue to grow Zynga needs to be far more successful in mobile, and perhaps enter other markets (console, set top box, etc.)

If i might interject:

1) Facebook traffic is not falling. The reports are contradictory enough that we cannot conclude that : http://www.insidefacebook.com/2011/06/13/available-data-show...

2) I think Cityville was their fastest growing game: http://venturebeat.com/2010/12/15/fastest-growing-game-in-hi...

Also I fail to see how mobile is the next big wave. There's only a small percentage of users who play social games on mobile (but they do on the iPad, for non-flash games at least).

Facebook traffic isn't in decline.

16% of all US online time is spent on Facebook. That's up from 11% 1 year ago and 14% a quarter ago.

http://allthingsd.com/20110926/the-facebook-chart-that-freak...

I suspect the metric used in reports like http://www.insidefacebook.com/2011/06/13/available-data-show... rely too much on page loads. Facebook's increasing use of Ajax breaks a lot of 3rd party measurement metrics.

You should have kept reading to the next sentence. teej said that web traffic is declining as users shift to mobile use of Facebook.

The OP stated web traffic was declining, not overall traffic.

Macro trend #1 should change once Facebook rolls out the mobile gaming strategy

It is my opinion:

Zynga is thought pollution.

Will Google+ of any help?

Off topic, but i am really disappointed that google chooses to open their APIs to specific companies only instead of making it open to anyone.

There's something to be said for beta testing in a way that's less likely to take the entire site down due to unexpected behaviour under load.

Most of all - ZERO INNOVATION!

I think that we can stop this debate about whether innovation will necessarily lead to success (financially) or not. I might have one case to against you. One case in Asia: the biggest online gaming company in Vietnam (and also in South-East Asia) called VNG bought license of one game from the Chinese Kingsoft, rebranded it, customized the UI, distributed in Vietnam and now they have $60M in revenue. The key success factor is that the market is so ripe and so ready for online gaming, and the game VNG sells in VN just "works" for those customers, they keep paying for the company for the virtual goods and monthly subscription. nobody cares the originality of the game.

Which holds true with my personal definition of innovation: find opportunities and/or challenges then apply solution. Great example of this!

(Not necessarily find some crazy new solution to a problem -- that's called research)

Sorry guys, making money != innovation. Was Madoff an innovator?

The innovation doesn't need to occur in product development. The business model, distribution, or any other aspect are also open to new techniques, even when the product is decidedly un-innovative.

Yes, making money is not innovation. Innovative things are usually financially successful, however.

This is no longer the case. In terms of game design, Zynga is now leading the way on many fronts.

You could make a case that this is entirely due to the fact that they ran out of companies to copy, but that's beside the point. Nowadays, it's just inaccurate to claim that Zynga doesn't innovate.

If I remember correctly from a few weeks ago, Zynga revenues increased and most of their spending remained flat, but they've increased spend on R&D dramatically hence why they are showing lower profit figures. This is a smart move, in my opinion. You can lead a market by being good at capturing it early on, even if you simply just copy other people's ideas, but to remain there or go beyond that requires innovation especially as competition increases or the nature of the market changes.

No matter how you see it, for a billion dollar company, Zynga adds nothing to the technological stack. Frankly, can you give examples where they innovate? You mention game design, but I remember playfish making beautiful designs years ago.

http://blog.games.com/2010/09/08/zynga-ceo-to-employees-i-do...

he said "Nowadays" - your link is 1+ year old.

So he suddenly changes from "no innovation" to "actually, it's needed?". Their games are nothing more than spam. Really! One of the reason I quit facebook was friends playing them, and letting me know about their status.

I'm a gamer. I work at game development studio, and I spam my buddies that play the same game as me with my status, but no one else...

Facebook's web traffic is NOT in decline.

He posted a link, you just threw out a sentence. Care to back up your claim?

Of course a big part of this is Zynga bet huge on Flash (for no particularly good reason). If Zynga had bet on HTML5 it's stuff would all be working on iPhone for free.

Far be it from me to be someone who defends Zynga on anything, but your post is pretty ridiculous.

HTML5 is a pretty iffy target platform for games today. It is very difficult to support all the different browsers across desktop and mobile well and still have fast audio and even just simple 2D graphics. That's today.. in 2007 (when Zynga was started) HTML5 basically didn't exist as anything other than a pipe dream. If Zynga had "bet on HTML5" back in 2007 they would have been a stillborn company that never made any profit to begin with. For the types of games they make, Flash was inarguably the only option then and even today on desktop browsers it is arguably still the only reasonable option.

Yes, HTML5 will be great for games, maybe in 2014 or so. I'm sure they have people there working with HTML5 and getting ready for that.

I can't speak as a big Zynga user (indeed, I don't play their games at all) but my wife is a total addict. Zynga's games, as far as I can tell, and certainly the older games, don't make much use of capabilities that Flash offers over plain old HTML4 + JavaScript. So, in essence they picked Flash because it _might_ have let them make interesting games with what was at the time a ubiquitous engine, but in fact they made rather uninteresting games that could have been done without it, and this has cost them dearly.

Zynga used Flash for the same reason everyone else uses Flash -- ubiquity and consistency. HTML 5 canvas/JS would require divergent codepaths for each browser since they all implement different subsections of the spec (occasionally in different ways) and would still probably require a Flash fallback for IE users (most of Zynga's target audience).

It would be nice to get automatic compatibility with anything that runs a modern web browser, but the sad reality is that most PCs don't use a modern web browser, and HTML 5 doesn't really simplify anything. Flash runs the same everywhere from only one codebase.

I'm a big supporter of HTML5 and I strongly dislike Flash, by that's ludicrous. You can't just put a game designed for desktop/laptop screen sizes and for the mouse/keyboard and expect it to work as-is on the iPhone. The game may load, but it won't be playable. You need to do a version for that type of UI. HTML5 would enable reuse of the backend, but not much more.

Zynga bought Dextrose who where developing a HTML5 based game engine, back in 2010. Nothing that I know of has come out of that acquisition yet.

http://techcrunch.com/2010/09/24/zynga-continues-internation...

no i think zynga cityville runs on dextrose game engine

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