Zynga lets players connect with their inner mob boss, farmer, and poker champ. The company is a leading social game developer with titles such as Mafia Wars, FarmVille, and Zynga Poker. It offers the games online for free primarily through Facebook, but also on its own website, with 240 million monthly active users in more than 175 countries. Players use a credit card or a service such as PayPal to buy virtual currency to purchase in-game virtual goods that enhance, extend, or accelerate gameplay. The company generates most of its revenue from the US; foreign customers represent about 40% of sales. Zynga was founded by Chairman Mark Pincus, who fashioned the name after his late dog Zinga.
The US is Zynga’s largest market, representing almost 60% of sales. It has about a dozen offices in the US and international locations in Canada, China, Germany, India, Ireland, Japan, Luxembourg, and the UK.
Sales and Marketing
As a social gaming company, Zynga uses social media for its marketing efforts. It attracts players mostly through unpaid channels, such as the viral and sharing features on social networks such as Facebook and Twitter. It also hosts live and online player events.
The company’s games are free to play. Zynga makes money through the in-game sale of virtual goods, mobile game download fees, and advertising. Overall sales grew 12% in 2012 to $1.2 billion.
The company's biggest revenue-generating games were FarmVille (24% of sales), Zynga Poker (19%), and CityVille (12%). Zynga's top games vary over time, but the top three games usually account for the majority of sales.
Online game revenue accounts for most of sales (89%) and advertising (11%). Online game revenue increased only 7% over 2011. This segment consists of consumable and durable virtual goods. Consumable virtual goods are items such as "energy" used by virtual characters to perform in-game actions and that need to be replenished, while durable virtual goods are persistent items "owned" by a player's virtual character, such as the tractors or buildings in FarmVille. Durable goods exclusively available by purchase and the time-saving advantage of buying consumable goods are two of the biggest incentives that drive players to fork over real money.
In 2012 about 85% of total sales came through the Facebook platform, and investors have been wary of the company’s dependence on the social media website. In addition, Facebook keeps 30% of customer spend on their site. As such, Zynga has been working to reduce its dependence on Facebook; its games are also played on the company’s own website, mobile devices, and other social sites such as Google+, Myspace, and Yahoo!
As it struggles to deliver its games for mobile platforms (where social games are increasingly being played), Zynga in 2013 laid off nearly 20% of its workforce (about 520 employees). It also closed several offices.
Zynga is also using partnerships to extend its presence outside of its games. It teamed up with Hasbro in 2012 to grant the toy company rights to develop products based on Zynga games and for co-branding with Hasbro properties.
Mergers and Acquisitions
Zynga uses acquisitions to expand globally and help it become less dependent on the Facebook platform and the US market. Acquisitions also help diversify its development teams and, consequently, its catalog of titles.
Its acquisition pace completely stopped by 2013 following the restructuring, but 2011 was a busy year. That year it bought 15 companies to build its portfolio of social games, obtain new employees, and expand internationally.
In 2012 it made one of its largest acquisitions, paying about $180 million for creator of Draw Something, OMGPOP. Also that year it bought Wild Needle Games, which focused on mobile games for women.
Founder and Chairman Mark Pincus controls nearly 45% the company’s stock and hold 60% of its voting power.