Sunday, December 9, 2012

Will Zynga Emerge As A Gaming Company Or Gambling Company? | TechCrunch

Will Zynga Emerge As A Gaming Company Or Gambling Company? | TechCrunch



Will Zynga Emerge As A Gaming Company Or Gambling Company?

KIM-MAI CUTLER

posted 25 mins ago
zynga-gambling
There is more than a bit of schadenfreude among longtime insiders in the gaming industry at Zynga’s performance over the last year. The company has fallen from a private, pre-IPO valuation of around $14 billion to just $2 billion over the past year as it failed to maintain growth on the Facebook platform and didn’t transition quickly enough to compensate on Android and iOS. At a $2 billion market cap, Zynga isn’t worth that much more than the $1.6 billion in cash and marketable securities it had at the end of the last quarter.
But now that shares are up more than 10 percent since Zynga acknowledged that it is taking steps toward real-money gaming in the U.S., the company faces an interesting question about its identity in the long-term.
Will it be a gaming company, or a gambling company?
Zynga has a number of growth opportunities — on mobile platforms, its own destination site and in real-money gaming. But Zynga’s efforts at building its own platform have had mixed results over several years and mobile platforms haven’t lent themselves to a winner-take-all environment so far (and this applies to everyone).
So Zynga’s shares are acutely sensitive to any real-money gaming possibilities. They rose 7 percent the day after Zynga said it was making steps toward applying for a gambling license in Nevada, andthey fell by 5 percent back in June when Zynga’s vice president and Zynga Casino general manager Jesse Janosov didn’t mention tangible progress on the gambling front at a big press event.
Like every newly public company, Zynga faces the question about how much it is willing to succumb to the short-term profit pressures of the public markets. And it will probably give in.
Zynga has always been more of a mercenary company than a missionary company. Many of its earliest employees didn’t have histories in the gaming world, and in many ways, that allowed them move quickly and not be too attached to any of the industry’s long-term notions of what a game should or ought to be.
Even though we’re sometimes critical of the company, Zynga has done a lot to influence the direction of the industry in popularizing the freemium business model that has long been accepted in Japan, China and South Korea. It pioneered an aggressive metrics-driven approach to gaming. It pushed many older companies to move quickly from treating games as a consumer product you buy a single time off a shelf to treating them more as a service.
But mercenary technology companies are hard to keep intact once they’re public. There are simply too many opportunity costs for the more profit-motivated talent once a slower natural growth rate settles in and the obvious upside is gone. Mercenary culture worked to Zynga’s benefit when it was smaller, but now it is its Achilles heel.
The great consumer technology companies that have lasted a decade or more have a strong overarching vision that keeps the company culture strong even through the most difficult times.  This is why Mark Zuckerberg puts propaganda-like screen prints in Facebook offices everywhere around the world about “Move Fast And Break Things” and “Done Is Better Than Perfect” and constantly re-iterates the company’s mission to “make the world more open and connected.”
Zynga’s mission has been something vaguely about “play” or bringing “play” to everyone. But it’s hard not to see that mission ring hollow sometimes when the company has generated so much ill will in the larger community over the years for pursuing what can be euphemistically called the “fast follower” strategy. A move further into gambling will certain stretch that mission of “play” if not pollute it entirely.
That said, Zynga already shares a number of characteristics in common with gambling companies. Like casinos in Vegas, it tailors every aspect of the gaming experience towards monetization. Pixels in games are arranged like drinks by the Blackjack table, enticing you to play more. There’s eye-candy at the table at real poker games and in Zynga’s virtual ones. Everything is calculated, including the whales — a term itself borrowed from the gambling industry — who are given special treatment.
Plus, Zynga is culturally already in love with gambling. The hits-driven business has had its ups and downs, and when the company does well, winning teams sometimes go to Vegas to play. Pincus himself is known in Silicon Valley circles as an able poker player.
So if they as they venture down this path in a serious way, don’t call it a pivot. And maybe it will work?

No comments:

Post a Comment