Zynga Inc Corporational Growth - Report Example

A Case Study of Zynga Zynga Talking about internet gaming one cannot forget Zynga’s emerging and successful ventures over the internet in the past years. Zynga has been the platform for online games since 2007, with its collaboration with Facebook; Zynga has had a very detailed history with Facebook in terms of business ventures for about five years. The company since has gone through many ups and downs towards become the most used online gaming website. With many of its advantages, Zynga has emerged through the tough times by accelerating innovation throughout. Now known as Zynga was initially launched as Zynga Inc. by Mark Pincus in 2007 and was amongst the other young initiatives such as Instagram, foursquare etc but with the demand of users want towards online social gaming the company started to grow towards great potentials especially with the advent of Facebook. Zynga was named after Mark Pincus’s American Bulldog, Zynga who was known for its human like qualities and its warmness towards others. The company puts in the spirit of the dog in its logo towards providing a connecting outlook for people through social media. After the change of company’s name in November 2010, Zynga now has a platform of its own, Zynga.com with variety of games such as Farmville, ChefVille, CastleVille, Zynga Poker etc. Heading all the operations from San Francisco the company is has around 2100 employees with the new CEO Don Mattick a former Microsoft employee. When Zynga went public in 2011 it was valued at $8.9 billion which is the biggest public offering the gaming world. After that time onwards, Zynga has had much of a problematic future, with a few successes and major downfall. As a company of major interest to social media gamers, the company review will focus on the complete business systems of Zynga. It will put in focus the successes and failures throughout the time from history to the present day Zynga.com. History and Present Zynga’s major issues can be narrowed down to two major heads. Throughout the history of Zynga which is around seven years to date, the first half was ultimate rise and success but after the events after 2010 event the company has gone to an overdrive. The innovation and independence has led to some major issues and contributed a lot to the sudden rises and downfalls of the company. Mark Pincus role towards creating Zynga was not limited toward being big but it was towards become the best at social gaming. Much to the success of Zynga can then be attributed through the merger of gaming platform to Facebook. Since 2009 Zynga had most around 97% of its revenue through online gaming present on Facebook. This was then not just one man game; it was a deliberate effort of the CEO himself, with the expertise of Bing Gordon and with crucial help through the insiders of Facebook such as Owen Van Natta. The key personal were the game towards the addiction creating phase of the social gaming industry. With their help, the innovational boundaries of Zynga seemed limitless at first and contributed highly towards the revenue building and market capture of the gaming industry. The first phase of massive outburst of social gaming also led towards problems through the input of consumers. The spamming of online games over Facebook led to a negative reputation in the gaming arena for Zynga which was then led out by the expertise of Brain Reynolds and Mark Skaggs. They converted the real regulations towards the true advertisement for Zynga to not have been criticized through their techniques. These developers then led such innovation through the year to provide much more addicting game to surpass its competitors such as Playdom. This was a great system through which the company became the leader around the world for its online addictive games. This also led Zynga to take much more lucrative exists. Since its launch till the year 2011, its initial public offering made history and Zynga for an online gaming hit the revenue counters of $1.5 billion with the aim to take over the virtual goods market shares that sum up to over $10 billion. It was also then planning to double and triple its revenue by the upcoming five years through attaining other possibilities throughout the internet. Collaboration with Facebook The young startup had a great advantage over from the start success to attract new business towards its door step. Facebook helped Zynga to help invent a stronger structure and bigger audience to work with. The opening of third party application on Facebook towards beating its rival MySpace helped Zynga to beat other gaming websites around the web. When Facebook offered around seventy companies including Microsoft, Digg, Washington Post, and now Zynga for being available on the web towards attracting more audience toward their business, Zynga stepped in and beat most of all its rivals. Zynga then launched Xynga Poker was amongst the first and most successful venture of Zynga Inc in 2007-2008. Success of 3 R’s Zynga believed in the three R’s- Reach, Retention and Revenue. This system based on a very simplistic model had clear cut boundaries to reach anyone, anywhere through internet. Internet playing as the main medium towards growth required active monthly users. The company also envisioned to provide the games free but with a limited amount of growth in the game. The addiction phase was then the major business revenue through which Zynga accumulates wealth from all around the world. Now having up to 250 million active users, with over 30 games, Zynga has added much to its market of players as well as wealth. The strategy of 3 R’s was a comparative advantage of over big internet gaming giants such as Social Gaming Network to an extent that within its launch till 2009 it had over 40 million active users spread around the world. Zynga’s gaming creativity added Virtual Goods which converted the players in to customers to buy goods towards their games. The company also then offered different potential outlook to ease the access for the players by providing them VIP access as little as $5. Although only around 2.5% of the players joining the program but considered as a minimum of $5 dollars and with people paying up till $100 in some areas, the company made more than $50 Million in revenues. This led towards hiring better innovators leading up to the events of launching Farmville which acquired over a 10 million MAU’s in four months leading up to 20 million by the end of August 2009. This was a great encouraging factor through the help of Facebook towards generating more revenue and Zynga then launched games such as CastleVille that gained a much wanted attention towards creating a larger market for Zynga. The company then also started to grow in terms of its outreach. Now having million of players around the world, the company launched its officer in Bangalore, India and a studio in Los Angeles. This was important as Zynga’s IPO launch had to hit a success for its growth. 2011-2012 Turning events After the successful launch of its IPO, the company hit $1 billion revenues. This was a great motivational factor that died pretty soon under the upcoming events. After over fifteen acquisitions on software games developers from Boston, to Dallas and even in Europe and naming them all to Zynga (Boston, Dallas, Germany etc) the company hit a wrong edge in March 2012 when it purchased the company OMGPOP for $180 million and it dropped the daily 15 million daily users to 10 million. To pull out from such a problem, Zynga didn’t stop acquiring companies but acquired Buzz Monkey, one of the leading gaming companies which helped in generating much more players and income for Zynga. All the development still had major problems as the share prices dropped to around $3 a share with the company’s value dropping from $316 million in 2012 to $204 million in the year 2013. The prices of the share since then are on a tough road towards success and this elevation of problems led to the step down of the founder and CEO Mark Pincus. These events happened due to many other contributing factors. During 2012, Facebook did some adjustments to their system towards not having too many notifications from gaming companies and that led to major problems for Zynga which relied mostly on the advertisements. That year the 20% decline was due to the changing phase of Facebook working nature. Zynga then became vulnerable to its competitors such as King.com and Wooga. Zynga also launched Farmville 2 in order to protect its loosing position in the market by adding 3D effects to the GUI. This success was much needed and added much towards Zynga’s initiative towards mobile gaming technology to reach maximum outreach around the world. 2013 and downfall Zynga during the year 2013 became independently on its own website with all the games on its own data base. The company also had connected users through Facebook, Microsoft and Mac that enabled them to play at some place virtually. The company in general then went towards defensive mode towards protecting the main data base to have at least constant returns. Many of the games were discontinued and around 18% of its workforce was laid off through closing offices in New York, Dallas and LA. In July 2013, after the CEO Mark Pincus stepped off and only played the role of executive program designer the company shifted towards real money gaming, this added in the decrease of 13%. By July, 2013 the company value continued to decrease through investor’s outlook. The major downfall of all ended up when the three major executive left Zynga, John Osvald and Nathan Etter who were the senior vice president of games and Jesse Janosov, vice president of casino division resigned. These three put a big nail towards the problems that were laid down for Zynga. Now considering the fact that Zynga is planning to downsize the company from 3000 employees to just a few hundred, and being called one of the top 10 tech fails in 2012 there are certain issues through the business models which can be looked. These further evaluations of Zynga would contribute towards how and why the company managed to have a major downfall economically and why doesn’t Zynga’s plan B didn’t work out as much as they wanted to. Zynga’s Five Forces, SWOT and Competitive Profile Analysis Five Forces: Zynga’s five forces analysis when taken under consideration to determine the competitive attractiveness then reveals the following outcomes. Looked up the first force of New Entry, the resources are very low but the players for Entry are very high. This can be a threat to Zynga as major New Entry in the market such as King.com affected largely to Zynga and they just have recently started to retain their position. To have copy rights over the publications in certain areas can help limit this new entry for players. When considered the substitutes, these can be looked upon in many ways. The MAU are all online and can go down towards many reasons. The substituted to entertainment provided by Zynga has many alternatives. To ensure that this problem doesn’t occur much, the innovators towards addiction of game have to be introduced to have a stable MAU during the advent of some new game, movie or event release. Moving on to the buying power, it is in contact with the selling of products of Zynga through online portals. Seen through the association of Zynga with Facebook can be a great example. With 90% revenue’s associated with Facebook, Zynga had didn’t have much of an option to set some demanding prices. The price was then set by Facebook as they were their sole advertisement. With their connection to Facebook, considering the supplying power has been strong with some valued customers but with more people joining in, and with high dependency with Facebook, this is much more of a threat that has created problems for Zynga and its growth. The bargaining power of supplier i.e. Zynga with all the negative aspects surrounding the forces act as a stronghold towards creating opportunities for the company. The suppliers bargaining power in this case is very high as the innovators can set their price and can limit entries of newer players to the market. This plays as a great advantage for Zynga to keep on producing and having limited hire of innovators with a high supplying price to increase its revenues. Comparing the current situation, the corporate culture of Zynga is now under direct pressure to pave roads for itself much faster and with much more quality. The innovations thus required from Zynga are major to avoid any growth of other forces attracting its downfall. The critical situation leaves Zynga in no place then to create more innovative ideas to have more users bring in money. SWOT Analysis Zynga can be looked upon through the scope of SWOT analysis which can give a better outlook to the pertaining position of the company in the market and some of the solutions for it to overcome those bumpy edges. Strengths: Although Zynga has been on the downfall, there are still over 250 million users waiting to be increased by millions through the positive future practices of the company. With such low generating revenue, the monetary outlook towards attracting a major percentage of the players towards the VIP section with a small payment can abruptly add millions. As it is then just on a gaming software module, making these developers to sort out a plan to quickly invest in a bigger opportunity is a strength Zynga can play with. Zynga’s strength also lies within the partnership. Although acquisition has been adding innovation but it has been costing a lot while returning much less. While the partnership with Facebook was much dependant, with over 95% revenue coming through Facebook during 2010, Zynga needs to learn from its past. The gambling initiative with real money online is a great initiative when taken abroad. Zynga can work upon the regulation of this type of gaming especially within the mobile technology to have it more hands on approach. With the new CEO in place, the major concentration of work is still kept towards mobile innovation that can have much more MAU to generate more revenues. While King’s company has much less workers and much more players, the competition of the players within Zynga has to grow immensely to hold the MAU. Weaknesses: Since 2010 Zynga has had major problems taking care of its users and shares. The subscribers have dropped in millions which have affected major revenues. Ending major partnerships hasn’t left Zynga with any stable net incomes and playing by the strengths has been a major challenge for the social gaming giants. When compared throughout the year, following are the results of the finding in terms of MAU’s. Zynga with its dependency problems have been on a major crisis. With increasing litigations regarding hampering intellectual property, Zynga’s public figure has been going on a downfall. Zynga has being sued by companies such as Electronic Arts, Oregon Trail, Night Owl Games and many other companies for copyright fragmentation. Opportunities: Zynga’s shares to date are starting to increase by the end of 2013. The shares have gone up $4 and there has been a 27.71 percent increase in the market economy of Zynga within its new leadership. The opportunities that lay before Zynga are to turn to the basics of which they started; having strong number of people who can invest their time and money. This strategy of getting under the main reasons for the downfall as suggested by the new CEO is the opportunity for him to set the company on its track again. For the year 2014, the company has the opportunity in the smart phone industry. Pre-selling games to phone developers around the world through expansion can help in creating large amounts of revenue while also increasing the users for the people investing in mobile phones. This opportunity is just at a start and Zynga will have to be pro-active as people are moving away from computers and PC’s towards smart phones and tablet PC’s. Zynga advertisement although regarding as spamming now has almost ended, it is then also an advantage towards Zynga to find partnerships with growing social media portals towards promoting games. This can increase the traffic that is coming towards Zynga. Enabling and reinventing the previous shut off games and providing easier 3D access is a dimension Zynga can work with. Providing all these opportunities within its Zynga.com portal can help in having direct revenue without sharing as well as helping in building mobile store for the VIP players can keep on having better revenue. For the future opportunities, Zynga has been working with its developers in creating multi-language games that can have usage for more players who are not accustomed to English language. A better outlook towards opportunities would be to merge up with third party developers that could cost much less than acquisition and can have more hidden revenues. Threats: Real money gambling can be a major problem towards scenarios based for the players. With high difference with online and offline users and problems such as hacking in the mobile world, there can be negative prospects that can effect major revenues to Zynga. Zynga also required the much attention seeking strategy of brand loyalty. The players come and go accordingly to any attractive game they follow. It also happens that many users might like certain game and at times the company start to shut down games the loyalty of the user ends with it. For such threats of loosing users, Zynga needs to desperately have user loyalty for permanent games. Many portals are now emerging can have slow down the positive growth Zynga is expecting for the year 2014. Profile Matrix As suggested by the Porter’s five forces as well as the SWOT analysis, Zynga’s only way forwards is through mobile technological innovations. This can play a major role towards getting Zynga out of crisis for the upcoming five years. The requirements when followed upon the profile matrix are then put in comparison with EA and King.com. EA is much larger but also has been facing major problems since a few years. King.com has been major revenues in the past two years turning out to be a major competitor for Zynga. All three companies are working towards growth and require innovative outreach to run for the future. For EA, the revenue is more but still has been deeply affected by their practices along developing games. Compared is the profile matrix for EA, Zynga and King.com.     Zynga EA Kings.com Critical Success Factors Weight Score Rating Score Rating Score Rating Creativity & Innovation 0.25 3 0.75 3 0.75 2 0.5 Mobile Business 0.25 2 0.5 3 0.75 3 0.75 Global Expansion 0.2 2 0.4 2 0.4 2.5 0.5 Creative Employees 0.2 2 0.4 2 0.4 1.5 0.3 Customer Service and Loyalty 0.1 2 0.2 3 0.3 1 0.1 Total 1.0   2.25   2.6   2.15 Zynga’s Profile Matrix: The matrix shows directly emphasis on the mobile business that has been growing quite greatly for both King.com as well as EA but has a difference with Zynga. This in fact is the way forward for Zynga. There isn’t much different in creativity under the innovation of three companies but due to the simplicity of King.com games, they have gained much more attention leading up to a higher weight. King.com is also a young start and the creativity has been helping them to be now be equally near to Zynga. EA being much older and a mature company have been able to cover the rest with its loyalty part. That is a major of chunk of which is desperately required for Zynga’s future growth and stability. Conclusion Putting Zynga’s history and present on one table, it can be seen that the company has made major business in very short period of time and has gone through many experiences while facing rise and fall of their company. The way forward for Zynga would be to look forward for more opportunities in term of partnerships with limited dependency. Zynga as a company grew out much faster due to its quick initiative of having games online connecting people socially everywhere. With companies such as Apple, Google, Samsung and other mobile phone companies producing simpler more reachable handhelds for the users, Zynga will have to join in towards breaking new ground with taking entrepreneurial risks towards getting more people on board with their innovative ideas. Zynga also required work within the network of customer service, with the employee count reaching to just 350, Zynga can utilize its potential to launch its previous scoring games into making big bucks. The company needs a big shot to get all the things under control before they spin out of the leadership again. With limited income coming in, the innovative part of Zynga needs to get on its food towards building high potential systems to beats it ultimate rivals. References: MacMillan, D., Burrows, P., & Ante, S. E. (2009). Inside the app economy. Business Week, 4153, 347-357. Shambora, J. (2009). Zynga suddenly is everywhere. What gives. Fortune (December 2. Cifaldi, F. (2012, November 9). 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