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Zynga CEO hints at potential for taking company private

Mark Pincus retweets interesting analysis by Softech VC Charles Hudson

Zynga's struggles have been well documented. The once mighty social publisher is struggling to get its stock back up while executives continue to walk out the door and its user engagement continues to plummet. Some believe that Zynga can certainly be saved, but perhaps it's going to happen out of the public spotlight. Interestingly, Zynga boss Mark Pincus recently retweeted an analysis by Softech VC Charles Hudson about how the company could benefit from going back to being a private firm.

There are numerous pundits who've said Zynga was far too early and ambitious in filing for its IPO, and now the company is under immense pressure.

"There are really interesting opportunities available to Zynga - they're just too risky to do as a public company. There is a lot of greenfield opportunity in front of Zynga. Social casino, both for-fun and real money, are both still markets that can be contested with good products and smart marketing spend. There are interesting opportunities in midcore and hardcore mobile games. And very few companies have really cracked social distribution. All of the segments I've mentioned above are speculative - they haven't settled out yet and there's still a lot of work to do to figure out what it takes to win. Winning in these market spaces will take experimentation, testing, and will inevitably involve some failure. That sounds more like work to do in private than in public," said Hudson.

"Fundamental distribution and platform transitions are hard enough to do - doing them in the glare of being a public company is downright impossible"

Charles Hudson

Hudson agrees with most that Zynga's future lies in mobile, but making the transition from a Facebook reliant company to one that can leverage mobile and other platforms isn't so easy, especially with the public demanding results.

"Zynga is in the midst of managing a really difficult platform transition - this is really hard to do as a public company regardless of what industry you're in," Hudson continued. "This is not just a games issue. Look at all of the traditional commerce companies that have tried to compete with e-commerce. And all of the print and analog media companies in music and news that have struggled to cope with the transition to digital. One thing is clear to me - fundamental distribution and platform transitions are hard enough to do - doing them in the glare of being a public company is downright impossible."

"The reason is simple - public companies are measured quarterly and these kinds of transitions require quarters of hard work to effect. Zynga, and just about every knowledgeable analyst that covers the company, understands that the future is in mobile. Making that transition from a Facebook-centric world to one where they have a meaningful contribution on mobile will take time and that's hard to do in public."

One of the tricks for Zynga will be to build up a network on mobile that simulates the sort of opportunities the company enjoyed on Facebook.

"There's no reason to believe that Zynga can't build up a strong, meaningful cross-promotion network that rivals what they have on Facebook. Independent companies like Chartboost, Playhaven, and Papaya (AppFlood) have proven that the model can work across developers. And Zynga has some good assets in mobile when you look at Draw Something, Words with Friends, all of the X-With-Friends games, and upcoming IP. The real secret, though, to making this work is that Zynga needs a sufficiently diverse portfolio of offerings in its quiver to have the right game to suggest to the right user at any given point in time. Right now, they are heavily weighted toward casual. I expect they will add more hardcore, midcore, and casino games so that they eventually have something for everyone," Hudson noted.

"On Facebook, Zynga competed with Playfish, Playdom, Wooga and others to build the strongest cross-promo network. They eventually won. Now they're competing with a new set of formidable competitors in GREE and DeNA. Unfortunately for Zynga, they are competing with those companies on their home platforms (mobile) - but Zynga will compete and I think we're still in the early days of seeing how this all plays out."

[Thanks to Business Insider]

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Latest comments (6)

Bruce Everiss Marketing Consultant 8 years ago
Nice article.
Zynga's share price is about the same as their cash reserve. So if you buy their shares now you get a company for free, this makes a buy back very tempting.
Zynga have changed the game industry radically and for the better by concentrating on the customer. Looking after the customer by using metrics to give the customer what the customer wants.
Their problem is, like that of many console publishers, they got stuck on a platform that was in decline and made the move to the new dominant platform too late. The whole core of gaming, the whole future is now in connected mobile devices. Phones and tablets. Zynga know this and are using their considerable talents and capabilities to make the necessary platform transition.
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Sandy Lobban Founder, Noise Me Up8 years ago
I think whats happened is the river bed has run dry on Facebook, and there's no power in copying a "traditional" game format and simply digitizing on facebook any more. For me, its as a result of the wider facebook problem of"when some one comes to a site for a reason, its near impossible to get them to do anything else". Its just not a place to play quality games. Facebook is for gossip and news. Games are done elsewhere much more effectively.

Zynga probably see themselves as a "bigger deal" than an indie developer, because of where they currently are, but the playing field is level whether they like it or not. You're only as good as your last idea. They need to look within for strong mobile or browser ideas and follow them through. The public journey is over. This needs to be a smaller private company in order to remove the media spotlight, and so they can get on with the actual hard work of making original games. For the first time they are being tested as a business and not as a movement of investors who fancied a slice of games.
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Andrew Goodchild Studying development, Train2Game8 years ago
So if Marc Pincus sold his shares at $10+ each, and buys them back at under $3, it's going to be a happy Xmas at the Pincus mansion this year.
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Show all comments (6)
Gary LaRochelle Digital Artist / UI/UX Designer / Game Designer, Flea Ranch Games8 years ago
Why Zynga went public:

From the article:

"There has been widespread speculation that a large number of Zynga employees will leave the company once they are allowed to sell shares. Why?

I'm not sure why there's been all that speculation other than that we've been in a quiet period. Our company has historically had very low attrition, much lower than other public or private companies in Silicon Valley. I know that hasn't been reported on, but it's true. We also continue to have an amazing inflow of resumes and talent.

When you think about what keeps talent at a company, it comes down to three points:

1. Do employees believe in the mission and direction of the company. I believe they do, because Zynga offers a unique opportunity to build games for the broadest audience ever seen in games.

2. Do employees feel they have great career mobility. And I'd point you to the fact that a culture of leveling up is one of our values. More than 60% have leveled up annually, which means they've taken on greater leadership roles and compensation each year. When we're past the acquire period and you can talk to actual employees, I think they'll tell you they have more opportunity for mobility here than if they worked at any other company.

3. Our teams manage themselves, which means they have a great amount of control over their work environments.

Beyond that, our culture runs deep. Our employees have a real love for Zynga and real pride. We've asked them not to go out and defend us in the press or blogs, so I don't think that's come through publicly yet. -Mark Pincus"
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Jim Webb Executive Editor/Community Director, E-mpire Ltd. Co.8 years ago
Our company has historically had very low attrition,
Historically and the past few months are very much at odd with each other.
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I think Facebook has come full circle - a place to check what your relative or friends are up to.
I dont really see it as a place to click click for entertainment, the mobile/tablet is so much more interactive than the FB platform which is limited by the current gen of browsers. As such, Zynga has probably struck a berg. a massive berg the size of a continent, which does not leave much room for conventional manoeuvring or making entertaining clckathons.

As such, zynga has two clear options. Online gambling or learn to start making real games !
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