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Ten years after Farmville, Zynga's still standing | Opinion

Zynga's rapid rise was matched only by the speed of its fall from grace -- but its turnaround in recent years has been a dramatic third act

There is a pretty big anniversary coming up next month, though I'll wager you hadn't noticed -- in June, Farmville will turn ten.

Tenth anniversaries are peculiar things; it's not so long ago that you actually feel nostalgic, as such, instead usually perching uncomfortably somewhere at the exact midpoint between, "no way, it can't be ten years already," and, "wow, has it only been ten years." Farmville is no different. It's hard to believe that it's already been a decade since it took the world by storm. Yet looking at everything that's happened since then -- the enormous and ongoing changes to gaming of which Farmville, for a few years, was the tip of the spear -- it's equally hard to believe it's only been around for ten years.

That was an odd in-between time, when social networks were flourishing and developers were racing to find casual, social game designs that would work on these new platforms, but smartphones had not yet taken the world by storm. It was a time when Farmville's creator, Zynga, looked like the future of the games business, and it wasn't a future that filled everyone with joy.

"Zynga's comeback is arguably one of the best turnaround stories in industry history"

Plenty of people just seemed a bit discombobulated by the notion of one of the world's most successful games being something that their mom was more excited about than they were. But there were legitimate concerns as well, over things like the monetization model and the company's attitudes around customers and creators alike. Besides, founder Mark Pincus did ever such a good turn as a moustache-twirling pantomime villain.

Then, after a few years of being the inevitable future, hurtling down the tracks at the rest of the games industry like a freight train... Zynga was the past. It listed on the NASDAQ in late 2011, did fine for a few months, and then dropped like a stone. By mid-2012 it was trading at under $3 per share, having lost 75% of its value since its peak earlier in the year. It stayed down there in the doldrums for years, reaching its nadir at under $1.80 in early 2016.

Zynga, it seemed, wasn't the future after all; it had merely been a nursemaid for the future, a strange mid-evolution organism that flourished in temporary conditions between the rise of social media and the all-conquering march of the smartphone. There were other issues that led to Zynga's fall, but by far the most important was its failure to adapt quickly and nimbly enough to smartphone gaming. It was overtaken by leaner, faster, hungrier and, yes, sometimes plain luckier companies in the smartphone space, and that was the end of that.

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Zynga's turnaround has been driven by former EA exec Frank Gibeau

Except it wasn't the end. Zynga is still around to blow out the candles on Farmville's tenth anniversary cake. In fact, while few in the industry outside the dedicated mobile gaming space have been watching, Zynga has staged a comeback -- a competent and quietly impressive comeback that's arguably one of the best turnaround stories in industry history.

Frank Gibeau, formerly of EA, took over as CEO in 2016; he replaced Mark Pincus, who had already stepped back once before but returned to head up the company after a rather less successful stint in the job by former Xbox boss Don Mattrick. The firm's share price has been on a steady climb since then, reflecting improving financials and a growing confidence in the company's management of both its IP and its business in general.

I call this a quietly impressive comeback, because on its path back towards relevance and success, Zynga hasn't made any huge, dramatic moves -- no big acquisitions, no gigantic splashy launches. In fact, Zynga continues to lean on a lot of the same IP (CSR Racing, Words with Friends and so on) that it has from the outset, supplemented by a handful of key titles it has launched and grown pretty organically since then. This is a set of IP that the company describes as "forever franchises," and much of Gibeau's focus seems to be on building up more games to that status.

"The new Zynga is built around not one or two world-crushing hits, but a large number of solid, reliable performers"

The new Zynga, then, is a publisher built around not one or two world-crushing hits, but a large number of solid, reliable performers. That might not be as eye-catching as Farmville's long-ago headline grabbing performance -- remember when it had more active users than the entire population of the UK? -- but it clearly works for the company, and investors like it too. The last time Zynga's valuation reached its current heights was in early 2012.

One of the most impressive things about the turnaround that Gibeau has overseen is that it seems to have restored the company as a whole at the same time as restoring its core franchises. No mean feat, though perhaps there's a virtuous-circle benefit involved in working on both product and corporate culture at the same time. The company isn't out of the woods yet -- it isn't profitable right now, which is the next really big test it's going to have to pass -- but it's managed to build itself up to the point where it's being trusted with big brands by external IP-holders, including HBO and Disney, which speaks well of how the firm is being managed overall.

This move into licensed fare is one of the catalysts for its current valuation growth. There is also some evidence that it's planning to accelerate its growth through acquisitions of smaller studios in the coming years -- it just raised $600 million through sale and leaseback of its HQ building -- which, if chosen well and managed carefully, should go some way towards building out more of those "forever franchises."

Why, other than the coincidence of Farmville turning ten, is this turnaround relevant to talk about in terms of the industry at large? I'd argue that it's a pretty interesting lesson for all of the other companies around the mobile space that have struggled to build a solid and sustainable business out of their original mega-hit titles. There is life after the demise of that flash-in-the-pan wonder-game; sure, it's taken Zynga a long time to get there, but it started this comeback from a dramatically low point following a disastrous few years on the market, and the almost complete destruction of its image and goodwill in the broader industry.

The way it's built back up, returning to a solid market cap and good reputation among investors off the back of a solid catalogue of steady performers, is a signal of a welcome maturity creeping into the mobile and social games market after years of dramatic but often poorly managed growth. Zynga still has its work cut out for it, but the path it's following now is one that should be watched closely across the industry.

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