Pay to play: how to lose friends and alienate people
The company behind FarmVille and Mafia Wars used to be valued at $1 billion, but profits are down and game players are moving elsewhere. As its woes begin to hurt Facebook, is it game over for Zynga?
YOU’D HAVE TO WONDER if the people who ploughed money into casual gaming – the type of entertainment you buy as a smartphone app or play on a website – will feel embarrassed in years to come. The computer-game company Zynga, which went public last December with a $1 billion valuation, now looks like an unwise investment: this week it reported a second quarterly drop in earnings, prompting its share price to slump by 40 per cent. Facebook, the platform where Zynga’s key games live, lost 18 per cent of its value on Thursday, and is now down 37 per cent over two months.
The problem with casual gamers is that they are just that: casual. They don’t queue to buy the latest release, like Call of Duty fans. They don’t invite their friends around to play Paper Toss. And they have little loyalty to games companies, unlike aficionados who will automatically pick up a new game just because Rockstar made it. Casual gaming is designed to fill moments at the bus stop or during an ad break.
Casual gaming comes in three forms: the quick-hit game that goes viral, such as Bejeweled, Cut the Rope and Angry Birds; a more cumulative hit that sucks you in time and again, such as Zynga’s FarmVille and Mafia Wars; and modern takes on classic games, such as Words with Friends and Draw Something.
There’s also a fourth category that Zynga is looking to in order to make gaming more compulsive: gambling. Poker and bingo (and Slingo, a slot machine-bingo combination) are already popular Zynga applications. The idea of the company’s becoming a gigantic casual-gambling force seems unlikely in the short term given that it lacks the infrastructure to change course completely, but by the middle of next year it will probably begin to turn a lot of its output in that direction.
Zynga has built its success on Facebook, which is the perfect platform for a company that needs to reach a wide audience willing to spend time (and money) on playing. Although Zynga blames its fall in revenue in part on changes on Facebook that make it harder to find games, Facebook is also suffering because of Zynga’s decline. Twelve per cent of Facebook’s revenue comes from the games company. You might imagine it would be smarter to base more than a 10th of a multibillion-dollar company’s earnings on something other than virtual sheep, but that’s the situation, and a huge chunk of Facebook’s disastrous week has to do with Zynga’s decline and unclear future.