Zynga chief ahead of the online game

Mark Pincus, the founder of the company behind 'FarmVille', is known for his vision, negotiating prowess – and toughness, writes DOUGLAS MacMILLAN

WHEN ZYNGA reached an impasse while negotiating a five-year partnership with Facebook in August 2010, the online social game developer’s chief executive, Mark Pincus, demanded a one-on-one meeting with Mark Zuckerberg.

The two chief executives ate dinner at the Facebook cafeteria and held a freewheeling discussion until 2am. Over the course of the meeting and two other marathon sessions that followed, Pincus convinced Zuckerberg that Zynga’s games would help Facebook to add users and revenue. They forged a deal that threw Facebook’s support behind Zynga, in exchange for a cut of sales.

Pincus’s negotiating prowess – Google chairman Eric Schmidt calls it “fearsome” – helped to put his company on course for a $1 billion (€770 million) initial public offering (IPO) this week. The challenge now is keeping up that intensity as a publicly held company, where Pincus will deal with more scrutiny and less control over the business.

“One of the big questions for anybody going public is, ‘can they maintain their long-term focus?’,” says Zuckerberg, whose own company is slated to hold its IPO next year. “I just don’t think that’s a big issue with Mark because he can deal with the pain of any short-term hit to power and get to where he wants to go. I hope I’m the same way.”

At 45, Pincus is 18 years older than Zuckerberg and twice the age of some start-up founders in Silicon Valley. He has started five companies and invested in many more over the past two decades. Zynga, founded in 2007, is the culmination of a career’s worth of lessons learned, says Marc Andreessen, a venture capitalist and co-founder of Netscape, who has invested in the start-up.

“He has built a machine,” Andreessen says. “Google is a tightly wired business machine. Microsoft is a tightly wired business machine. Apple is too. Zynga is very much in the mould of those other companies.”

Zynga makes money by offering games for free and then charging for virtual items, such as a puppy in FarmVille or an assault rifle in Mafia Wars. About 6.7 million Zynga users were paying customers in the first nine months of the year, up from 5.1 million a year earlier. Revenue more than doubled to $828.9 million in the period. Unlike Groupon and some other recent IPOs, Zynga is profitable, although its net income has decreased this year as Pincus steps up spending on overheads, marketing and product development.

Pincus has a history of clashing with board members and employees. He has alienated some Zynga staffers by pushing them to work long hours. A few employees were asked to return unvested equity because their potential rewards did not match what they were contributing to the business, says Roger Dickey, one of the first 30 workers at Zynga and the creator of Mafia Wars.

“Mark didn’t get where he is by being a softie,” adds Dickey, who left the company earlier this year.

Pincus has said himself that he went too far at times, especially in Zynga’s early days. “I did every horrible thing in the book just to get revenues,” including giving users virtual credits in exchange for downloading software that was later difficult to delete, he said in a 2009 speech.

Pincus grew up in Chicago’s affluent Lincoln Park neighbourhood, the son of an architect mother and a father who worked as a public relations adviser. After studying economics at the University of Pennsylvania, he took jobs in banking, working at Lazard Frères and Asian Capital Partners. He then went on to get an MBA at Harvard University.

He moved to San Francisco in 1995 to capitalise on the beginnings of the dotcom boom. He persuaded venture capitalist Fred Wilson to invest $250,000 in FreeLoader, an internet service for personalised news.

Wilson gave Pincus a few months to make back his money. After seven months, FreeLoader was sold for $38 million to Individual, a company that delivered news online.

Pincus’s next start-up was Support.com, which helped businesses diagnose and fix problems with computers from remote locations. Founded in 1997, it went public in 2000. Pincus left his post as chief executive – and, eventually, the company – amid tension with the board, according to two people with knowledge of the situation.

After Support.com, Pincus focused on investing in new start-ups, including Brightmail, Napster and Friendster. In 2000, he bought Eric Schmidt’s aircraft, a single-engine Beechcraft Bonanza, and devoted more time to his hobby of flying.

Pincus made an early bet on social networking when he started Tribe Networks in 2003. Although the company was sold to Cisco Systems in 2007 before gaining wide popularity, it helped establish Pincus as a predictor of technology trends, says Marc Benioff, founder and chief executive of Salesforce.com.

“He has been doing social for almost a decade. He was doing social when Mark Zuckerberg was still in high school.”

Pincus met Zuckerberg in 2004, after tech investor Peter Thiel put out a call asking if any of his friends wanted to invest in Facebook. Aside from Reid Hoffman, the founder and chairman of LinkedIn, the only person to go along with Thiel was Pincus. “He had a pretty good intuition early on that this would grow into something,” Zuckerberg says.

After investing in Facebook, Pincus used Zynga to double-down on that bet. Facebook had just opened its site to outside developers, letting Zynga offer its Texas HoldEm poker game to the social network’s burgeoning ranks of users.

Pincus staffed his company with managers skilled at analysing data. Unlike traditional game developers, which spend millions of dollars producing a game and then ship it out, Pincus continually tinkers. The idea is to get users to play for longer periods and spend more money on virtual items.

This year, in a move that might help Pincus avoid a reprise of the board tension at Support.com, Zynga revamped its stock structure to give him 70 times more voting power than shares sold in the IPO. The change grants him more influence than other Silicon Valley founders, including Google’s Larry Page and Sergey Brin, who hold 10 times the voting power of investors.

Pincus often gets his way outside the boardroom as well, says Google’s Schmidt. In the summer of 2009, Pincus was seeking a partnership that led to Google buying a 3 per cent stake in Zynga. When Pincus came to the negotiating table, he knew more about the proposed deal than everyone on the Google side of the table combined, according to Schmidt.

“He is a we’re-going-to-make-this-happen- or-else type of person,” Schmidt says. “He is a fearsome, strong negotiator.” – (Bloomberg)