October 31, 2012 • 46 mins
Who founded Zynga? How much were Zynga shares worth at their peak? What happened to the company? Join Jonathan and Chris as they unravel the facts behind this company's story.
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Transcript
Episode Transcript
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Speaker 1 (00:02):
Get in touch with technologies with tech Stuff from how
stuff dot com. Hello again, everyone, and welcome to tech stuff.
My name is Chris Poette and I am an editor
at how stuff works dot Com. Sitting across from me,
as is typical, is senior writer Jonathan Strickland. He there.
(00:23):
Uh sorry, I was catching up on my chef bill.
I needed to make some falcaccio. I was actually asking
people to come over and water my plants virtually, So
you may have already guessed today's topic is a quick
look because it hasn't been that old, a quick look
at the history of Zinga and Zinga is a company
(00:45):
that has made a big name for itself, not always
in a positive way online. And if you don't know
what Zinga is, it's a company that's based out of
San Francisco, California, as many tech companies are, and it
is a video game company. But it's a game company
that typically produces games that are either meant to go
(01:05):
on mobile devices, so smartphones and tablets, or they're meant
to exist on another platform like Facebook or Google Plus.
Although you can also go to the Zinga dot com
homepage and play games within widgets. Yeah, and uh, if you,
if you weren't sitting from where we were. As soon
as Jonathan said that this episode was going to be
(01:26):
about Zinga, you probably didn't hear the groans of many
of our listeners. We we heard you. It's okay, it
was hold on. It was like a thousand voices created
out in English and then were suddenly silenced. Yeah, zing
is it is a company that has acquired a following
and a big group of people who have pitchforks and
(01:50):
torches both there there there seemed to be a few
people in the middle of that, but not really. It's
it's uh, we'll get into that in just a minute,
but it does have quite a large group of people
who really pick on Zinga because of its business practices.
Um so, some people really love the games and some
(02:11):
of the games I don't really consider games because it's
really no ending to them. They're sort of software toys.
But they do they do make some games and things
and and there they had quite a huge, uh following,
even just a short time ago. But let's but it's
it's an interesting story because, as as Jonathan pointed out,
it has been a very short time. I mean, they
(02:33):
went from sort of nobody's in the industry, competing with
some of the biggest players like Electronic Arts to you know,
darlings of the computer industry and sort of towards back
again and not quite back again, but they're they're approaching it.
They're hurt as of the time. We're recordings in and
we'll get more into all of that. So this is
(02:54):
a company that was founded by a fellow named Mark
Jonathan Pinkus who found h Zinga right around two thousand seven,
and and Pinkas had been working well, he held several
jobs which in an interesting article we read on venture Beat,
which it was what was it a twelve page article
(03:14):
about the history of Zinga. Oh, that's an amazing article.
I would totally recommend people going to check this out
of because we we can't cover the same amount of
material and it it actually ends before we wanted to
end too, so but a lot of our our research.
It's a very well written article and we use a
lot of our research on this on this It was
written by Dean Takahashi for venture Beats and also has
(03:36):
been converted converted into a sixty three page e book
on Amazon's Kindle bookstore. So yeah, it's it's a very
deep look at the history of zincing. Now, we should
say this was written in two thousand eleven and a
lot has happened since then. But uh. In that article
(03:57):
they mentioned how Pinkas had said he had essentially been
fired or asked to leave every job he held earlier
on in his career, and then came to the conclusion
that what he needed to become was an entrepreneur, so
working for himself rather than working for someone else who
would eventually tell him to go away. Well, that's that's
(04:18):
what these are not my well that was my paraphrasing
of what he said, but these were his words, and
and he was probably being somewhat facetious, but essentially what
he was saying is that he has this desire to
create businesses, and so he struck out and started struck
(04:38):
out his inn, left the corporate world, not struck out
his inn with it, and then started to launch businesses
and several of them saw some early success. He h
he launched companies like Freeloader Incorporated. UM, he launched a
very very early social network called Tribe Networks, which did
(05:00):
not ultimately go anywhere, right, I mean, that was one
of those ideas where it actually preceded things like MySpace
and Facebook. So so he he was onto something. He
saw the he saw the horizon. He saw that social
networking could be a big thing. It's just that his approach,
perhaps it wasn't the right approach, perhaps it didn't come
(05:21):
at the right time. It might have been some sort
of combination of these and other factors as well. At
any rate, it did not take off like a MySpace
or later on a Facebook. No, No, that's that's true. UM.
And it's also interesting to note that none of the
companies that he had uh started before and he they're
conflicting reports about the number of companies that he was
(05:44):
starting and or involved with. Um, they're a handful, like
the ones that that we've mentioned. UM. Apparently too, he
has been quoted as saying that there were far more
failures than successes too, so he may have been involved
with more of them. But they're not naming companies. We're
not talking about somebody like you know, Trip Hawkins, who's
known for being a you know, he he was you know,
(06:06):
founder of e A and you know, got into digital
chocolate later. Um. But yeah, I mean, he wasn't known
as a gaming industry giant who started a new a
new gang of gaming company. This is his first gaming
for a and uh there's also some mild controversy about
the name Zinga. He has been quoted as saying is
(06:29):
named after his uh dearly departed puppy dog, bulldog. Yeah.
And then there's another story that I read on a
totally different article which said that he had a friend
who used the online handle Muzinga often people would just
refer to him as Zinga, and that he had named
his dog after this person. Uh, but that's sort of
(06:52):
the same story, but only yeah, a little yeah, a
little bit more of no tracing it back where does vend?
But anyway, he called the company's He hired on some
folks like h Eric Scheiermeyer, Michael Luxton, Justin Waldron, Kyle Stewart,
Scott Dale, Kevin Hagen, Steve Shuttler, and Andrew Trader. And
(07:15):
he had these guys together, and his idea was to
create these simple, uh easy to learn, easy to play
games because he was he kind of equated it to
going to a cocktail party and hanging out and just
chatting for a while. You know, it's a pleasant experience.
You don't tend to have super deep conversations at a
(07:38):
cocktail party unless you're going to a cocktail party held
by nuclear physicists. Um. Then in general, you tend to
talk about a lot of different things and you don't
get too far down into the service, but you can
have an entertaining conversation sort of the same thing he
wanted to do with these games, Like he saw the
games that other companies were making that were these very deep,
rich experiences, um, lots of work developing the world and
(08:02):
the physics or or the game mechanics, and he said, well,
you know that there is a place for that, But
what if we concentrate on games that were meant for
a more casual player, someone who you know, enjoys the
game mechanics, the gameplay is fun and has some sort
of reward system in place so that the player feels
like they should keep playing. But it doesn't need to
(08:24):
be as deep, and it doesn't have to exist on
its own. It doesn't have to be like, uh, you
don't have to go to a store and buy a
box that has a disk in it and bring it
home and and install it. It's something that could exist
on top of another existing platform, whether that's a web
page or a social network as it would turn out later,
(08:44):
or a mobile device. Yeah. Um, and uh. One of
the one of the earliest maneuvers that I think set
zinga apart from its competitors was, uh, it launched games
on my Space because that was, you know, the network
of choice, but it also it was hedging its bets
on the new competitor, Facebook. Yeah, back in two thousand
(09:07):
and seven. It's easy for us to forget now that
my Facebook has beaten a billion subscribers, right. Facebook is
now over one billion active subscribers or accounts. I'm betting
that some of those people have multiple accounts, probably just again,
but still that's a lot of accounts. Over five million
people have accounts on Facebook. Um. But yeah, yeah. Back
(09:31):
in the day, you know, my Space was dominating for
the longest time, and Facebook was only open to college students.
So for a while, a lot of people thought that
Facebook was going to be an also ran it was
never going to catch up. That, of course, is not
what happened. And and now we're in an era where
my Space is launching yet another redesign, dramatic redesign to
(09:54):
see if they can can can emerge from the dull
drums and perhaps become a player again, and it may
very well happen. It's easy to write off my Space
after its precipitous fall, but we've seen companies rise and
fall and rise again before, so you know, you never
say never at any rate. Like like Chris was saying, Zinga,
(10:16):
they were looking ahead and saying, you know, we want
to make sure that are what we're producing ends up
getting to as many people as possible. And that means
we can't just assume that one platform is always going
to be the way people access content online. And so
they started to create games that would work on Facebook.
(10:37):
And you know, Facebook had a very limited a p
I at the time, like there were an application programming interface, right,
So Facebook was not a platform for other programs early
in its existence. Certainly no it that eventually changed, and
they did experiment with it fairly early, but it was
(10:59):
you know, it was until fairly recently that it actually
became a viable platform for a company to launch an app.
But back in two thousand seven, Zinga released a game
on Facebook, and it was a social poker game, free
to play, Texas Hold Him poker. Okay, so Zinka did
(11:20):
a very smart thing here, because you know, this is
back when poker, which had been around for a very
long time, uh you know, just sort of sitting there
under the surface, waiting to be rediscovered. And that's about when,
you know, in the mid two thousand's, that's when people
were really getting back on board, which was really strange.
I mean it just seemed to come out of nowhere, like, uh,
suddenly there was this huge focus on poker in general
(11:41):
and Texas hold Him in particular particular. ESPN started showing
it and thought, wow, this has become a sport, and uh,
you know, there was a lot of interest. I mean
I've I've watched my share of World Series of Poker
tournaments and it is a very fascinating thing. And it's
you know, even by two thousands seven that that fervor
had not really died down. I would say that perhaps
(12:04):
today there's not quite as much interest and as there
used to be. I mean we used to see like
celebrity poker tournaments and on television all the time, but
it's still there's still an interest there. And uh, so
Zinga said, well, you know, let's produce a game that
is on a social network that's getting a lot of attention,
and let's do it a game that's actually popular in
(12:27):
the UH and the zeitgeist at this moment. Let's let's
combine these things and we're going to try and capitalize
on it. And it worked. Yeah, the UH. It's kind
of interesting too because this is where social gaming is
now pretty big thing, and so is casual gaming. Again,
it's sort of like poker these things. Well, social gaming, no,
(12:49):
but casual gaming has. It's been around for forever and ever,
you know. But the thing is, it wasn't the big
money maker that it is now, and it is thanks
in part two companies like zinga UM who found ways
to get people back involved with it. You know, you
play let's say you play a game on a social game,
a casual game on a UM you know, online somewhere. Okay,
(13:14):
so you've played it, and you know, after a couple
of weeks, you know that the interest kind of waynes
You know, I've played it. I love that game, and
you'll come back to it again in the future maybe,
but you know, it's you get away from it because
you lose track of you know, you have something you
gotta do on Tuesday night. Now on Wednesday night's kind
of packed two and after a couple of weeks ago,
I just don't feel like going back. But Zinga introduced
(13:34):
the the concept of adding poker chips to this game.
But this is one of those things that Zinga has
developed a reputation for acting in sort of weird ways
on this this Holdham Poker game. They they had a
thing where they you could, you could add more friends. Um,
you know, they wanted you to get poker chips and
(13:55):
if you would, uh you know, help them, uh you know,
download by downloading this key. What almost Yeah, this was
one of those things where actually this would come back
to hunt Pinkas later where he he essentially said in
a later interview that he made every horrible decision you
(14:16):
could make in order to make money. He was trying
to find different ways to generate revenue, and it didn't
matter what impact it would have on the user experience.
That's that's how people have interpreted those words. Now, whether
Pinkas really meant truly that he tried every horrible thing
or not doesn't really matter, because as people in later years,
(14:39):
uh said, you know, they just went ahead and interpreted
it as that and that became the reality, which is
kind of you know, just says be careful what you say,
because because later on, even if you're saying something and
you're exaggerating in order to make a point, people may
later take that exaggeration as the gospel truth. And whether
(15:01):
or not it was, that's how it's been interpreted. So yeah,
Pinkas said, we tried all these different things, and if
you downloaded this wiki, the idea was that you would
download this this tool and it would in the game,
you would end up being rewarded with more poker chips.
But again it was a negative experience for most users.
And and even Pinkas said, like, I couldn't figure out
(15:22):
how to remove this thing once I installed it. So uh,
there were other ways of trying to generate revenue, and
in fact, uh, the game was profitable for Zinga. They
ended up raising some money. It wasn't a whole lot
in the grand scheme of things, but it was important
(15:42):
to Pinkas that they they show that the company was
capable of generating revenue before he went out to seek
around of funding. He didn't want to go out and
hit venture capitalists without first being able to say, look,
I can prove to you that what we're doing has
a play in this market. This company has a demonstrable
(16:03):
value because we're able to make money. Otherwise you're just
going up to catalists and saying, hey, look, this game
is really popular, a lot of people are playing it.
You should give me money. Like, until you can prove
me money, until you can prove that all those people
are generating revenue for you, it's really hard to get
the investors on board. I mean Twitter has seen this,
(16:26):
uh for for years. Since Twitter started, they had a
lot of users, but for the longest time, there was
really no revenue generating uh operation there. I mean there's
just very little, if any, and so uh you know. Essentially,
the way that to convince venture cabalists to invest in
something like Twitter is to say it's a huge, huge service.
(16:50):
Millions of people are using it and depending upon it. Uh,
the gap that it would leave if it went away
is enormous. Therefore it is valuable. All we have to
do is figure out the a of tapping into that value.
And that's enough for some investors. But Pinkus was like, no,
I want to make sure that I have a good
story to tell when I go and visit these venture capitalists,
(17:11):
and he did, and so in two thousand and seven
he actually had the first round of UH venture capital
and and was able to get investments. Then he was
also UM well back in January two thou because it
was late two thousand seven when we started pursuing it.
January two tho eight, they raised about five million dollars
(17:32):
from various venture capital funds and then UH six months
later they did a second round of fundraising and raised
another twenty nine million. And at that point they also
hired on someone as a sort of consultant named Bing Gordon,
who was a former chief creative officer with Electronic Arts.
(17:56):
So here is someone who has had experience with the
major video game company coming on board with Zinga. UH.
The the the title most often given to Mr Gordon
is Consigliari, which, for those of you who are fans
of the Godfather trilogy will think, wow, so some sort
(18:20):
of quote unquote family consultant has joined on. Well, it's
it's kind of funny since Mafia Wars was the the
big cross platform hit for Zinga at that point, which
may may or may not be related. Yeah, and also
(18:40):
the the acquisition of Yoville, which is still you know,
moving along out there. They they have continued to support
that game. Now, Mafia Wars raises one of the big
big stories within Zinga, which is something that would haunt
them for years. Um a few short years that have
(19:01):
existed between when Mafia Wars has come out and today.
But one of the issues about Mafia Wars was that
people pointed out there was an earlier game called Mob Wars, which, um,
Mafia Wars bore a certain similarity to Mob Wars, some
would say, to the point of identity. This is another
(19:24):
one of those points which the uh Zinga detractors like
to make, um, which is and it's not completely unwarranted.
Um yeah that will I will neither say that it
is or isn't warranted to say that many of Zinga's
games bear a striking resemblance to other popular, successful social
(19:49):
network games. And and there are there the first right. Well,
there have been people from Zinga, like former employees, who
have said that the message, essentially, according to these former employees,
was that find games out there that work, copy them,
and do whatever you have to do to be as
(20:11):
popular or more popular than the previous game. Now, whether
or not that was actually a directive within Zinga, I
cannot say. This may very well be the words of
employees who have uh, you know, an ax to grind
against the company, and they're saying whatever they want to
kind of disparage it. I don't know. I don't want
(20:33):
to pass judgment seeing as how I don't have that
direct experience. But there have been people who have essentially
accused Zinga, former employees who have accused Zinga of purposefully
setting out to copy other games and to use the
popularity of Zinga and its broad reach to essentially, uh
co opt those games from the original creators. Now, with
(20:55):
the case of Mob Wars and Mafia Wars, there's some
more murky issues there. Uh. The Zinga executives were saying
things along the lines of, you know, we were in
talks of actually acquiring Mob Wars, but then the guy
who designed Mob Wars learned about how Zinga was going
into selling virtual goods in order to generate revenue. Here's
(21:18):
another way of generating revenue with a free to play game.
So besides convincing you to download tools that you will
never get rid of as a way of generating revenue
by making a partnership with whomever is creating the tool.
Another way is to sell virtual goods that give you
some sort of edge or some sort of uh customization
(21:40):
ability within a virtual game for real money. And once
the guy from Mob Wars saw that, then he began
to incorporate those same features within Mob Wars. So Zinga
has said, wait, no, the guy from mob Wars was
copying us. So yes, our game is also about mafia warfare.
But our game was built a round this idea of
(22:00):
selling virtual goods. His wasn't until he heard about it
from us. So there's this sort of there's this crossfire
of accusations between the two groups, right, But in the
end you have Mafia Wars coming out, and there were
lawsuits about you know, infringing copyright, infringing intellectual property. And
(22:21):
this was not the one and only time this happened
to Zinga. That's happened, you know, in other with other
games as well, um including one that one of the
more popular games that Zinga pushed out was Farmville, and
there was another farm based game that again people said,
this bears a certain resemblance to this other game. And
(22:42):
again there are conflicting reports about whether or not the
people at Zinga were aware of that game, whether they
were purposefully trying to copy it, or if this was
just a parallel development issue. Um. And again we don't
have the whole story right. One one one report suggests
that one of the venture capital fund UH fund managers
(23:06):
had said, or or I guess the people at the
venture capital firm had said, you know, why don't you
do a farm game? Yeah, I don't know. It's it's
it's very difficult to tell. Um. And uh. You know,
there are a lot of stories that fly around when
you when you have this kind of corporate drama going on. Um.
(23:27):
But yes, certainly, uh, certainly Farmville is another one of
those games that that you know, came out at the
same you know, time frame, a little later than another
very popular farm game, So you know, it's easy to
make that comparison. Yeah, and uh. And also this is
the time where if you were on Facebook during this time,
(23:47):
you began to get irritated if you were not a
fan of these games at the numerous UH notifications you
would received whenever your friends were raising sheep or planting corn,
and you had learned that there field of corn needed
watering or whatever. Okay, enough anyway, So yeah, this was
(24:11):
this was a time where people who were not fans
of this game became haters of the games because their
their Facebook notifications were starting to fill up with these
these game notifications which you could hide, and many of
us chose that option immediately. Well, um, you know many
many people have talked about Mark Zuckerberg, the founder of Facebook,
(24:34):
and whether or not he sees everybody's you know, personal
privacy or you know everybody wants to have these connections
to your friends, and you know these these questions. Well,
Mark Pinkas is another person who basically says, you know, hey,
playing games is fun when you do it socially. So
the Zinga games, uh, from when I first became aware
(24:55):
of them, at least, which is I would I would
guess Farmville. I think I became familiar with Mafia Wars afterward. Um,
but yeah, that's one of the very first things you do,
and you know, I wanted to try it out, see
what it was all about. And one of the very
first things they ask you to do when you when
it comes on and say, hey, what other friends and
they look at your Facebook list of friends. Um, you know,
(25:16):
they made it possible to look at just the ones
that are playing the game, but for the most part,
they say, hey, who in this entire list of friends
wants a free mail of hey? Or you know what?
You know, wouldn't these people really like to play? And
you know you're playing experience will be much better the
more friends you have playing it. And you know, there
is something about social gaming I don't I don't mean
(25:38):
to disparage social gaming at all. No, I mean there
are plenty of social games out there that I think
are lots of fun, particularly if you have a lot
of friends who are also into that game. And then
there are games out there that if you're the only
one playing, they aren't fun at all. You know, you
need other people playing that game to make it worthwhile.
I would argue that with my experiences with Zinca tie
(26:00):
Ols that that's very much the case with a lot
of these vill games. You didn't see the dash right before, Yeah,
I mean, if you, if you, if you, well, there's
an option. This is another one of Zinga's uh you
know when when they've been on the forefront of this movement,
is hey, you don't have to if you don't want
to share this with fifty of your friends, that's fine.
(26:21):
You can pay up real money if you'd like to
have in game money, that would be just fine with us. Right.
So again we're getting over to that virtual goods for
real money, and in fact, that became the chief way
that Zinga made money for a long time. Like the
revenue that Zinga made came from selling virtual goods. And
of course with that model, you want as many people
(26:43):
as possible playing your game. Now, the game itself is free,
So just because you have a half million people playing
a game doesn't mean you're making money off of them.
But even if only a small percentage of that million
are ponying up real cash for virtual goods, that's a
lot of money. I mean, when you're talking about huge
(27:03):
numbers like that, even a small percentage can be a
significant amount of cash. And that's also why Zinga released
so many games. It wasn't like you know, a game
company that might have one or two titles, maybe maybe
as many as six titles in a year. They're releasing
games all the time. And uh Pincus is not afraid
(27:25):
to pull the plug on a game if he sees
that it's not really working. He's he's killed off games
early early on in the process when he said, Okay,
no one is really sharing this among this test group.
That tells me that this is not a very sticky game.
Sticky meaning that this is the sort of thing that
people like to go back to and they like to
share it. Uh. Once he saw that, he said, all right,
(27:48):
let's get rid of that, because we shouldn't be dedicating
any resources to something that's not getting results. Now, this
also meant that people who worked for Zinga might be
working on a project that ultimately could get the plug
pulled on it shortly after launch, and you had such
a quick turnaround rate that you were always working. That
that working for Zinga could be a very demanding experience.
(28:12):
And uh, in fact, I did a look. I looked
at the at some surveys online about employee reaction to
working for Zinga, and uh of the people who worked
there said that they would recommend Zinga to a friend
who was looking for employment. So fifty just over half
(28:36):
would say Zinga is a good place to work. And
that study, well, the the the the latest I saw
was FORLVE, but that could have been early because we're
gonna get into Zinga's more recent experience in a little bit.
But the other thing was that fifty nine percent said
(28:58):
they thought that Pinkus was doing a good job as
CEO of Zinga, So that means were either not impressed
or actively they did not like what he's doing. Yeah. Well,
if you look at it strictly as a business model, um,
the game The games themselves are brilliant because not only
(29:18):
are they social games. Um, they encourage you to add
friends and play with your your Facebook friends. But in
addition to that, they want you to you know, spend
a few real life dollars in there as well. I
mean you can, you can play without spending any real
cash and and in fact I have never spent a
(29:39):
cent on any of the games. However, I can tell
you that playing it with no or few friends without
spending cash makes them maddeningly slow and difficult to achieve anything.
They like to encourage you to buy a special building
or a specific decoration for your castle slash farm, slash city,
(30:00):
slash whatever. Yeah, um, and you know you can. You can.
You can maybe have your friends give you one, or
you could you know, spend five dollars and and earn
enough in game cash to do that, or or maybe
you're building something, a large building in your your world,
and uh, you know, if you just fork over a
(30:21):
few dollars, it will happen that much faster, and and
it makes more in game money than anything else. And
the thing is, all of a sudden, you've encouraged your
friends to start playing, and they're all spending five dollars,
ten dollars of their money and so on. And so
it's a brilliant business model if you can get enough
people to do it and you and also they pointed
out that once they get this network in place, they
(30:45):
don't have to win over everyone who's playing every time,
because if they get just a few, If I have
a lot of friends playing games on Zinga and then
a few of them start playing a new game, that
may tempt me to try out the new game game
as well. And so I know, the idea is that
once you get that big net of users, that network
(31:06):
of users, then you've you've got enough seeds planted Farmville
or otherwise to try and convince more people to try
out new games as you release them. So even when
you get tired of an old game, a new game
might come along and you want to play that, And
that did work for a while. In fact, when that
article that we were citing earlier, the venture Beat article,
(31:28):
when that was written back in two thousand eleven, Uh,
Zinga was on the rise. I mean they were doing
really really well. Uh they held an i p O
and uh and that I p O there their stock
was originally that's initial public offering offering, thank you. Uh,
they held that back in December eleven. So at the
(31:49):
end of eleven they have this i p O. And
originally their stock was priced at ten dollars. By March,
that price had gone up to fourteen dollars fifth sense
per share, so the stock was was increasing in value.
But some stuff has happened since then. One of those
(32:12):
things is a pretty spectacular deal that Zinga made with
another company called o MG Pop, which created a little
game called draw Something. Draw Something was incredibly popular, uh,
Like shortly after it came out. That's pretty much what
(32:35):
I heard all of my friends in the tech industry.
That's all I heard from them, like on their Twitter
feeds and everything. They talked about draw Something and how
fun it was and um, and it did have a
pretty incredible adoption rate, and oh yeah it was. It
was soaring. They were the darling, sudden darling of the
UH mobile and online gaming casual gaming thing because basically
(32:59):
was a drawing game where the your opponent wasn't actually
your opponent, they were actually working with you. Yeah, essentially. Yeah,
So the game was incredibly popular, and so Zinga looked
at that and said, well, we should take advantage of this.
We should use this capital that we've raised through the
I p O and just through our revenues and everything
(33:20):
else and UH and purchase this company because it would
be a very valuable asset in our our repertoire. And
so they did for around a hundred and eighty million dollars.
And the problem was that they bought that company just
before it hit its peak in UH in adoption, and
(33:43):
then shortly thereafter people began to lose interest in the
game through no fault of the game. This is just
the way we work as human beings. Like we find
something new and fun and we go crazy about it,
and then after we get used to it for a while,
we just stopped thinking about it so much and we
don't use it as much. Um. The same thing is true,
(34:05):
very true with a lot of casual games. In fact,
Zinga seemed that over its history, and that's one of
the reasons why Zinga releases these games so frequently. It's
because you can't just release a game. Even if you
created a truly amazing game, like something that someone would
play and there'd be nothing but praise said about that game.
It has a shelf life, you know, and and you
(34:27):
you might have the long tail experience where you've got
people who are finding the game late and adopting it late,
but it's never going to be as many or as
intense as that early era when people first discover it. Well,
same thing happened with draw Something and so even though
it was this phenomenal success at the time when Zinga
was looking into buying it, surely thereafter people stopped playing it,
(34:50):
or at least huge numbers of people stopped playing it
and UH and so it suddenly looked like Zinga had
paid way too much money for a company, like they
had seriously overvalued o MG Pop when they acquired it.
That's not the only company that Zinga has acquired. They've
acquired other companies as well. In their UH. Their quest
(35:12):
to succeed as a company. Um and in other cases
it's it's kind of similar. In fact, there were ties
where Zinga was looking at things like a pop Cap games,
UM that was not bought by Zinga. There was another
company that swept that up. Yeah. As a matter of fact, Uh,
Zinga reportedly made a bigger offer for um the indie
(35:36):
legend gaming legend PopCap than uh than Electronic Arts, the
eventual winner did, but they actually turned it down. Uh.
And of course now they have gone. By the way.
The pop Cap is known for titles like the Jeweled
Plants Versus Zombies Zuma and uh you know. They they
(35:58):
had made the move from being a computer based developer
to the mobile world. Um and uh you know also
to um uh also to the social gaming sites you
know Facebook, they've you know, but Jeweled Blitz and zooma
Blitz are among the largest, most durable titles that I've seen. Um,
(36:22):
you know, come and go on the Facebook platform and
uh you know they it was certainly one of those
those companies that have proven its ability to create new titles,
unlike some other people. UM. So you know that there
was definitely something there and uh, despite the bidding war, uh,
and the apparent, according to reports, winner being Zinga. They
(36:45):
decided to go with e A. Now why did they
decide to go with e A. That's a matter of
some debate. It's it's sort of unclear. They haven't said specifically,
but rumors, you know, rumors of course spread when something
like that happens, and they said, well, you know, maybe
there's something there, maybe there's some sort of personal conflict,
or maybe they knew something about Zinga, or at any rate,
(37:08):
Zinga in in hit its peak and then dropped. The
stock price, dropped, the the adoption rate for the game's dropped. Um.
Things just turned for the worst in every way really
for Zinga, uh, to the point where I think the
lowest price so far as of the recording of this
(37:30):
podcast was two dollars and thirty one cents a share.
And now remember it launched at ten dollars a year
and hit a peak of fourteen dollars and fifty cents
a share earlier this year. You know, it hasn't even
been a whole year since that happened. And as of
the recording of this podcast, we were recording on October twelve,
and this morning, before the the market opened, the price
(37:54):
was at two dollars and forty three cents a share.
It has dropped since we started recording this podcast to
two dollars and four two cents a share. Yeah, so
that's actually up it had it had gone down a
penny or two below that. Okay, So it's yeah, No, granted,
moment by moment this value changes, So it's you always
have to take that with a grain of salt. But
but I've heard, I've heard a lot of you know,
(38:16):
I was looking into a lot of projections. I was
looking to a lot of projections, and most of them
had the stock price valued at around three dollars for
the next twelve months or so. Now, granted, it took
less than twelve months for it to go from fourteen
fifty to one, but you know, that's that's sort of
the projections by a lot of analysts right now. And
(38:40):
part of that is because there seems to be a
decreasing tendency for people to play social games on or
games at all, on social networks. There was a survey
done in twenty that found that, uh, the fifty six
of students who were surveyed in this study said they
(39:02):
planned on playing fewer social games in the next year.
And uh so that you know, more than half of
the students were saying, I don't think I'm gonna be
playing as much. It's just not for me. That was
back in So if that trend is more widespread than
just among students, then that would suggest that perhaps, you know,
(39:22):
social gaming was one of those early distractions that was
very you know, had a had a big impact when
it first came out, but it's becoming increasingly difficult to
replicate that in the social gaming world. That's not to
say that someone's not gonna come around and create a
game that just knocks everybody socks off. It may very
well happen today or tomorrow or you know, a year
(39:44):
from now. But the trend is a decreasing interest in
social games in the online platform. Um, there's part of
that might be made up for mobile. I mean, you could,
you know, if these company are able to really concentrate
on the mobile experience, they might be able to recapture
that because mobile is still a very popular platform. In fact,
(40:07):
it's you know, increasingly popular. So that might be a
way that Zinga can turn things around. Uh, and there
are a lot of other ways I mean, I'm not
a I'm not a businessman by any stretch of the imagination.
So while while Zinga's plight looks great indeed to my eyes,
it doesn't mean that Pinkinson team can't turn it around,
(40:28):
or perhaps, you know, maybe some other company will come
in and purchase Zinga. I've seen some speculation about Facebook,
although at this point I'm wondering if Facebook would look
at Zinga and say, this looks like it's something that
we would have wanted four years ago, but not now. Yeah. Yeah, Well,
there's certainly a lot of intellectual property to be had
(40:52):
right there, which often is under some contention as to
whether or not that truly blonds Zinga. But yes, go ahead,
yeah no, And and that's you know that this is
where we get into that hazy well you know, it's
a farm game, so you know who you know, is
this sufficiently different enough from that one? Now that that's true?
(41:13):
But you know, of course there there are some some
more original titles, and uh, you know, I think I
think it's possible that um, that may happen. Although you know,
when I happened to go look at the stock price
just a moment ago, there is also news again as
of the time we're starting this podcast that Mark Pinkis
is suggesting he wants to take the company private again.
(41:36):
So yeah, there were no there was something else. I
didn't mention this when we were talking about it, but
I did. There was another part of that Venture Beat
article that was kind of interesting about how the company
had made uh some money back in back in two
thousand and eight, the revenue for Zinga was around nineteen
point four million dollars, but because it was a private company,
(41:58):
it didn't have to release the fact that their cost
or that their losses amounted to twenty two point one
million for the year, meaning that their costs far outweighed
their revenue. But it was a private company, so there
was no requirement for them to release that information. But
as a as a publicly traded company, you have to
(42:19):
do that. So when things are bad, you can't cover
it up. You know, you can try and obfuscate it
with language when you're doing your press conference and talk
about the opportunity you have. If you hear the word
opportunity said a lot, that can sometimes be a red flag.
I'm not saying it's the red flag in every case.
So if you just recently heard the word opportunity at
(42:41):
your all hands meeting. That does not necessarily mean you
need to panic, but it's sometimes one of those little
words that can indicate that there's uh less than positive
things going on on the business side, UM problems, our opportunities. Well,
you have to think of it that way, right, I
(43:03):
mean if you don't. If you don't think of it
that way, then not only is morale an issue, but
you actually do start to sabotage yourself in turning things around.
So not to really put down anyone who tries to
look at things as opportunities, I actually think that's a
pretty positive way to go about it, as long as
you're being genuine, right, I mean if you're being insincere
(43:24):
in calling it an opportunity, that's a problem. But if
you look at and say, all right, this message that
I'm getting here says we're not doing as good a
job as we need to. What do we need to
do to change to do as good a job? There
been some suggestions that ZINGA should cut costs by perhaps
uh laying off employees and consolidating departments. One of the
(43:48):
flip sides to that is if you start cutting costs.
Then you're also cutting into the resources you have to
develop new games, so you're actually making it harder on
yourself to create the product that will help make the
money that you need to make in order to become
profitable again or to to turn things around. So it
becomes this kind of domino effect, right. You start to
(44:10):
cut costs, you start to lay people off, you start
to consolidate departments. It becomes harder for you to make
a good game because it's harder for you to make
a good game, fewer people are following you, and so
it just you know, continues until your company crumbles away.
So it's a really challenging thing. And I don't have
all the answers because you know, it's easy to say no,
keep everybody make good stuff. Like yeah, that's that's that's
(44:34):
the kind of leadership that doesn't get you anywhere. That's
that would be my leadership's style, kind like Homer Simpson,
are you guys working? Yes? Could you work harder? I
guess so, okay? Do that? That's that's kind of my
leadership style, which is why I'm a senior writer. All right, then,
(44:55):
uh well, I guess that kind of wraps up where
Zinga is right now. And again this this is a
company that's had a real roller coaster story and and
some of it's a little shady and some of it's
a little uh you know uh on the level of
of could this be creating it yet another bubble within
the tech industry? Um, it's business. It's business. Yeah, and
(45:16):
and it just like any other business venture, you cannot
count out a company until it's gone. And even then
sometimes they come back. But so Zinga may turn things around,
They might find the secret sauce needed to really get
people invested in the company, both figuratively and literally. And uh,
you know, maybe it will happen, but it could very
(45:38):
well be that this might serve just as a warning
to other people who want to launch their own companies.
You can see some really uh great success early on
if you're doing you know, if you're hitting all the
right beats. But sometimes that that's short term success and
it will come at the cost of a long term success. Yes. Um,
(46:01):
well we'll wrap that up here. If you have guys,
have any suggestions for future episodes of tech Stuff, why
don't you send us a little note. You can do
that via email. Are address as tech stuff at Discovery
dot com, or send us a message on Facebook our Twitter.
You can find us there with the handle text stuff
(46:21):
hs W and Chris and I will talk to you
again really soon. For more on this and thousands of
other topics, is it how stuff works dot com
Get in touch with technologies with tech Stuff from how
stuff dot com. Hello again, everyone, and welcome to tech stuff.
My name is Chris Poette and I am an editor
at how stuff works dot Com. Sitting across from me,
as is typical, is senior writer Jonathan Strickland. He there.
(00:23):
Uh sorry, I was catching up on my chef bill.
I needed to make some falcaccio. I was actually asking
people to come over and water my plants virtually, So
you may have already guessed today's topic is a quick
look because it hasn't been that old, a quick look
at the history of Zinga and Zinga is a company
(00:45):
that has made a big name for itself, not always
in a positive way online. And if you don't know
what Zinga is, it's a company that's based out of
San Francisco, California, as many tech companies are, and it
is a video game company. But it's a game company
that typically produces games that are either meant to go
(01:05):
on mobile devices, so smartphones and tablets, or they're meant
to exist on another platform like Facebook or Google Plus.
Although you can also go to the Zinga dot com
homepage and play games within widgets. Yeah, and uh, if you,
if you weren't sitting from where we were. As soon
as Jonathan said that this episode was going to be
(01:26):
about Zinga, you probably didn't hear the groans of many
of our listeners. We we heard you. It's okay, it
was hold on. It was like a thousand voices created
out in English and then were suddenly silenced. Yeah, zing
is it is a company that has acquired a following
and a big group of people who have pitchforks and
(01:50):
torches both there there there seemed to be a few
people in the middle of that, but not really. It's
it's uh, we'll get into that in just a minute,
but it does have quite a large group of people
who really pick on Zinga because of its business practices.
Um so, some people really love the games and some
(02:11):
of the games I don't really consider games because it's
really no ending to them. They're sort of software toys.
But they do they do make some games and things
and and there they had quite a huge, uh following,
even just a short time ago. But let's but it's
it's an interesting story because, as as Jonathan pointed out,
it has been a very short time. I mean, they
(02:33):
went from sort of nobody's in the industry, competing with
some of the biggest players like Electronic Arts to you know,
darlings of the computer industry and sort of towards back
again and not quite back again, but they're they're approaching it.
They're hurt as of the time. We're recordings in and
we'll get more into all of that. So this is
(02:54):
a company that was founded by a fellow named Mark
Jonathan Pinkus who found h Zinga right around two thousand seven,
and and Pinkas had been working well, he held several
jobs which in an interesting article we read on venture Beat,
which it was what was it a twelve page article
(03:14):
about the history of Zinga. Oh, that's an amazing article.
I would totally recommend people going to check this out
of because we we can't cover the same amount of
material and it it actually ends before we wanted to
end too, so but a lot of our our research.
It's a very well written article and we use a
lot of our research on this on this It was
written by Dean Takahashi for venture Beats and also has
(03:36):
been converted converted into a sixty three page e book
on Amazon's Kindle bookstore. So yeah, it's it's a very
deep look at the history of zincing. Now, we should
say this was written in two thousand eleven and a
lot has happened since then. But uh. In that article
(03:57):
they mentioned how Pinkas had said he had essentially been
fired or asked to leave every job he held earlier
on in his career, and then came to the conclusion
that what he needed to become was an entrepreneur, so
working for himself rather than working for someone else who
would eventually tell him to go away. Well, that's that's
(04:18):
what these are not my well that was my paraphrasing
of what he said, but these were his words, and
and he was probably being somewhat facetious, but essentially what
he was saying is that he has this desire to
create businesses, and so he struck out and started struck
(04:38):
out his inn, left the corporate world, not struck out
his inn with it, and then started to launch businesses
and several of them saw some early success. He h
he launched companies like Freeloader Incorporated. UM, he launched a
very very early social network called Tribe Networks, which did
(05:00):
not ultimately go anywhere, right, I mean, that was one
of those ideas where it actually preceded things like MySpace
and Facebook. So so he he was onto something. He
saw the he saw the horizon. He saw that social
networking could be a big thing. It's just that his approach,
perhaps it wasn't the right approach, perhaps it didn't come
(05:21):
at the right time. It might have been some sort
of combination of these and other factors as well. At
any rate, it did not take off like a MySpace
or later on a Facebook. No, No, that's that's true. UM.
And it's also interesting to note that none of the
companies that he had uh started before and he they're
conflicting reports about the number of companies that he was
(05:44):
starting and or involved with. Um, they're a handful, like
the ones that that we've mentioned. UM. Apparently too, he
has been quoted as saying that there were far more
failures than successes too, so he may have been involved
with more of them. But they're not naming companies. We're
not talking about somebody like you know, Trip Hawkins, who's
known for being a you know, he he was you know,
(06:06):
founder of e A and you know, got into digital
chocolate later. Um. But yeah, I mean, he wasn't known
as a gaming industry giant who started a new a
new gang of gaming company. This is his first gaming
for a and uh there's also some mild controversy about
the name Zinga. He has been quoted as saying is
(06:29):
named after his uh dearly departed puppy dog, bulldog. Yeah.
And then there's another story that I read on a
totally different article which said that he had a friend
who used the online handle Muzinga often people would just
refer to him as Zinga, and that he had named
his dog after this person. Uh, but that's sort of
(06:52):
the same story, but only yeah, a little yeah, a
little bit more of no tracing it back where does vend?
But anyway, he called the company's He hired on some
folks like h Eric Scheiermeyer, Michael Luxton, Justin Waldron, Kyle Stewart,
Scott Dale, Kevin Hagen, Steve Shuttler, and Andrew Trader. And
(07:15):
he had these guys together, and his idea was to
create these simple, uh easy to learn, easy to play
games because he was he kind of equated it to
going to a cocktail party and hanging out and just
chatting for a while. You know, it's a pleasant experience.
You don't tend to have super deep conversations at a
(07:38):
cocktail party unless you're going to a cocktail party held
by nuclear physicists. Um. Then in general, you tend to
talk about a lot of different things and you don't
get too far down into the service, but you can
have an entertaining conversation sort of the same thing he
wanted to do with these games, Like he saw the
games that other companies were making that were these very deep,
rich experiences, um, lots of work developing the world and
(08:02):
the physics or or the game mechanics, and he said, well,
you know that there is a place for that, But
what if we concentrate on games that were meant for
a more casual player, someone who you know, enjoys the
game mechanics, the gameplay is fun and has some sort
of reward system in place so that the player feels
like they should keep playing. But it doesn't need to
(08:24):
be as deep, and it doesn't have to exist on
its own. It doesn't have to be like, uh, you
don't have to go to a store and buy a
box that has a disk in it and bring it
home and and install it. It's something that could exist
on top of another existing platform, whether that's a web
page or a social network as it would turn out later,
(08:44):
or a mobile device. Yeah. Um, and uh. One of
the one of the earliest maneuvers that I think set
zinga apart from its competitors was, uh, it launched games
on my Space because that was, you know, the network
of choice, but it also it was hedging its bets
on the new competitor, Facebook. Yeah, back in two thousand
(09:07):
and seven. It's easy for us to forget now that
my Facebook has beaten a billion subscribers, right. Facebook is
now over one billion active subscribers or accounts. I'm betting
that some of those people have multiple accounts, probably just again,
but still that's a lot of accounts. Over five million
people have accounts on Facebook. Um. But yeah, yeah. Back
(09:31):
in the day, you know, my Space was dominating for
the longest time, and Facebook was only open to college students.
So for a while, a lot of people thought that
Facebook was going to be an also ran it was
never going to catch up. That, of course, is not
what happened. And and now we're in an era where
my Space is launching yet another redesign, dramatic redesign to
(09:54):
see if they can can can emerge from the dull
drums and perhaps become a player again, and it may
very well happen. It's easy to write off my Space
after its precipitous fall, but we've seen companies rise and
fall and rise again before, so you know, you never
say never at any rate. Like like Chris was saying, Zinga,
(10:16):
they were looking ahead and saying, you know, we want
to make sure that are what we're producing ends up
getting to as many people as possible. And that means
we can't just assume that one platform is always going
to be the way people access content online. And so
they started to create games that would work on Facebook.
(10:37):
And you know, Facebook had a very limited a p
I at the time, like there were an application programming interface, right,
So Facebook was not a platform for other programs early
in its existence. Certainly no it that eventually changed, and
they did experiment with it fairly early, but it was
(10:59):
you know, it was until fairly recently that it actually
became a viable platform for a company to launch an app.
But back in two thousand seven, Zinga released a game
on Facebook, and it was a social poker game, free
to play, Texas Hold Him poker. Okay, so Zinka did
(11:20):
a very smart thing here, because you know, this is
back when poker, which had been around for a very
long time, uh you know, just sort of sitting there
under the surface, waiting to be rediscovered. And that's about when,
you know, in the mid two thousand's, that's when people
were really getting back on board, which was really strange.
I mean it just seemed to come out of nowhere, like, uh,
suddenly there was this huge focus on poker in general
(11:41):
and Texas hold Him in particular particular. ESPN started showing
it and thought, wow, this has become a sport, and uh,
you know, there was a lot of interest. I mean
I've I've watched my share of World Series of Poker
tournaments and it is a very fascinating thing. And it's
you know, even by two thousands seven that that fervor
had not really died down. I would say that perhaps
(12:04):
today there's not quite as much interest and as there
used to be. I mean we used to see like
celebrity poker tournaments and on television all the time, but
it's still there's still an interest there. And uh, so
Zinga said, well, you know, let's produce a game that
is on a social network that's getting a lot of attention,
and let's do it a game that's actually popular in
(12:27):
the UH and the zeitgeist at this moment. Let's let's
combine these things and we're going to try and capitalize
on it. And it worked. Yeah, the UH. It's kind
of interesting too because this is where social gaming is
now pretty big thing, and so is casual gaming. Again,
it's sort of like poker these things. Well, social gaming, no,
(12:49):
but casual gaming has. It's been around for forever and ever,
you know. But the thing is, it wasn't the big
money maker that it is now, and it is thanks
in part two companies like zinga UM who found ways
to get people back involved with it. You know, you
play let's say you play a game on a social game,
a casual game on a UM you know, online somewhere. Okay,
(13:14):
so you've played it, and you know, after a couple
of weeks, you know that the interest kind of waynes
You know, I've played it. I love that game, and
you'll come back to it again in the future maybe,
but you know, it's you get away from it because
you lose track of you know, you have something you
gotta do on Tuesday night. Now on Wednesday night's kind
of packed two and after a couple of weeks ago,
I just don't feel like going back. But Zinga introduced
(13:34):
the the concept of adding poker chips to this game.
But this is one of those things that Zinga has
developed a reputation for acting in sort of weird ways
on this this Holdham Poker game. They they had a
thing where they you could, you could add more friends. Um,
you know, they wanted you to get poker chips and
(13:55):
if you would, uh you know, help them, uh you know,
download by downloading this key. What almost Yeah, this was
one of those things where actually this would come back
to hunt Pinkas later where he he essentially said in
a later interview that he made every horrible decision you
(14:16):
could make in order to make money. He was trying
to find different ways to generate revenue, and it didn't
matter what impact it would have on the user experience.
That's that's how people have interpreted those words. Now, whether
Pinkas really meant truly that he tried every horrible thing
or not doesn't really matter, because as people in later years,
(14:39):
uh said, you know, they just went ahead and interpreted
it as that and that became the reality, which is
kind of you know, just says be careful what you say,
because because later on, even if you're saying something and
you're exaggerating in order to make a point, people may
later take that exaggeration as the gospel truth. And whether
(15:01):
or not it was, that's how it's been interpreted. So yeah,
Pinkas said, we tried all these different things, and if
you downloaded this wiki, the idea was that you would
download this this tool and it would in the game,
you would end up being rewarded with more poker chips.
But again it was a negative experience for most users.
And and even Pinkas said, like, I couldn't figure out
(15:22):
how to remove this thing once I installed it. So uh,
there were other ways of trying to generate revenue, and
in fact, uh, the game was profitable for Zinga. They
ended up raising some money. It wasn't a whole lot
in the grand scheme of things, but it was important
(15:42):
to Pinkas that they they show that the company was
capable of generating revenue before he went out to seek
around of funding. He didn't want to go out and
hit venture capitalists without first being able to say, look,
I can prove to you that what we're doing has
a play in this market. This company has a demonstrable
(16:03):
value because we're able to make money. Otherwise you're just
going up to catalists and saying, hey, look, this game
is really popular, a lot of people are playing it.
You should give me money. Like, until you can prove
me money, until you can prove that all those people
are generating revenue for you, it's really hard to get
the investors on board. I mean Twitter has seen this,
(16:26):
uh for for years. Since Twitter started, they had a
lot of users, but for the longest time, there was
really no revenue generating uh operation there. I mean there's
just very little, if any, and so uh you know. Essentially,
the way that to convince venture cabalists to invest in
something like Twitter is to say it's a huge, huge service.
(16:50):
Millions of people are using it and depending upon it. Uh,
the gap that it would leave if it went away
is enormous. Therefore it is valuable. All we have to
do is figure out the a of tapping into that value.
And that's enough for some investors. But Pinkus was like, no,
I want to make sure that I have a good
story to tell when I go and visit these venture capitalists,
(17:11):
and he did, and so in two thousand and seven
he actually had the first round of UH venture capital
and and was able to get investments. Then he was
also UM well back in January two thou because it
was late two thousand seven when we started pursuing it.
January two tho eight, they raised about five million dollars
(17:32):
from various venture capital funds and then UH six months
later they did a second round of fundraising and raised
another twenty nine million. And at that point they also
hired on someone as a sort of consultant named Bing Gordon,
who was a former chief creative officer with Electronic Arts.
(17:56):
So here is someone who has had experience with the
major video game company coming on board with Zinga. UH.
The the the title most often given to Mr Gordon
is Consigliari, which, for those of you who are fans
of the Godfather trilogy will think, wow, so some sort
(18:20):
of quote unquote family consultant has joined on. Well, it's
it's kind of funny since Mafia Wars was the the
big cross platform hit for Zinga at that point, which
may may or may not be related. Yeah, and also
(18:40):
the the acquisition of Yoville, which is still you know,
moving along out there. They they have continued to support
that game. Now, Mafia Wars raises one of the big
big stories within Zinga, which is something that would haunt
them for years. Um a few short years that have
(19:01):
existed between when Mafia Wars has come out and today.
But one of the issues about Mafia Wars was that
people pointed out there was an earlier game called Mob Wars, which, um,
Mafia Wars bore a certain similarity to Mob Wars, some
would say, to the point of identity. This is another
(19:24):
one of those points which the uh Zinga detractors like
to make, um, which is and it's not completely unwarranted.
Um yeah that will I will neither say that it
is or isn't warranted to say that many of Zinga's
games bear a striking resemblance to other popular, successful social
(19:49):
network games. And and there are there the first right. Well,
there have been people from Zinga, like former employees, who
have said that the message, essentially, according to these former employees,
was that find games out there that work, copy them,
and do whatever you have to do to be as
(20:11):
popular or more popular than the previous game. Now, whether
or not that was actually a directive within Zinga, I
cannot say. This may very well be the words of
employees who have uh, you know, an ax to grind
against the company, and they're saying whatever they want to
kind of disparage it. I don't know. I don't want
(20:33):
to pass judgment seeing as how I don't have that
direct experience. But there have been people who have essentially
accused Zinga, former employees who have accused Zinga of purposefully
setting out to copy other games and to use the
popularity of Zinga and its broad reach to essentially, uh
co opt those games from the original creators. Now, with
(20:55):
the case of Mob Wars and Mafia Wars, there's some
more murky issues there. Uh. The Zinga executives were saying
things along the lines of, you know, we were in
talks of actually acquiring Mob Wars, but then the guy
who designed Mob Wars learned about how Zinga was going
into selling virtual goods in order to generate revenue. Here's
(21:18):
another way of generating revenue with a free to play game.
So besides convincing you to download tools that you will
never get rid of as a way of generating revenue
by making a partnership with whomever is creating the tool.
Another way is to sell virtual goods that give you
some sort of edge or some sort of uh customization
(21:40):
ability within a virtual game for real money. And once
the guy from Mob Wars saw that, then he began
to incorporate those same features within Mob Wars. So Zinga
has said, wait, no, the guy from mob Wars was
copying us. So yes, our game is also about mafia warfare.
But our game was built a round this idea of
(22:00):
selling virtual goods. His wasn't until he heard about it
from us. So there's this sort of there's this crossfire
of accusations between the two groups, right, But in the
end you have Mafia Wars coming out, and there were
lawsuits about you know, infringing copyright, infringing intellectual property. And
(22:21):
this was not the one and only time this happened
to Zinga. That's happened, you know, in other with other
games as well, um including one that one of the
more popular games that Zinga pushed out was Farmville, and
there was another farm based game that again people said,
this bears a certain resemblance to this other game. And
(22:42):
again there are conflicting reports about whether or not the
people at Zinga were aware of that game, whether they
were purposefully trying to copy it, or if this was
just a parallel development issue. Um. And again we don't
have the whole story right. One one one report suggests
that one of the venture capital fund UH fund managers
(23:06):
had said, or or I guess the people at the
venture capital firm had said, you know, why don't you
do a farm game? Yeah, I don't know. It's it's
it's very difficult to tell. Um. And uh. You know,
there are a lot of stories that fly around when
you when you have this kind of corporate drama going on. Um.
(23:27):
But yes, certainly, uh, certainly Farmville is another one of
those games that that you know, came out at the
same you know, time frame, a little later than another
very popular farm game, So you know, it's easy to
make that comparison. Yeah, and uh. And also this is
the time where if you were on Facebook during this time,
(23:47):
you began to get irritated if you were not a
fan of these games at the numerous UH notifications you
would received whenever your friends were raising sheep or planting corn,
and you had learned that there field of corn needed
watering or whatever. Okay, enough anyway, So yeah, this was
(24:11):
this was a time where people who were not fans
of this game became haters of the games because their
their Facebook notifications were starting to fill up with these
these game notifications which you could hide, and many of
us chose that option immediately. Well, um, you know many
many people have talked about Mark Zuckerberg, the founder of Facebook,
(24:34):
and whether or not he sees everybody's you know, personal
privacy or you know everybody wants to have these connections
to your friends, and you know these these questions. Well,
Mark Pinkas is another person who basically says, you know, hey,
playing games is fun when you do it socially. So
the Zinga games, uh, from when I first became aware
(24:55):
of them, at least, which is I would I would
guess Farmville. I think I became familiar with Mafia Wars afterward. Um,
but yeah, that's one of the very first things you do,
and you know, I wanted to try it out, see
what it was all about. And one of the very
first things they ask you to do when you when
it comes on and say, hey, what other friends and
they look at your Facebook list of friends. Um, you know,
(25:16):
they made it possible to look at just the ones
that are playing the game, but for the most part,
they say, hey, who in this entire list of friends
wants a free mail of hey? Or you know what?
You know, wouldn't these people really like to play? And
you know you're playing experience will be much better the
more friends you have playing it. And you know, there
is something about social gaming I don't I don't mean
(25:38):
to disparage social gaming at all. No, I mean there
are plenty of social games out there that I think
are lots of fun, particularly if you have a lot
of friends who are also into that game. And then
there are games out there that if you're the only
one playing, they aren't fun at all. You know, you
need other people playing that game to make it worthwhile.
I would argue that with my experiences with Zinca tie
(26:00):
Ols that that's very much the case with a lot
of these vill games. You didn't see the dash right before, Yeah,
I mean, if you, if you, if you, well, there's
an option. This is another one of Zinga's uh you
know when when they've been on the forefront of this movement,
is hey, you don't have to if you don't want
to share this with fifty of your friends, that's fine.
(26:21):
You can pay up real money if you'd like to
have in game money, that would be just fine with us. Right.
So again we're getting over to that virtual goods for
real money, and in fact, that became the chief way
that Zinga made money for a long time. Like the
revenue that Zinga made came from selling virtual goods. And
of course with that model, you want as many people
(26:43):
as possible playing your game. Now, the game itself is free,
So just because you have a half million people playing
a game doesn't mean you're making money off of them.
But even if only a small percentage of that million
are ponying up real cash for virtual goods, that's a
lot of money. I mean, when you're talking about huge
(27:03):
numbers like that, even a small percentage can be a
significant amount of cash. And that's also why Zinga released
so many games. It wasn't like you know, a game
company that might have one or two titles, maybe maybe
as many as six titles in a year. They're releasing
games all the time. And uh Pincus is not afraid
(27:25):
to pull the plug on a game if he sees
that it's not really working. He's he's killed off games
early early on in the process when he said, Okay,
no one is really sharing this among this test group.
That tells me that this is not a very sticky game.
Sticky meaning that this is the sort of thing that
people like to go back to and they like to
share it. Uh. Once he saw that, he said, all right,
(27:48):
let's get rid of that, because we shouldn't be dedicating
any resources to something that's not getting results. Now, this
also meant that people who worked for Zinga might be
working on a project that ultimately could get the plug
pulled on it shortly after launch, and you had such
a quick turnaround rate that you were always working. That
that working for Zinga could be a very demanding experience.
(28:12):
And uh, in fact, I did a look. I looked
at the at some surveys online about employee reaction to
working for Zinga, and uh of the people who worked
there said that they would recommend Zinga to a friend
who was looking for employment. So fifty just over half
(28:36):
would say Zinga is a good place to work. And
that study, well, the the the the latest I saw
was FORLVE, but that could have been early because we're
gonna get into Zinga's more recent experience in a little bit.
But the other thing was that fifty nine percent said
(28:58):
they thought that Pinkus was doing a good job as
CEO of Zinga, So that means were either not impressed
or actively they did not like what he's doing. Yeah. Well,
if you look at it strictly as a business model, um,
the game The games themselves are brilliant because not only
(29:18):
are they social games. Um, they encourage you to add
friends and play with your your Facebook friends. But in
addition to that, they want you to you know, spend
a few real life dollars in there as well. I
mean you can, you can play without spending any real
cash and and in fact I have never spent a
(29:39):
cent on any of the games. However, I can tell
you that playing it with no or few friends without
spending cash makes them maddeningly slow and difficult to achieve anything.
They like to encourage you to buy a special building
or a specific decoration for your castle slash farm, slash city,
(30:00):
slash whatever. Yeah, um, and you know you can. You can.
You can maybe have your friends give you one, or
you could you know, spend five dollars and and earn
enough in game cash to do that, or or maybe
you're building something, a large building in your your world,
and uh, you know, if you just fork over a
(30:21):
few dollars, it will happen that much faster, and and
it makes more in game money than anything else. And
the thing is, all of a sudden, you've encouraged your
friends to start playing, and they're all spending five dollars,
ten dollars of their money and so on. And so
it's a brilliant business model if you can get enough
people to do it and you and also they pointed
out that once they get this network in place, they
(30:45):
don't have to win over everyone who's playing every time,
because if they get just a few, If I have
a lot of friends playing games on Zinga and then
a few of them start playing a new game, that
may tempt me to try out the new game game
as well. And so I know, the idea is that
once you get that big net of users, that network
(31:06):
of users, then you've you've got enough seeds planted Farmville
or otherwise to try and convince more people to try
out new games as you release them. So even when
you get tired of an old game, a new game
might come along and you want to play that, And
that did work for a while. In fact, when that
article that we were citing earlier, the venture Beat article,
(31:28):
when that was written back in two thousand eleven, Uh,
Zinga was on the rise. I mean they were doing
really really well. Uh they held an i p O
and uh and that I p O there their stock
was originally that's initial public offering offering, thank you. Uh,
they held that back in December eleven. So at the
(31:49):
end of eleven they have this i p O. And
originally their stock was priced at ten dollars. By March,
that price had gone up to fourteen dollars fifth sense
per share, so the stock was was increasing in value.
But some stuff has happened since then. One of those
(32:12):
things is a pretty spectacular deal that Zinga made with
another company called o MG Pop, which created a little
game called draw Something. Draw Something was incredibly popular, uh,
Like shortly after it came out. That's pretty much what
(32:35):
I heard all of my friends in the tech industry.
That's all I heard from them, like on their Twitter
feeds and everything. They talked about draw Something and how
fun it was and um, and it did have a
pretty incredible adoption rate, and oh yeah it was. It
was soaring. They were the darling, sudden darling of the
UH mobile and online gaming casual gaming thing because basically
(32:59):
was a drawing game where the your opponent wasn't actually
your opponent, they were actually working with you. Yeah, essentially. Yeah,
So the game was incredibly popular, and so Zinga looked
at that and said, well, we should take advantage of this.
We should use this capital that we've raised through the
I p O and just through our revenues and everything
(33:20):
else and UH and purchase this company because it would
be a very valuable asset in our our repertoire. And
so they did for around a hundred and eighty million dollars.
And the problem was that they bought that company just
before it hit its peak in UH in adoption, and
(33:43):
then shortly thereafter people began to lose interest in the
game through no fault of the game. This is just
the way we work as human beings. Like we find
something new and fun and we go crazy about it,
and then after we get used to it for a while,
we just stopped thinking about it so much and we
don't use it as much. Um. The same thing is true,
(34:05):
very true with a lot of casual games. In fact,
Zinga seemed that over its history, and that's one of
the reasons why Zinga releases these games so frequently. It's
because you can't just release a game. Even if you
created a truly amazing game, like something that someone would
play and there'd be nothing but praise said about that game.
It has a shelf life, you know, and and you
(34:27):
you might have the long tail experience where you've got
people who are finding the game late and adopting it late,
but it's never going to be as many or as
intense as that early era when people first discover it. Well,
same thing happened with draw Something and so even though
it was this phenomenal success at the time when Zinga
was looking into buying it, surely thereafter people stopped playing it,
(34:50):
or at least huge numbers of people stopped playing it
and UH and so it suddenly looked like Zinga had
paid way too much money for a company, like they
had seriously overvalued o MG Pop when they acquired it.
That's not the only company that Zinga has acquired. They've
acquired other companies as well. In their UH. Their quest
(35:12):
to succeed as a company. Um and in other cases
it's it's kind of similar. In fact, there were ties
where Zinga was looking at things like a pop Cap games,
UM that was not bought by Zinga. There was another
company that swept that up. Yeah. As a matter of fact, Uh,
Zinga reportedly made a bigger offer for um the indie
(35:36):
legend gaming legend PopCap than uh than Electronic Arts, the
eventual winner did, but they actually turned it down. Uh.
And of course now they have gone. By the way.
The pop Cap is known for titles like the Jeweled
Plants Versus Zombies Zuma and uh you know. They they
(35:58):
had made the move from being a computer based developer
to the mobile world. Um and uh you know also
to um uh also to the social gaming sites you
know Facebook, they've you know, but Jeweled Blitz and zooma
Blitz are among the largest, most durable titles that I've seen. Um,
(36:22):
you know, come and go on the Facebook platform and
uh you know they it was certainly one of those
those companies that have proven its ability to create new titles,
unlike some other people. UM. So you know that there
was definitely something there and uh, despite the bidding war, uh,
and the apparent, according to reports, winner being Zinga. They
(36:45):
decided to go with e A. Now why did they
decide to go with e A. That's a matter of
some debate. It's it's sort of unclear. They haven't said specifically,
but rumors, you know, rumors of course spread when something
like that happens, and they said, well, you know, maybe
there's something there, maybe there's some sort of personal conflict,
or maybe they knew something about Zinga, or at any rate,
(37:08):
Zinga in in hit its peak and then dropped. The
stock price, dropped, the the adoption rate for the game's dropped. Um.
Things just turned for the worst in every way really
for Zinga, uh, to the point where I think the
lowest price so far as of the recording of this
(37:30):
podcast was two dollars and thirty one cents a share.
And now remember it launched at ten dollars a year
and hit a peak of fourteen dollars and fifty cents
a share earlier this year. You know, it hasn't even
been a whole year since that happened. And as of
the recording of this podcast, we were recording on October twelve,
and this morning, before the the market opened, the price
(37:54):
was at two dollars and forty three cents a share.
It has dropped since we started recording this podcast to
two dollars and four two cents a share. Yeah, so
that's actually up it had it had gone down a
penny or two below that. Okay, So it's yeah, No, granted,
moment by moment this value changes, So it's you always
have to take that with a grain of salt. But
but I've heard, I've heard a lot of you know,
(38:16):
I was looking into a lot of projections. I was
looking to a lot of projections, and most of them
had the stock price valued at around three dollars for
the next twelve months or so. Now, granted, it took
less than twelve months for it to go from fourteen
fifty to one, but you know, that's that's sort of
the projections by a lot of analysts right now. And
(38:40):
part of that is because there seems to be a
decreasing tendency for people to play social games on or
games at all, on social networks. There was a survey
done in twenty that found that, uh, the fifty six
of students who were surveyed in this study said they
(39:02):
planned on playing fewer social games in the next year.
And uh so that you know, more than half of
the students were saying, I don't think I'm gonna be
playing as much. It's just not for me. That was
back in So if that trend is more widespread than
just among students, then that would suggest that perhaps, you know,
(39:22):
social gaming was one of those early distractions that was
very you know, had a had a big impact when
it first came out, but it's becoming increasingly difficult to
replicate that in the social gaming world. That's not to
say that someone's not gonna come around and create a
game that just knocks everybody socks off. It may very
well happen today or tomorrow or you know, a year
(39:44):
from now. But the trend is a decreasing interest in
social games in the online platform. Um, there's part of
that might be made up for mobile. I mean, you could,
you know, if these company are able to really concentrate
on the mobile experience, they might be able to recapture
that because mobile is still a very popular platform. In fact,
(40:07):
it's you know, increasingly popular. So that might be a
way that Zinga can turn things around. Uh, and there
are a lot of other ways I mean, I'm not
a I'm not a businessman by any stretch of the imagination.
So while while Zinga's plight looks great indeed to my eyes,
it doesn't mean that Pinkinson team can't turn it around,
(40:28):
or perhaps, you know, maybe some other company will come
in and purchase Zinga. I've seen some speculation about Facebook,
although at this point I'm wondering if Facebook would look
at Zinga and say, this looks like it's something that
we would have wanted four years ago, but not now. Yeah. Yeah, Well,
there's certainly a lot of intellectual property to be had
(40:52):
right there, which often is under some contention as to
whether or not that truly blonds Zinga. But yes, go ahead,
yeah no, And and that's you know that this is
where we get into that hazy well you know, it's
a farm game, so you know who you know, is
this sufficiently different enough from that one? Now that that's true?
(41:13):
But you know, of course there there are some some
more original titles, and uh, you know, I think I
think it's possible that um, that may happen. Although you know,
when I happened to go look at the stock price
just a moment ago, there is also news again as
of the time we're starting this podcast that Mark Pinkis
is suggesting he wants to take the company private again.
(41:36):
So yeah, there were no there was something else. I
didn't mention this when we were talking about it, but
I did. There was another part of that Venture Beat
article that was kind of interesting about how the company
had made uh some money back in back in two
thousand and eight, the revenue for Zinga was around nineteen
point four million dollars, but because it was a private company,
(41:58):
it didn't have to release the fact that their cost
or that their losses amounted to twenty two point one
million for the year, meaning that their costs far outweighed
their revenue. But it was a private company, so there
was no requirement for them to release that information. But
as a as a publicly traded company, you have to
(42:19):
do that. So when things are bad, you can't cover
it up. You know, you can try and obfuscate it
with language when you're doing your press conference and talk
about the opportunity you have. If you hear the word
opportunity said a lot, that can sometimes be a red flag.
I'm not saying it's the red flag in every case.
So if you just recently heard the word opportunity at
(42:41):
your all hands meeting. That does not necessarily mean you
need to panic, but it's sometimes one of those little
words that can indicate that there's uh less than positive
things going on on the business side, UM problems, our opportunities. Well,
you have to think of it that way, right, I
(43:03):
mean if you don't. If you don't think of it
that way, then not only is morale an issue, but
you actually do start to sabotage yourself in turning things around.
So not to really put down anyone who tries to
look at things as opportunities, I actually think that's a
pretty positive way to go about it, as long as
you're being genuine, right, I mean if you're being insincere
(43:24):
in calling it an opportunity, that's a problem. But if
you look at and say, all right, this message that
I'm getting here says we're not doing as good a
job as we need to. What do we need to
do to change to do as good a job? There
been some suggestions that ZINGA should cut costs by perhaps
uh laying off employees and consolidating departments. One of the
(43:48):
flip sides to that is if you start cutting costs.
Then you're also cutting into the resources you have to
develop new games, so you're actually making it harder on
yourself to create the product that will help make the
money that you need to make in order to become
profitable again or to to turn things around. So it
becomes this kind of domino effect, right. You start to
(44:10):
cut costs, you start to lay people off, you start
to consolidate departments. It becomes harder for you to make
a good game because it's harder for you to make
a good game, fewer people are following you, and so
it just you know, continues until your company crumbles away.
So it's a really challenging thing. And I don't have
all the answers because you know, it's easy to say no,
keep everybody make good stuff. Like yeah, that's that's that's
(44:34):
the kind of leadership that doesn't get you anywhere. That's
that would be my leadership's style, kind like Homer Simpson,
are you guys working? Yes? Could you work harder? I
guess so, okay? Do that? That's that's kind of my
leadership style, which is why I'm a senior writer. All right, then,
(44:55):
uh well, I guess that kind of wraps up where
Zinga is right now. And again this this is a
company that's had a real roller coaster story and and
some of it's a little shady and some of it's
a little uh you know uh on the level of
of could this be creating it yet another bubble within
the tech industry? Um, it's business. It's business. Yeah, and
(45:16):
and it just like any other business venture, you cannot
count out a company until it's gone. And even then
sometimes they come back. But so Zinga may turn things around,
They might find the secret sauce needed to really get
people invested in the company, both figuratively and literally. And uh,
you know, maybe it will happen, but it could very
(45:38):
well be that this might serve just as a warning
to other people who want to launch their own companies.
You can see some really uh great success early on
if you're doing you know, if you're hitting all the
right beats. But sometimes that that's short term success and
it will come at the cost of a long term success. Yes. Um,
(46:01):
well we'll wrap that up here. If you have guys,
have any suggestions for future episodes of tech Stuff, why
don't you send us a little note. You can do
that via email. Are address as tech stuff at Discovery
dot com, or send us a message on Facebook our Twitter.
You can find us there with the handle text stuff
(46:21):
hs W and Chris and I will talk to you
again really soon. For more on this and thousands of
other topics, is it how stuff works dot com
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Karah Preiss
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