Wednesday, July 3, 2013
Zynga Missed The Pivot To Mobile, So Can A Veteran Console Exec Revive It?
Although shares jumped by 10.4 percent today on news that Microsoft’s Don Mattrick is taking over Zynga as CEO, the most important audience the company needs to address for a real, long-term turnaround is not investors. It’s the game developer community. Because here are the new economics of hit mobile games: Finland’s Supercell: 100 people. $179 million in revenue in the first quarter, with $104 million in profit. Japan’s Gung-Ho: 20 employees servicing the hit game Puzzle & Dragons. That game alone had an estimated $113 million in revenue in April. Those figures are just from Japan, and they have about 300 employees. Compare that to Zynga, which has 2,400 employees, and made just $4 million in profit on $264 million in revenue in the first three months of this year. It doesn’t matter if you’re publicly traded. Or an “Internet treasure,” which is how founder and former CEO Mark Pincus likes to refer to his company. Or that the company has close to $1.7 billion in cash and short-term and long-term investments on its balance sheet. The companies that are succeeding on Android and iOS, which is where Zynga wants to diversify, are incredibly lean and operate with a great deal of internal freedom. So what you need is a person with the charisma and social capital to attract the best game designers, artists and producers in the world. Unfortunately, Zynga has hemorrhaged so much of its original talent over the last two years, that it is unclear if it can recover. There are simply too many other profitable, privately held companies for good talent to go to. On top of that, the early stories about equity clawbacks and then recent layoffs have also damaged the company’s reputation as a place to work. At the same time, the kind of talent that made Zynga successful in the beginning — the people who gave it the number-crunching, aggressive edge to succeed where older gaming talent didn’t — aren’t necessarily right either in this new era. Production values keep going up and other competitors have learned from Zynga’s data-obsessed, detail-oriented approach. Mattrick needs to turn around Zynga’s reputation as an employer. There are definitely some points in his favor: He was a highly respected executive at EA and then went on to run the Xbox division at Microsoft. And it does help that he’s overseen the creation of content for dozens