Introduction: Through its collaboration with Facebook, Zynga has become the leader in the social gaming sector. However, due to risks associated with this model, Zynga has decided to independently build a platform that not only promotes its own games but also helps competitors grow, achieving mutual benefits for the industry.
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Backup Plan
In the early months of 2010, Zynga's engineering team halted all new game development work. As the developer of popular social games like "FarmVille," this San Francisco startup was engaged in intense negotiations with Facebook. Then and now, Facebook provided a platform and a large audience for Zynga's games. Zynga CEO Mark Pincus realized he needed a fallback plan in case the negotiations fell through. He ordered his engineers to start developing their own website.
"Everyone was working day and night at the time," Pincus recalled. "It was an incredible engineering feat. We quickly prepared to host our games independently." But this website was never launched. Tensions eased, and both Facebook and Zynga realized they had a mutually beneficial relationship, so they signed a five-year contract.
Two years later, Zynga is now a public company, and Facebook is about to go public. (Their collaboration has become one of the most profitable in the internet industry: Facebook disclosed in its prospectus that Zynga contributes 12% of its revenue.) On March 1st, however, Zynga finally unveiled the long-planned website. Using the domain Zynga.com, which was previously just an information site, it will not only offer Zynga’s games but also host competitors' products. Other companies can use this service to release their own games and promote them to Zynga players, but in exchange, they must pay Zynga a certain percentage of their revenue.
Development Plan
Zynga aims to become a platform for other businesses to develop on, similar to Facebook, Twitter, and other tech companies. "We want to grow the market for everyone. Our goal is to have a billion people playing games together," said Pincus.
On Zynga.com, players can log in with their Facebook accounts and use Facebook's payment system to buy virtual tractors and crops. Pincus said using Facebook's tools significantly reduces the complexity of participating in online games. However, he admitted that the integration between the two has never been perfect — Zynga estimates that about a third of Facebook's social gamers are occasional players who get annoyed when their friends talk endlessly about cows in "FarmVille." This is one reason why Zynga decided to branch out on its own.
The website will begin testing later this month, with featured games including "CityVille," "Zynga Poker," and "Words With Friends." When a player selects a game, the interface almost fills the entire browser. On one side of the screen, the zFriends feed continuously displays messages related to other players’ gaming activities. While still relying on Facebook's platform to identify friend relationships, Zynga has developed its own mechanism to match strangers who enjoy the same game and spend similar amounts of time playing.
Besides the new website, Zynga Platform will also host games for other companies. Analyst Michael Pachter from Wedbush Securities believes this shows "Zynga acknowledges they cannot monopolize innovation." The biggest appeal for developers is access to Zynga's 240 million monthly active users who play their games at least once a month.
In return, Zynga will take a cut of the revenue, though the exact percentage has not been disclosed. An informed source revealed that after Facebook takes 30% from the payment system, Zynga will take another 30% from the remainder. In other words, original developers receive only 49% of the income.
External Recognition
Paying commissions to two companies might seem excessive, but at least one developer approves of this model. Mob Science, a game studio based in San Diego, plans to launch a game called "King World" on the Zynga Platform this spring. In this game, players create a character and save the queen. "Completely depending on Facebook is risky," said the company's CEO Michael Witz. "We need a lot of money to attract users, and it's hard to gain widespread adoption on Facebook. Instead, we're willing to spend time creating the game and let Zynga leverage their rich experience to drive the game's success."
In recent years, Zynga has spent hundreds of millions of dollars building its own data centers to gradually reduce its reliance on Amazon's cloud computing services. These new servers allow Zynga to provide better services more flexibly to other game developers. Later this year, the company also plans to launch a data analysis console to help game developers understand which features enhance or detract from gameplay. Zynga executives also stated that the company might one day serve as consultants for small game developers.
"We will open up many services that were previously offered only internally to external parties," said Zynga CTO Cadir Lee. "We hope to improve all games. Even large companies face technical challenges during growth." EA is one such example. The company owns the hottest online game "The Sims Online," but has experienced multiple server crashes.
Pincus and his company did not discuss cooperation with competitor EA, but they believe they possess the best skills in the social gaming field, and if they can train smaller companies, their strength will greatly increase. Many developers remain watchful regarding Zynga's specific services and pricing. "Everyone we've talked to is willing to participate to some extent, but they need to see the formal product we offer," said Pincus.