Introduction: Through its cooperation with Facebook, Zynga has become the leader in the field of social gaming. However, due to the risks associated with this model, Zynga has decided to independently build its own platform, not only to promote its own games but also to help competitors grow, achieving mutual benefits within the industry.
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Backup Plan
In the early months of 2010, Zynga's engineering team paused all new game development. As the developer of several popular social games like "FarmVille," this San Francisco startup was engaged in tense 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 backup plan in case the negotiations failed, so he ordered his engineers to start developing their own website.
"Everyone was working day and night at that time," Pincus recalled. "It was an extraordinary engineering feat. We quickly prepared to host our games independently." But the website was never launched. The strained relationship eased soon after, and both Facebook and Zynga realized they had a mutually beneficial relationship, leading to 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 partnerships in the internet industry: Facebook revealed in its prospectus that Zynga contributed 12% of its revenue.) But on March 1, Zynga finally unveiled the long-anticipated website. Using the domain Zynga.com, which was previously just an informational site, it will now not only offer Zynga’s games but also host products from competitors. Other companies can use this service to release their games and promote them to Zynga players, but in return, they must pay Zynga a percentage of their income.
Development Plan
Zynga hopes to become a platform for other companies to develop their businesses upon, similar to Facebook, Twitter, and other tech companies. "We want to expand the market for everyone. Our vision is to have a billion people playing games together," said Pincus.
On Zynga.com, players can log in using their Facebook accounts and purchase virtual tractors and crops using Facebook's payment system. Pincus said using the tools from this social network greatly reduces the complexity of participating in online games. However, he admitted that the integration between the two has always been imperfect—Zynga estimates that about one-third of Facebook's social gamers are casual players who may feel annoyed when friends talk endlessly about cows in "FarmVille." This is one of the reasons why Zynga chose to branch out on its own.
The website will begin testing later this month, featuring prominently played games such as "CityVille," "Zynga Poker," and "Words With Friends." When a player selects a game, the game 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 needing Facebook's platform to identify which players are friends, Zynga has developed its own mechanism to match strangers who enjoy the same game and spend a similar amount of time playing.
In addition to 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 lies in accessing the 240 million players who play Zynga games at least once a month.
As part of the deal, Zynga will take a certain percentage of the revenue, though the exact ratio has not been disclosed. According to informed sources, after Facebook takes 30% from the payment system, Zynga will then take 30% from the remaining portion. In other words, original developers can only receive 49% of the income.
External Recognition
Paying commissions to two companies might seem excessive, but at least one developer recognizes 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 rescue the queen. "Completely relying on Facebook is very risky," said the company's CEO Michael Witz. "We need a lot of funds to attract users, and it is difficult to achieve widespread popularity on Facebook. Instead, we are willing to spend time creating games and let Zynga leverage their rich experience to help the game succeed."
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 enable Zynga to more flexibly provide comprehensive services 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 game performance. Zynga executives also stated that the company might one day become a consultant for small game developers.
"We will open up many services that were previously provided only to internal game studios," said Zynga CTO Cadir Lee. "We hope to improve all games. Even large companies face technical challenges during growth."
Neither Pincus nor his company discussed cooperation with competitor EA, but they believe they already possess the best skills in the social gaming sector. If they can train smaller companies, their strength will significantly increase. However, many developers remain cautious about the specific services and usage prices offered by Zynga. "All the people we've talked to are willing to participate in this project to some extent, but they need to see the formal product we offer," said Pincus.