Zynga has grown into Facebook’s largest social games developer in just 4 years.
We’ve just released a new case study on the Internet gaming giant Zynga! Founded in 2007 by Marc Pincus, Zynga has become Facebook’s largest social networking games developer, boasting a staff of over 2,000 employees and a base of over 270 million users.
With a selection of 29 different game titles and annual profits of roughly $850 million USD, Zynga has covered some ground in just four years! If that’s not reason enough to take a closer look into the inner workings of the Zynga “empire,” I don’t know what is.
Before you check out the case study, here’s a glimpse of how Zynga got its start and where it’s headed:
After receiving an initial investment of $29 million from Kleiner Perkins Caufield & Byers, Zynga has expanded rapidly, quickly annexing the game YoVille in 2010 along with seven other development studios. Later, in 2011, Zynga bought Floodgate Entertainment and MarketZero. Zynga’s original headquarters are in San Francisco but due to their incredible expansion, they’ve now opened headquarters in India and Seattle as well.
Although Zynga ran into several controversies involving some scamming, copyright infringement, and spamming allegations, it emerged largely unscathed. One good side effect of these controversies (and after spending some time on the bad side of many of its consumers) is that Zynga’s business practices have become stronger and cleaner. A good example of this new direction is Zynga’s charity initiative, opened in 2009 and called Zynga.org, which takes virtual purchases within its many titles and converts those purchases into monetary charitable donations for various causes.
Zynga has been pushing to go public in the last few weeks, following in the footsteps of popular music-streaming site Pandora, in the markets by filing a $1 billion IPO, but it’s working against a variety of obstacles. The date to go public has been pushed back several times, and with the current state of the stock market, some controversy inside the company itself, and some other distractions, Zynga hasn’t been able to make it official. It will definitely be something to pay attention to in the coming weeks, as the most recent date to go public is scheduled for after Thanksgiving 2011.
Zynga’s close relationship with Facebook, the current colossus of social networks, has been the main reason for its growth. In the second quarter of 2010, however, this relationship became strained as Facebook started to push Facebook Credits in all Facebook applications. But after extensive negotiations, Zynga and Facebook signed a five-year agreement allowing the use of Facebook Credits in Zynga’s applications.
Recently, Zynga has been distancing itself more and more from Facebook. Pincus has commented publicly on making an independent online platform much like Facebook, but entirely dedicated to gaming. This has been a subject of interest and doubt among potential investors who know that Zynga might as well attribute its success to the Facebook platform. Zynga games are almost synonymous with Facebook now, as they depend so much on the interaction and competition of friends building virtual communities, businesses, farms, mafia rings, etc., using Facebook as the plane of interaction for the players.
Zynga’s revenue comes from the sale of cyber goods and services within these games and the market has become so lucrative that in 2010, Zynga set up a new currency facilitator called the Platinum Purchase Program to handle purchases in the hundreds of dollars.
Because of the nature of Zynga’s games, it requires massive server usage for its vast customer pool so that the interactions between players and the applications run smoothly. Site lag due to traffic spikes, system failures, security breaches, limited bandwidth etc. could be disastrous. The solution for Zynga was a switch to a flexible VPS cloud hybrid platform that accommodates growth and scales to meet demand.
The release of the now infamous FarmVille is a good example of how cloud hosting has benefited Zynga. The company had projected that traffic would grow to 200,000 within two months, but it found itself attracting one million players a week almost immediately. Such staggering growth was only supported by the supplemental cloud hosting services it had provisioned from Amazon.
There are so many lessons to be learned from Zynga, not the least of which is the fact that Pincus found and dominated a popular niche in the entertainment industry, capitalizing on the awesome force of social networking and the public’s incurable love of repetitive, time-wasting nonsense. Thanks to that and cloud hosting, Zynga can very well expect to see success in the future of gaming and the stock market.