In the past 12 months, Zynga Inc has struggled with a contracting player base, a deflated stock price and waves of layoffs. Now it is coming to terms with downsized ambitions.
As Chief Executive Mark Pincus, 47, leads the online games developer he founded in 2007 through perhaps the most crucial year of his tenure, he is pushing to restore revenues by doubling down on "FarmVille," the franchise that took Facebook users by storm four years ago and launched Zynga to stardom.
Though some industry observers had declared farm simulation games a fad and predicted FarmVille 2's early demise, the sequel to Zynga's best-known title has defied expectations at its San Francisco headquarters, Pincus said in an interview. FarmVille 2 has clung to its perch near the top of Facebook charts and the number of people who play the game each day still hovers near all-time highs of eight million, even six months after launch.
Given a glaring weakness in mobile games, however, one of Zynga's current priorities is porting FarmVille 2 to mobile devices so players can move from PCs to smartphones and back without losing their data. That presented technical challenges that the company is ironing out, Pincus said.
"The ideal is to make that one seamless experience between Web and mobile so you can take your farming experience from work to home," Pincus said. "We're having to retool and reinvent around our process and technology."
Pincus badly needs a reliable hit franchise. In the past nine months, Zynga has shuttered 20 titles and closed offices in Baltimore, Boston and Tokyo. It has trimmed 5 per cent of its workforce, though its headcount of nearly 3,000 still dwarfs that of fierce rivals like Supercell, a Finnish company with 100 people that claims an equivalent amount of revenue, or the 600-strong Rovio, the publisher behind the "Angry Birds" games.
Gone is the swagger that defined the early years, when Zynga's army of developers flooded the market with dozens of new titles from cooking games to bingo variations, its dealmakers splashed money to snap up smaller rivals, and its managers opened studios in cities around the world.
Wall Street is viewing Pincus' shift with cautious approval, having been singed by Zynga's abysmal stock performance - an 80 per cent decline over the past year that began around the time it invested $180 million in then-promising game studio OMGPOP.
"Certainly their shareholder base wants to see more discipline," said Sean McGowan, an analyst at Needham and Co. "When you have limited resources, it makes sense to start with a proven winner, then expand that franchise. But it needs to be a blend of sticking with the proven brands and realising when people might say: 'FarmVille 4? No, I'm done with that.'"
Investors place much stock on Zynga's future prospects in Internet gambling, because of its massive poker-playing community and existing game software. But with meaningful income from real-money casino efforts likely to be months, if not years, away, it may have to risk "sequelitis" for now.
Tables turned
Almost 18 months after going public, Zynga is staving off fierce competition from newer or nimbler rivals that mimic its games.
Supercell, founded in 2010, has scored with "Hay Day," an iPad game that contains elements resembling FarmVille. With just one other game under its belt, Supercell says it is on track to make more than $800 million in revenue this year, roughly equal to the $860 million that Wall Street expects from Zynga in 2013.
Veteran video games publisher Electronic Arts Inc, one of Zynga's earliest rivals, in recent weeks said it would lay off an undisclosed number of employees and focus on core franchises like Battlefield and sports titles.
Activision Blizzard Inc, another publishing heavyweight, has fared better thanks to the strength of series like "Call of Duty," which has brought in more than $8 billion in cumulative sales since the first title launched in 2003. Yet even Activision is struggling to sustain revenue growth.
Zynga's bottom-line could be shored up through a more streamlined pipeline, Pincus argued. Since FarmVille first launched, it has gradually honed its development process to reduce the resources and development costs required for each significant update by more than 80 percent, he said.
