Zynga’s latest acquisition: adult supervision
Welcome to the Counterparties email. The sign-up page is here, it’s just a matter of checking a box if you’re already registered on the Reuters website. Send suggestions, story tips and complaints to Counterparties.Reuters@gmail.com.
Kara Swisher broke the news yesterday that Zynga is going through a tech rite of passage — bringing in a professional manager. Don Mattrick, the former head of Microsoft’s interactive entertainment, will take over as CEO. This is a move, Swisher notes, that’s been blessed by Mark Pincus, Zynga’s co-founder and current CEO, who still has 61% voting control of the company. Pincus, in a blog post, said he’ll stay on as chairman and head of product.
In recent months, Zynga, the maker of FarmVille and Mafia Wars, quickly lost the title of America’s Favorite Time Waster; its stock is down more than 60% since its IPO in late 2011. As Bloomberg notes, Zynga has lost 100 million players in the last year, while King, the maker of a bleep-blooping pocket lobotomy called Candy Crush Saga, is adding users at roughly the same pace. Early last month, Zynga began a round of 520 job cuts — equivalent to about 18% of its workforce. OMGPOP, which Zynga had bought just a year earlier for roughly $180 million, was basically shuttered; Zynga had already written off $95 million of that purchase. After the layoffs, more than a few OMGPOP employees were quick to slam Zynga’s management.
Mattrick’s track record is certainly impressive: Nicole Laporte reports that Mattrick was instrumental in creating The Sims while at EA, and at Microsoft he helped popularize the Xbox and Kinect, which became the fastest-selling electronic gadget of all-time. He’s also, she writes, a “relentless, dogged” personality who “lives like a Saudi prince and jets to work.” 95% of Mattrick’s pay, the WSJ says, will be in stock.
VC investor Ben Horowitz writes that Mattrick and Pincus will be effectively sharing command. That, he says, is a big problem:
Shared command always seems really attractive to the people at the top of the organization like the CEO and the board: “We have two world-class people, this gives us the best of both worlds! We shouldn’t get caught up in the conventions of years past. We’re all adults. We can get along.” It looks much less attractive to those who do all the work in the organization. To them it looks more like frustration, chaos, and delay.
Douglas McIntyre agrees, while noting that Zynga still has more than $1.2 billion in cash left over from its IPO. Like Groupon — which also earlier this year deposed its CEO — Zynga management, he says, has “taken money from shareholders that almost certainly will never be used effectively. If it should not go back to those who own the stocks, where should it go? Certainly not to the bunglers.” – Ryan McCarthy
On to today’s links: