The whole world is going to play together: Zynga founder

July 10, 2012

“Do you want to play Atari?”

Mark Pincus is sharing an inscription from his high school yearbook with a roomful of journalists at his company Zynga’s San Francisco headquarters.

The purpose of this event, called Zynga Unleashed, is to reveal the roadmap of one of Silicon Valley’s fastest growing companies – but right now Pincus is looking back.

“I spent my youth trying to get everyone around me to play games,” he continues. “But somewhere between high school in my first job, games stopped happening. I think that video games were too complicated for the people around me and I couldn’t rationalize sitting and playing alone.”

The narrative Pincus is spinning omits a few twists and turns: the overseas stint, Harvard, the Washington years and the failed social network. He jumps right into the chip factory, five blocks down the road, where his multibillion dollar gaming company got its start five years ago.

“I set out with a small group of people to make gaming free, social and accessible. And something that would bring my friends and family back to play,” he relates, pressing a clicker that keeps the slides moving.

The next day, we are on the doorstep of Zynga’s first home.

“This building was originally the Williams Potato Chip Factory in the ‘20s, ‘30s and ‘40s,” he explains.  “I thought it was a perfect place to build a game around poker chips and microchips.”

Pincus, it must be said, is not a universally-loved individual. He likes fun and games, sure. But he was pretty intent on success too. He’s publicly admitted to doing “every horrible thing” for early revenues, including letting users download annoying toolbars.

However, Pincus & Co. also made what turned out to be a lucrative bet on people’s willingness to pay real money for virtual goods. Zynga’s first game was called Texas Hold ‘Em Poker. Pincus had a hunch that players would jump at the chance to up the stakes by buying poker chips.

“It was March 7, 2008 and like most things we did, we turned on the feature late at night,” he says from inside Zynga’s first office, now deserted.

“There was a lot of built up demand in our players to buy chips and basically to play at the much higher stake tables and before that there wasn’t any way to do that other than to spend a month or two working your way up through the lower tables to win the chips.”

His winning streak had started.

Other hits followed, including the virtual farming game Farmville, the virtual city-building game CityVille and Words With Friends, a title that was picked up by Zynga when it acquired mobile games studio Newtoy in late 2010.

Propelled by a close integration with the world’s biggest social network Facebook, Zynga has become the poster-child for how companies can create value via online networks.

The company surpassed a billion dollars in revenue in 2011, and in mid-December, Zynga listed on the Nasdaq with a value of $8.9 billion.

However, celebrations of the company’s fifth anniversary have been tempered by talk of cooling enthusiasm for its brand of gaming.

On June 12, analysts at Cowen & Co. published a report suggesting that the market for games on Facebook was in an “accelerating user tailspin” after the mobile measurement firm AppData published statistics showing daily active users of Zynga’s social games had dropped 8.2 percent in May.

The Zynga Unleashed announcements, which included a more extensive gaming platform called Zynga With Friends and new titles such as ‘The Ville’, ‘Chefville’ and ‘Farmville 2’ landed with a thud on Wall St. Zynga’s Nasdaq-listed shares fell nearly five percent on the day.

Zynga shares, which were priced at $10 for the company’s market debut on December 16 have lost nearly half of their value.

Pincus, a boyish looking 46-year-old, appears sanguine.

Now sitting on the top floor of Zynga’s more spacious new headquarters down the road, he explains “we are the biggest believers in the future of play and social gaming and I fundamentally believe that the whole world is going to play together and as they do there’s going to be the opportunity to provide the kind of valuable entertainment that we’ve seen for decades for TVs and movies.”

That said, he acknowledges that maintaining momentum in a culture addicted to change can be challenging.

“In this job, in this game, you cannot take your eyes off the ball…we need to keep reinventing social gaming and play so that it appeals to more and more people. It’s a consumer and product mission, and then it’s a business mission and if we get focused on short-term volatility in our game traffic and share price, I don’t see how that’s going to make us more successful in the future.”

Asked if he was frustrated by Wall Street’s reaction to the announcements at Zynga Unleashed, he says no.

“I’m measuring our success in two ways. One I’m measuring it anecdotally. Are we making an experience that gets through to our moms? And that gets through to people like you who don’t have time for games. So as we see that happen, I believe that we’re on our mission and I’m measuring our success by the size audience we can bring to our games,” he says, before striking a more measured note.

“There are obviously metrics that are perfectly overlapping between what Wall Street cares about and how I view the future. The daily active users of our games matters. The percentage of our users who choose to buy in game, or spend money with us matters a lot but we’re focused on growing them in the long-term and short-term.”

One factor that’s been weighing on Zynga’s stock is the company’s reliance on Facebook for the lion’s share of its revenues.

The Zynga With Friends social network has been cast by some as an effort to wean itself off the Facebook ecosystem, but Zynga also recently became the first company to start running Facebook ads on its own platform.

Rather than trying to lessen Zynga’s dependence on the world’s number one social network, Pincus explains company is “doubling down on our Facebook relationship.”

That said, he’s also keen to emphasize Zynga’s successes on mobile. At Zynga Unleashed, the company laid claim to being “the largest mobile gaming network in the world” and Pincus says it will begin to bring its games to mobile at an accelerated pace.

“We’ve grown terrifically on Facebook first and now we’re growing on these other platforms (iPhone and Android). To me it’s less about diversifying and moving away and it’s more just we want to get to the largest audience and we want to provide them the best experience,” he says.

Pincus also rejects criticism of his company’s $183 million acquisition of OMGPOP, the New York studio behind the pictionary style game Draw Something. In May, the Financial Times reported that Electronic Arts Chief Executive John Riccitiello made a reference to an unnamed competitor paying high prices for “instant one-hit wonders.”

Pincus, suddenly prickly, fires back.

“I’m not defining our success by how much CEOs of other game companies respect our decisions and in fact in the case of New Toy and in the case of OMGPOP we were the only company bidding on buying them. It wasn’t competitive. Nobody else wanted to buy New Toy but we saw something there that the rest of the industry didn’t see and I wonder now whether he thinks that was a good or bad acquisition. Words With Friends is the third-most downloaded mobile app of all time. So to go out an innovate in the market and build this industry we’re going to have to be early and take risky bets. And we’re going to have to make leading investments and we’re going to define success by the audience we build for play and for Zynga you know, not by whether a competitor likes the deals,” he says.

In the past, Pincus has trumpeted the importance of “failing fast” as a method of building successful products. So he’s flexible, but only to a point.

“The way I think about it is that your vision and your mission and your goals should never change. Your objectives should rarely change and your strategy should change as often as it needs to for you to achieve your vision and your goals,” he outlines.

Zynga’s mission was, and remains “connecting the world through games.”

 

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