Over the past year or so, Zynga has lost a lot: customer enthusiasm, stock value, uniqueness, employees, profit, their strategic partner and even their minds. This quarter they have lost the biggest thing they still had - their title as social gaming king. The salt in the wound is that they lost the title to a small gaming company called King.
Zynga has almost 3,000 employees, while King has only 400, yet their games have more daily active users than Zynga and, probably turn a significantly higher profit with such little employee overhead. Zynga has had a good run getting to that 3,000 employee mark, joining the Facebook application platform immediately upon launch in May of 2007. They have essentially created an industry around themselves, purchased high-profile companies and even tangled with the big boys in legal action. Many of their games are so big they are household names - Farmville and Mafia Wars being the best examples.
We have seen a lot of companies come and go - including EA-owned studio Playfish, which is currently leaving the market entirely. That shutdown is not entirely Zynga's doing, though. King has had a big hand in their demise, as their growth has clearly cut into everyone's active user count. CEO Riccardo Zacconi said of the transition,
King now has more than 66 million daily players of our games, and in Candy Crush Saga, we have a global hit on Facebook and on mobile. Our players love being able to switch from mobile phone to tablet computer to PC without losing their progress in the game - the cross-platform synchronization that makes that possible is a big reason for our popularity. Our bite-size games are perfect for coffee breaks, bus journeys, or any spare few minutes in your day.
The build-up wasn't quick, but it was calculated. Transitioning from tournament games to social games in 2009 with Candy Crush Saga started a trend, and King knew how to capitalize on it. They recognized long before Zynga or EA that situational games were no longer what was wanted, but instead quick-hit games like PopCap's Bejeweled were becoming popular. Games that you could get in and out of in a few minutes. Zynga's OMGPOP studio recognized this, but it never made it into the primary studio in a timely manner, and with that mistake, King expanded.
Another advantage king had was not being bound to Facebook. Their mobile offerings, like Bubble Witch Saga helped get the name out, and was the final step in outperforming Zynga at its own game. King focused on engaging new players, while Zynga merely relied on a percentage of Facebook's growth to join, which has backfired as Facebook's growth has slowed.
Zynga COO, and possible turnaround savior, David Ko is optimistic about the challenge from King,
The way I look at it is, we have a belief that social gaming is a huge opportunity. Not only from the estimate that it is a $9 billion market but also from what we're seeing in the marketplace. Competition like this just reinforces the opportunity. My biggest thing is, I want to make sure that we're confident that you're going to see more of our franchises in that mix.
Competition drives innovation, but only if a company can be innovative. We will see if Ko is the visionary to steer the ship or an optimistic lunatic that will end the company. Either way, congrats to the new king, King.