Zynga Finds a New Strategy to Compete in Online Social Gaming
Zynga Inc., based in San Francisco, is the most popular maker of online social games a rapidly growing and highly competitive segment of the game software and content industry. Every month, 1 out of 10 users of the Web play one or more of Zynga’s 55 games, which include FarmVille, CityVille, Zynga poker, and Mafia Wars. About 4/5 of the U.S. population, approximately 250 million people, plays its games each month.
In 2011, Zynga released its newest online game, Empires & Allies, which expanded the company’s repertoire, moving it into a new gaming arena“action and strategy” games, which have been dominated by leading game developer, Electronic Arts (EA), (whose blockbuster games include Crysis 2, Star Wars: The Old Republic, The Sims, and Portal 2). Microsoft, Nintendo, and Sony are also major developers of action games that can be played on their proprietary gaming consoles the Xbox, Wii, and PlayStation, respectively. Today, many of the games these companies develop can also be purchased and played on desktop PCs, laptops, and mobile computing devices such as smartphones and tablets.
Leading game developers like EA and Sony utilize a business model that innovates blockbuster games, which will sell millions of copies at a price of $ 50 – $ 75 each game, generating billions of dollars in revenues and profits. Each game is produced by a team of hundreds of developers, who may work for 2 years (or more) to create a new game before it is finally released for sale. The popularity of the games the team creates determines the success of established game developers ; as such, they are pursuing a differentiation strategy based on creating a unique product that can be sold at a premium price.
How
did Zynga manage to enter and successfully compete in the highly competitive social
gaming industry against giants such as EA and Nintendo? Its principal founder,
Mark Pincus, armed with only $29 million in venture capital, decided to pursue
a focused differentiation strategy to develop games using an approach that was
unique within the software gaming industry. Pincus’ approach was to start small,
and hire 20 or more game developers to work interactively in teams of 10 15
members to continuously create, develop, and then perfect new games such as FarmVille.
As each new game was launched, and revenue from online users started to
roll in, Pincus could recruit new teams of game developers. By 2011, Zynga
employed over 1,200 game developers and designers, and promoted a relaxed,
university campus like environment in which employees could even bring their
dogs to work if they chose.
