Zynga: Is the game over?

Author: Naga Damaraju, Ph.D.

Publication: Strategic Management: Text and Cases. (2021) Dess, G.G., McNamara, G., Eisner, A.B., and Lee, S.H. (10th edition), McGraw Hill.

Publication Date: January 2021

Abstract:
Zynga, incorporated in 2007 and located in San Francisco, California, had become a dominant player in the online gaming field, almost entirely through the use of social media platforms. Games like FarmVille, Words With Friends, and Texas HoldEm Poker had been among the most popular games on Facebook. To exemplify Zynga’s prominence, Facebook was reported to have earned roughly 12 percent of its 2011 revenue from the operations of Zynga’s virtual merchandise sales. However, Zynga lost market share in recent years due to the absence of an innovative product pipeline. Lack of new product-driven growth had led to uneven revenues, with significant losses—over $108 million in 2016. Even though Zynga made some strong acquisitions, this was not enough to completely reverse declines from the existing product lineup, and 2018 ended with a net income of only $15 million. To compound the problems, Zynga had been accused of copyright infringement, breach of written contracts, and, internally, it had a reputation for a risk-averse company culture that failed to reward innovation and creativity. Regarding its users, complaint resolution consisted of email-only support, and there was concern that customer information was not being properly protected against unauthorized access. To make matters worse, Zynga had four CEO changes since 2013, with the most recent one, Frank Gibeau from Electronic Arts, taking charge in March of 2016, now expected to turn the company around. By 2019, Zynga had only one game, Texas HoldEm Poker, in the top five virtual-gaming rankings, with users increasingly choosing to play King Company’s Candy Crush Saga and others. With all the criticism aimed at Zynga’s past behavior, will the company be able to change its approach, acquiring new titles and rights, developing new games and showing its capabilities as a leader in the industry rather than a follower?