Commentary
Another Zynga Exec Quits
- by Erik Sass , Staff Writer @eriksass1, September 11, 2012
Things are not looking up for publicly-traded social media companies, which will almost certainly discourage other firms (Twitter) from going public in the near future. In the most recent round of bad news, Zynga has lost yet another top executive, with the resignation of chief marketing officer Jeff Karp, while Pandora has suffered a brutal stock slide following news that Apple may launch a competing digital radio business, and Facebook’s stock price remains in the doldrums.
Karp’s resignation from Zynga follows a series of other high-profile departures, which, it is probably safe to assume given the company’s misfortunes, were not entirely voluntarily. In August alone the casualties included chief creative officer Mike Verdu, chief operating officer John Schappert, and several important vice-presidents with responsibility for marketing and production. The list leaves little doubt where the company’s troubles lie: it’s under financial pressure in part because of the need to keep churning out engaging games, which attract new players but also cost money to develop. At the time of writing, Zynga’s stock was trading at $2.83, down from $2.95 earlier this month and $14.69 in March of this year. Who ever thought making games could be so stressful?
Pandora is also taking it on the chin, as investors fled the stock following news that Apple is planning on launching its own digital radio service. While some stock market movements are irrational stampedes, this time the panic was probably justified, considering that Apple -- the world’s biggest company by valuation, with a war chest of $100 billion -- can install its competing service on every single device it sells, and update earlier devices without much trouble. Pandora’s stock price plunged from a high of $12.57 on September 6 to $9.73 at the time of writing.
Then there’s Facebook, which doesn’t have any fresh bad news to bemoan (that I’m aware of, at least) but whose stock continues to languish under the $20 mark. At the time of writing it was trading at $19.41, or just about half of its IPO price of $38. Whether the stock price rallies depends in large part on Facebook’s plans for monetizing its growing number of mobile users, which so far remain mysterious.
Erik Sass is editor of Publishers Daily. You can reach Erik at eriksass@gmail.com.
All these troubles are indicative of infant stage development. Social media, despite its rapid rise, is still in beginning iterations, and there will be casualties along the way as these start-ups learn how to monetize their ideas long term. It is important for these companies to bring in marketers during the development stage of the "idea" so that revenue is part of the project from the ground up. Companies like Zynga are now left saying, "we built some awesome games, but now how do we make money off of it?"
I'm not sure if you've played Zynga games, Eric, but Zynga is NOT one of those naive companies. As a (former) player of their games, I can testify they are experts in engaging players with great game-play and fun, whimsical graphics, characters, and story lines, and comfortable pacing of missions and plot advancement... initially.
Soon after the player is invested in the story and the achievements, however, it becomes almost impossible to keep up with the game (never mind advance in it) and achieve goals/missions without spending far more time than most people have, or - and here is the key - spending real cash to accelerate or skip altogether some of the most tedious tasks.
No, Zynga has the formula down pat and wields slick expertise in monetizing their games. They know what to do (and they make plenty of money).
What they can't do to save their own lives, though, is find the right balance between keeping the paying players engaged and overwhelming them with too many tasks and charging too much so they give up. Zynga always errs on the side of greed, killing their golden geese.
Note I said I am a former player. : )
Zynga is crippled by bad management. Their founder just quit which means that there is both hope in the company (he was a naive tyrant unrespected by all), or despair (game development costs are prohibitive with or without Facebook as a customer funnel.
As for Apple and Pandora, comparing them is like "apples" and oranges. Pandora's real value is not the list of songs that can be accessed (Spotify will give Apple more of a real competition, keep your eye on Amazon and watch Google's experiments with music streaming, perhaps through YouTube).
Pandora has a large staff of paid and volunteers who apply their skills to determining how songs relate across artists using complex statistical and qualitative algorithms. Creating a music list around an artist connects to songs from other artists in the same genre.
As a mathematician, it know it would take Apple a long time to replicate such a model and it is not a good fit to the iPlay platform.