Zynga's sinking: The game moving from the desktop to mobile devices

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The trend of Zynga's share price in the past year

Lead: According to foreign media today, social game developer Zynga is behaving like a roller coaster this year, with market capitalisation shrinking by three-fourths in just 10 months, making rumours that it will be bought are rife. The four major shifts in the industry are inextricably linked to the extent to which Zynga has descended from Silicon Valley's hottest "Tomorrow Star".

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Zynga's development in the 2008 was a smooth one, and it seemed to have the perfect timing: Facebook became a "gaming portal" for users who had never played games before, and the viral growth of the site was unstoppable; Facebook Ads cost less per click, and the cost of buying traffic is cheap. Most games are played on the desktop. However, with the changing trend of industry trends, Zynga has been in the middle of this change and has not regained its vigour.

Here are four major shifts in the industry that caused Zynga's rapid fall and share price slump:

1, developers overcrowded core players are not enough

In the first few years of Zynga's rapid rise, video games were seen as a good choice for core players, while arcade games such as "Pong" and "Pac" attracted a lot of fans. But as the game becomes more and more powerful, and the development of home game consoles, the games become more and more complex, and the level of the player also increases. Mom-level players don't play "Halo" or "Final fantasy" or, more accurately, they don't.

But Facebook is basically creating a gaming platform for millions of non-gamers. Mark Pincus, Zynga's co-founder, has found business opportunities in the Mark Ping to create easy games for the mass market. This kind of game is not very difficult, all ages is suitable. But as other entrepreneurs continue to pour in, the market begins to crumble.

Over the next 5 years, players have become more and more intelligent. The hottest games are still fairly simple, but the middle-core games such as war Commander, war-strategy games, are becoming popular. Those who originally planted pigs on "FarmVille" have turned to more complex games.

2, the increase in advertising costs

Back in the 2008, Facebook's huge number of users are potential gamers, and the huge market has yet to be developed. Zynga needs to build links with these users. But brand makers are not interested in Facebook ads, and other game developers have found no potential for Facebook as a gaming platform. This means that the cost of a Facebook ad is low for each click, and you don't have to make too much money from the player to pay for it.

As a result, Zynga has made every effort to raise funds, raising $40 million trillion in a short 7-month financing rounds. Zynga then bought a lot of ads from Facebook, which accounted for up to 10% of Facebook's corporate revenues.

In the end, advertisers, brands and other game developers are starting to advertise on Facebook, with each click cost naturally rising. It was reported that in 2009, Facebook cost about $0.27 per click, and this year grew three times times more than $0.88 trillion. That is, Zynga cannot easily get new users from Facebook as before, forcing it to rely on viral organic growth, but, unfortunately, Zynga has not been able to achieve that growth.

3. Facebook limits "Garbage games"

When Facebook launched its news feeds and apps platform, it did not consider how to integrate the two products. Zynga has grown rapidly through viral marketing and has developed a unique game that users need to ask their friends to help and share in order to win the game and share it with each of their friends. This means that every user that Zynga buys through its ads uses news feeds to advertise its embedded games, at least two friends to join.

Garbage games by developers such as Zynga (Game spam) are spreading very quickly and may even devour friends ' status updates and photos, destroying Facebook's user experience. Mark Zuckerberg, Facebook founder, responded.

He said in an interview: "A lot of users like to play games, but also many users hate the game, which makes us face a huge challenge, because people who like to play games want to publish the game process-related updates in the information flow." But people who don't like games don't need these updates. So, for the sake of balance of interest we have to make adjustments, if you are not a gamer, you will see less updates, "

4, screen change small profit margin

For years, Zynga has been selling virtual goods on Facebook's desktop games, and the latter does not deduct from sales. It is basically selling a low-cost version of a virtual product, which is a real money collection and has a high profit margin. In July 2011, Facebook eventually forced all developers to adopt a credits virtual currency, which was 30%. Despite talks with Facebook, Zynga paid a slightly lower share, but still has a knock-on effect on its revenues.

In Zynga's golden age, most users visit Facebook via desktop devices, and Zynga's game is right there. But now more and more users are accessing Facebook via mobile devices. The trend has not only surprised Facebook, it has also hit Zynga.

Zynga has a free value-added model, does not develop prepaid games, and has to learn to develop games that motivate players to interact each season. In addition, while the successful landing of iOS and Android platforms, opening up new revenue channels, but Zynga must pay 30% of the cost.

Zynga tried to solve the problem through acquisitions, but it didn't work. It acquired Newtoy for the popular game "Words with Friends", but the game developer did not create much revenue for Zynga, and several founders chose to leave the company. Zynga bought the game's developer Omgpop when you drew my guess, but the deal also didn't work as expected, and Zynga was forced to write down a maximum of 95 million dollars in the third quarter.

In the rapid fall of Zynga, financial factors are certainly the culprit. The Pincus, Zynga's IPO price and timing and the failure of Facebook's IPO have set the groundwork for a slump in Zynga's share price. 10 months ago, Zynga implemented an IPO at a 10 dollar price, and after a cut in revenue forecasts, the company's shares fell another 0.23 dollars, now only 2.48 dollars.

We think Zynga can find a path to recovery, but it's not easy. Zynga may buy more popular games and launch revenue-generating programs specifically for mobile platforms. But until these goals are met, Zynga needs to stop the brain drain and look for fresh blood that identifies Zynga's mission to connect the world through games. Sail)