Zynga CEO: Playfish Helps EA 'Catch Up'

Posted by: Douglas Macmillan on November 10, 2009

Mark Pincus has become the poster boy for the booming business of social online games. His company, Zynga, brings in more than $100 million in annual revenues, and owns the most popular Facebook app of the year, FarmVille. Zynga is even considered by analysts and observers to be a candidate to go public next year.

So what does Pincus make of video game stalwart Electronic Arts recently scooping up Playfish, one of Zynga’s top rivals, in a deal that’s worth up to $400 million? He says EA paid a justifiably high price to enter the social gaming space. “The founders got a really good cashout, and EA got to catch up to a business that they had kind of missed the start of,” Pincus says.

Zynga may benefit indirectly from the marriage, since EA marketing savvy could bring more attention to the social gaming space, he says.

Pincus isn’t worried about Playfish’s newfound access to more capital making it a stronger competitor. But he admits that EA’s popular game brands including The Sims and Madden have a lot of potential in the social gaming space. “There’s a good chance for them to try to leverage EA’s major brands and take Sims and other [games] into the market,” he says. This could be a “risk” for Zynga and others that don’t have a stable of recognizable game franchises to draw on, Pincus says.

EA never talked to Zynga about the possibility of an acquisition, according to Pincus. "They apparently didn’t want to buy us," he says. "They might have realized that we weren’t interested in being acquired." Or, EA might have assumed the price tag would have been too high to bother. If Playfish was worth $400 million with 60 million active users, analysts estimate Zynga, with 186 million users, may already be worth over $1 billion.

Pincus shrugs off speculation that Zynga is coming due for an IPO. "Why would we sell it or why would we take it public if neither of those options accelerated our business plan?" he asks. Even though a public offering would give Zynga cash to make deals of its own, Pincus thinks the constant scrutiny of Wall Street would threaten the company's innovative, entrepreneurial structure. That echoes the sentiment he conveyed last month, when I interviewed him for a BusinessWeek cover story on The App Economy.

Recently, Zynga has been brought to task for promotional offers made inside its games, offers which account for less than 20% of revenues. As the blog TechCrunch reported Oct. 31, many of these offers reward users for signing up for unwanted contracts and subscriptions. Since then, Pincus has pledged to put each offer in Zynga games under more scrutiny, and remove those that appear to be "misleading," he says. "We have to try to police them."

Policing is hardly what the company was doing before. Pincus claims he personally never knew about the more seedy offers in FarmVille and other games, since he spends most of his time building products, not revenues. "We have one person who deals with offer networks and it’s not even a full time job," he admits. Still, the entrepreneur adds that his ignorance of the matter is "not an excuse."

He’s certainly paying attention now. And with EA’s marketing muscle behind Playfish, he’ll need to keep closer tabs on the competition too.

Reader Comments

Seraphimia

November 11, 2009 6:05 PM

I think it speaks volumes about the quality of Playfish over the number crunching objectives of Zynga, even more so now that EZ have picked their winner. Playfish games are such better quality games compared to Zynga and the latter is clearly driven by the kaching rather than the users or quality coding, churning out copy cat games like there's no tomorrow.

Krystal

November 12, 2009 10:29 AM

I refuse to play anything Playfish now that they've been scooped up by EA. I've been on an EA boycott ever since The Sims 2 and their policy on sites charging for user created content. I play Farmville strictly for free and will continue to do so.

ballzini

November 12, 2009 1:00 PM

I think all 3 of these social network game companies are all hype, little substance. EA makes another brain-dead acquisition, and Zynga has an excuse to go hire another 25 chefs. I think all these young founders missed the Internet bubble, and all the lessons they should have learned: Don't buy revenue, Don't base your business model on another company's yet-to-be-proven business model (facebook and their apps), Build culture from cashflow not VC's checkbooks

Chris

November 17, 2009 6:10 PM

It will be fun watching these nickel and dime social networking games go down in flames once the leads start drying up and they get desperate.

Cantio

November 28, 2009 4:56 PM

You may all be right, only time will tell and in the meantime, they are offering a something that is clearly in demand at the moment and making a nice profit doing it. If it dries up, they will just move on to the next endeavor. None of the individuals behind these companies is new at entrepreneurship. They have ridden the wave successfully to the end before and then jumped onto the next one. That is what they will do again and again. This is "The American Dream", take your knowledge, experience, passions and figure out how to make them profitable. Have they made mistakes along the way? Sure, that is to be expected, but they took a risk, put themselves out there and did something. How many of us can say the same?

peter

November 29, 2009 7:34 AM

Zynga consist of low grade coders for their games. they wont acknowledge and fix their bugs. example fishville friend list bug. after 10 business days and still no one from Zynga announcing a fix for the bug. their forum is full of complains but they just ignore.

Zynga is not players oriented, they are more focus on making money.

Playfish is the real social game developer. Higher quality games with more depth. They do not need to advertise madly like zynga (spending more than one third of their revenue to advertise on facebook).

Any smart company will know Zynga is a bad buy. The team behind Playfish is way better thatn Zynga's.

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Bloomberg Businessweek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, and Douglas MacMillan, dig behind the headlines to analyze what’s really happening throughout the world of technology. Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.

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