While Zynga has seen huge success in recent years with Words With Friends, the company remains synonymous with Farmville, the Facebook game with which it made its name. Like many incumbent businesses Zynga was slow to pivot to the new thing, in this case mobile games, and for many years was left behind by the likes of Rovio, Supercell and King.
Over the last few years, though, it’s performed an impressive turnaround. Buying up successful mobile game studios and taking them to greater heights under its wing. A strategy that had it claim it was one of the fastest growing games companies in the world, backed up by a whopping 61 per cent uplift in revenue for 2019.
Behind that growth lies four ex-EA executives: Zynga CEO Frank Gibeau, who had 20 years at EA overseeing its top franchises, CFO Gerard Griffin, COO Matt Bromberg, and Bernard Kim, president of publishing, who spent a decade at EA, and takes the time to discuss Zynga’s M&A and IP strategy with MCV/DEVELOP.
“Zynga has been on a roll with regards to doing really smart acquisitions in the marketplace,” starts Kim. “And our vision around this is focused on companies that have very strong live service businesses.”
He namechecks three acquisitions in particular: “Gram Games has Merge Dragons. They just launched Merge Magic at the end of last year, which has performed really well for them, a really strong, stable live service business that continues to grow.
“Small Giant Games has Empires and Puzzles which has quickly become one of our top grossing games. This is a steady live service business that continues to deliver.
“And then Peak Games has a portfolio of card games that just continues to steadily and consistently drive both fantastic features for players and revenue as well.”
Zynga has undeniably made some smart investments then, and Kim explains how it went about selecting these particular companies. “We meet with a lot of companies,” he begins, but it’s in an increasingly fortunate position. “What’s exciting about Zynga and the improvement of our reputation in the marketplace is we actually receive a lot more inbound – companies that want to be part of Zynga.”
Lucky them. But even with that advantage, Zynga has to bring something to the partnership in order to increase the value of these already successful companies beyond what they’re currently generating.
“We have deep product management knowledge, we have data platforms, we have a strong publishing platform as an organisation. We sit down with the management teams of these companies, and we basically talk about the challenges and the opportunities that we have as companies, independently, trying to break out in the mobile games space, which is super competitive.
“The performance of these companies has only become better after the acquisition, we use a term internally: stronger merged. There’s a great feeling where you can be part of a larger family, you’re sharing best practice, everyone’s going through similar types of challenges in the marketplace. And we can share as a team going into the marketplace versus doing it alone.”
“We are sitting on a lot of cash. Our goal is to continue to put that cash to good use.”
And speaking more specifically Kim tells us: “In a very low pressure way, we basically offer a dashboard of services. And so they might say, ‘Hey, we would love for your beta team to come in and look at our economy in a specific live service’. And we’ll fly in our data scientists from San Francisco or from Austin. And they’ll sit down with management teams and go through a bunch of recommendations of things that could happen in the game. Or they might say ‘hey, we need help building a dashboard to help visualise some of the stats that are coming in every single day. Or maybe ‘you guys can help us with platform partnerships with Apple and Google’. We’re happy to help in all of those different ways.”
Some care must be taken, though, to not snuff out the culture of the studio, which is what generated the initial success that attracted Zynga’s attention.
“Absolutely,” Kim agrees. “Here’s an example, we bought Small Giant Games and virtually nothing has changed at the company when it comes to culture and structure, they even publish games under their own moniker, which was something that we wanted to protect. That’s why we’ve spent, ‘X’ dollars [reportedly $560m in this case] buying these companies, we’re buying the expertise and the culture, that’s not something we want to mess with.
“The same goes for Gram Games, they’re still publishing under their own brand. They have a very different development structure than the rest of Zynga and we want to continue to nurture that and help them thrive and in some cases, we stay very far away from the culture that those companies have developed over time.”
And such acquisitions are set to continue, Kim tells us: “With regards to Zynga’s core business, our financial fundamentals are very strong and we are sitting on a lot of cash. Our goal is to continue to put that cash to good use.”
Of course, M&A is only one pillar of Zynga’s continued growth, with the expanded company now set to launch a range of big titles, including some of the biggest IPs around.
With EA executives in key roles at the company, it comes as little surprise that Zynga is working on both Harry Potter and Star Wars titles, with the EA veterans being familiar with both franchises, of course. And while EA may have once had exclusive rights to their console iterations, mobile has always been a more competitive space when it comes to licensing. “I spent 10 years in Electronic Arts and worked on a lot of the licences, and a lot of those licences were not exclusive. We launched Star Wars Galaxy of Heroes, and it was up against maybe ten other mobile games in the marketplace.”
Zynga’s upcoming Star Wars title, which is yet to be named, has been in development since late 2018 by NaturalMotion studio BossAlien in the UK. When it does appear, it will certainly have plenty of other Star Wars games for company.
“We have absolutely no problem going into a marketplace and working with a little competition, for our management team competition is what drives us on a daily perspective. We don’t fear competition, we actually get pretty excited about it and step up to those challenges,” states Kim confidently, and on Zynga’s approach he adds: “It’s defined around great products and then great marketing and publishing.”
The new game has been described as a mid-core title, something a bit more involved than the casual games that Zynga is well known for: “The studio team has experience launching mid-core experiences. And we’re really excited about the gameplay and melding that together with an intellectual property that we also believe is going to stand the test of time.”
Before we see that title, another big IP is already in soft launch, Harry Potter: Puzzles and Spells. A match 3 game that is squarely back in the casual market.
“So when it comes to demographic, we’re literally going after everyone,” says Kim, and early footage of the game from its technical soft launch in the Philippines backs that up, with players matching shapes and casting spells within seconds of the game launching.
Kim is keen to distance it from other Harry Potter titles currently on the market: “This isn’t going to be an experience where it’s required that you spend three hours playing the game, or you have to run down to a park or anything like that.
“We’re really excited about what players can do in a match 3 experience and our goal is to make the game approachable, easy to get in, easy to get out of. And so if you want to spend 30 seconds playing the game, you can, if you want to spend three hours playing the game you can. And of course, it’s free to play so everyone can jump in.
“We’re pretty selective when it comes to which IP we bring into Zynga. We believe that the Harry Potter franchise and the iconic characters and stories are going to be around for a very, very long time.” He also notes Zynga’s previous partnerships with Warner Bros and Portkey Games (which oversees Harry Potter titles): “We’ve also worked closely with Warner Bros on Willy Wonka and Wizard of Oz.”
Working with highly-prized IPs does come with its own set of challenges when compared to home-brewed titles, though, as you can’t publicly iterate and test in the same manner.
“When it comes to large IPs we [still] actually create a tonne of prototypes and playables, we move really fast. But we don’t test them in the open marketplace. We test them with our own employees. We have a very vibrant and passionate group of gamers. And so we actually test them internally on our own platform. And that’s how we go about understanding what would work in the open marketplace. We do then test them often and early in the marketplace until we feel very comfortable with where gameplay is.”
Beyond the likes of Star Wars and Harry Potter, Znyga actually has its own big IP, the one that made the company: Farmville.
“When you think of Zynga, you think of Farmville as a franchise,” agrees Kim. “And we’re really excited about this new version built just for mobile: Farmville 3. We really believe that we brought the best parts of the original Farmville, but it’s been reinvented with more mobile and social mechanics that I think are going to delight players.”
As well as that of course, it has a big name recognition advantage, and no IP-sharing competitors to deal with, which hopefully should lead to more organic player growth, thereby saving on some of the costs that come from user acquisition.
“When it comes to Farmville, there’s very few franchises in the world that have experienced a billion downloads or play sessions, it’s pretty incredible and people have a great memory of playing Farmville in the past.” And that memory should help the game grow right to the top of the charts, or at least it would have done until recently.
The app charts are now dominated by the growth in hyper-casual titles. So we ask Kim if Zynga is interested in the space, either as a means in itself, or as a way to onboard a different audience to its core titles?
“Yeah, it’s something that we are keeping a very close eye on. Every single morning, the thing that I look at is the top free charts and the top grossing charts. And, as you know, the top free charts are highly populated with hyper-casual titles.
“These are great experiences where people can jump in, jump out, there’s no first-time user experience, you either understand the gameplay or you don’t, and you can trial a lot of different game play.
“It’s a genre that we think is not going away. And we actually have some titles in soft launch, as well as some titles that are going to be going out globally, that are right in this space. And we’re also developing internally and externally, so it’s a genre that we’re closely monitoring and we feel positive about,
Other areas for growth he notes are emerging markets, 5G and streaming: “I think that traditional markets continue to steadily grow. But we see emerging markets for Zynga. And of course, when I say emerging markets, it’s a market emerging for Zynga, so Asia for Zynga could be a big opportunity for us.
“We also see potential new platform growth with the arrival of 5G and streaming as big opportunities for the business.When it comes to positioning Zynga, like you mentioned, we are a mobile-first company, the majority of all of our revenue and engagement takes place on mobile platforms. We continue to see that platform grow both in adoption and organic growth. But we really believe we’re well positioned for emerging platforms as well, especially as the technology continues to increase and mobile devices become more advanced. And then streaming is going to just drive even more opportunities for higher performance games. So we’re really excited about that.”