http://money.cnn.com/2012/10/04/technology/social/zynga-outlook/index.htmlWhat do you think ZYNGA could’ve done differently to remain a successful company?
In an article from CNN, Julianne Pepitone shares some breaking news about the dynamic gaming company, Zynga, who hit the jackpot a couple years ago with their popular game, FarmVille, which they originally offered solely on Facebook. When first starting out the company flourished and became one of the most profitable gaming companies in America. Their strategy for competitive advantage in their industry is Differentiation, which offers better games, connected to a social media website that everyone in the world uses, and best of all is free of charge. Recently however, the company has gone through multiple financial and ethical struggles and has been working hard to hold on to their “loyal” users and to increase their stock share price. Unfortunately, because of CEO and founder Mark Pincus’s irrational decisions, the company is slowly burying themselves in a hole that they must crawl out of before they are in too deep.
The article starts off by sharing a couple of forecasts that the company has publicly stated, many of which are gloomy and downgraded. By blaming most of its gloomy 2012 forecast on “reduced expectations for certain web games and a delays on launching several new games,” Zynga has given nothing but excuses to its angry investors and things getting worse. With Zynga’s shares down 75% in afternoon trading on Friday, things are pretty bad
In class, we learned about forecasting and the significance of it in a successful company. Zynga’s purchase of a company called OMGPOP, which released its hit “Draw Something” early in March. If Zynga had used some kind of a demand forecast, they could’ve predicted sales of the existing product (Farmville) and prevented all the money that was lost through the buy out of the new product, “Draw Something” Although forecasting is seldom perfect, it is better to forecast and to have some kind of idea about what you’re getting your company into, then walking into something new completely blind.
Also, Zynga is infamous for buying out its competitors when they are feeling threatened. This has usually worked for them and is one of the main factors as to why they are so successful but also why a lot of people dislike them/feel that they are unethical. Unfortunately, Zynga’s CEO decided to buy the company for the sole purpose of Draw Something’s popularity and didn’t use any demand forecasts to predict future sales of the game. Draw Something unfortunately turned out to be a “short lived fad” and has cost Zynga lots and of lots money in the past couple of months. When Pincus was asked if he thought that he paid too much for OMGPOP considering its unpopularity, he calmed replied by saying”I’d say it’s too early to call it after one quarter.” Unfortunately, this nonchalant attitude will get the company going nowhere and will further decrease its profitability.
What do you believe was ZYNGA’s biggest mistake?
Would you invest in ZYNGA?