Zynga social game players will be able to log in to the new gaming site via Facebook. The company retained the Facebook login option to ensure that existing gamers continue to have the best gaming experience without having to start from scratch
Zynga Inc (NASDAQ:ZNGA), the social gaming company that has relied on Facebook Inc (NASDAQ:FB) for most of its revenues, has taken one more step to distance itself further away by relaunching its website on Wednesday. Now the FarmVille publisher will allow users to play Zynga games without having to sign in with their Facebook ID and password – which had been a hallmark of Zynga games so far.
Zynga began operating its new gaming site on Wednesday, March 20, 2013, separating itself from Facebook once and for all (Click Image To Enlarge)
Founded in 2007, the company went too close to Facebook Inc (NASDAQ:FB). The two companies enjoyed a strong symbiotic relationship for years. Almost 90 percent of Zynga Inc (NASDAQ:ZNGA)’s revenues come from Facebook games, while the Menlo Park-based social networking site earned about 15 percent of its revenues from Zynga games.
In the process, Zynga Inc (NASDAQ:ZNGA) became so dependent on Facebook Inc (NASDAQ:FB) that its fate was tied to rise and fall of Facebook. We have witnessed that several times in the past.
Zynga inc (Blue) and Facebook Inc (Red) - Share Price Comparisons Since Respective IPO Dates - Google Finance (Click Image To Enlarge)
Zynga Inc (NASDAQ:ZNGA) began losing its competitive advantage as other gaming companies flocked to Facebook. It was then that Zynga realized its fault for not diversifying its business outside of Facebook site. A few months ago, Facebook Inc (NASDAQ:FB) amended the deal that used to give Zynga Inc (NASDAQ:ZNGA) special privileges on the social networking site. That deal had also prevented Zynga from partnering with other social networks.
Starting next week, you will see a modified Zynga.com website. Zynga Inc (NASDAQ:ZNGA) general manager Tim Catlin told Reutersthat changes have been made after receiving feedback from players. They wanted to create their unique gaming names which are not tied to their real names displayed on Facebook. Using a separate gaming name is a plus for players who usually don’t want to reveal their real identities. Some other gamers wanted to play with complete strangers, not just friends.
However, players will still be able to log in to the gaming site via Facebook. The company retained the Facebook login option to ensure that existing gamers continue to have the best gaming experience without having to start from scratch.
Facebook Inc (NASDAQ:FB) and Zynga Inc (NASDAQ:ZNGA) both owe their initial financial success to each other, but they both want to diversify. That doesn’t mean a divorce, of course. Zynga and Facebook Inc (NASDAQ:FB) still earn a healthy part of their revenues from each other, and they still want a healthy relationship.
Zynga Inc (NASDAQ:ZNGA) shares were up 2.36 percent to $3.43 at 12:35 PM EDT
COMMENTARY: Zynga (NASDAQ:ZNGA) finished trading at $3.41 per share (down .01). I think this is a very risky move for ZYNGA because it may not be able to tap into those 1 billion Facebook users like it did before. On the otherhand, Zynga no longer has to pay Facebook a 30% cut of revenues generated on Facebook. Zynga game apps no longer run on the Facebook platform, but it provides a link to the new Zynga.com social gaming site. I looked earlier today, and there were 1.5 million gamers online.
Courtesy of an article dated March 22, 2013 appearing in ValueWalk
Berlin, Germany-based Facebook Inc (NASDAQ:FB) application metrics provider AppStats has examined the top social games in 2012, and states that Zynga Inc (NASDAQ:ZNGA) is both the biggest loser and the biggest winner of the year.
AppStats revealed that Zynga Inc (NASDAQ:ZNGA) has ‘lost’ over 19 million daily active users during the year 2012, ranging over 7 games. On the other hand, Zynga Inc (NASDAQ:ZNGA)’s Farmville 2 game is also the largest gainer of 2012 with 8.4 million new daily active users since its launch. AppStats also observed quite a few new developers entered the list of biggest gainers in 2012.
Winners
The winners include Candy Crush Saga from UK-based King.com, taking the second place in that list after Zynga Inc (NASDAQ:ZNGA)’s Farmville with an upsurge of 7.3 million daily active players this year. Yesterday, AppStats also put the finishing touch to King.com the Social gaming king of the year.
Spanish developer, Social Point’s adventure-filled game Dragon City was ranked third with 4.6 million daily active users. Social Point was founded in 2008.
SongPop, a widespread game by green developer Freshplanet, has been able to attract a large following in 2012 and ranks sixth on the list of biggest gainers of the year. Rovio’s Angry Birds Friends also succeeded to be included in the top 10 games. Angry Birds was ranked at the ninth place.
Social Game Winners for 2012 (Click Image To Enlarge)
Losers
Zynga Inc (NASDAQ:ZNGA)’s presence in the list of losers is quite noticeable when we look at the biggest losers of 2012 in games category. It has been a dreadful year for the company in many ways, and it won’t help that the top 3 ranks in the series of leading losers of 2012 in terms of daily active user diminution are held in reserve for CityVille, CastleVille and FarmVille.
Overall, Zynga Inc (NASDAQ:ZNGA) games takes 7 out of the 10 places in the top loser’s data with total losses capitulating to over 19.1 million in the top ten. As AppStats reveals in its report, Zynga Inc (NASDAQ:ZNGA) is generally challenging itself: the drops in daily active players come primarily from games like CityVille and Farmville, both of which have released a sequel in 2012. According to AppStats, Electronic Arts game ‘The Sims Social’ ranks as the fourth biggest loser of 2012 with a total loss of 2.4 million daily active users.
It will be worth watching as to how its new games perform in 2013, with competition growing up intensely, particularly from European social game developers.
Social Game Losers for 2012 (Click Image To Enlarge)
COMMENTARY: In a blog post dated December 3, 2012, Zynga announced that it was cutting its ties with Facebook and will begin hosting its games on its own social network. For nearly two years, Facebook has exercised just too much control over Zynga, and takes a 30% commission from every dollar spent on virtual goods by Zynga game players. This has always been a bone of contention for Zynga CEO Mark Pincus.
For the nine month period ending September 30, 2012, Zynga has coughed up approximately $275 million in commissions to Facebook. For the calendar year ending December 31, 2011, Zynga paid Facebook $330 million in commissions. If Zynga hosted all its games on its own social network, Zynga would've generated a profit of $114.22 after-taxes.
In a blog post dated June 29, 2012, I commented on Zynga's announcement that it was developing Zynga With Friends, its own social network. In that post, I was very critical of Zynga's inability to generate new hit games comparable to Farmville and Mafia Wars, and its inability to retain gamers.
Zynga's departure from the Facebook platform will negatively impact Facebook because it will have to replace those revenues with advertising or its own games (something it is rumored to be doing). Based on the latest forecasts, revenues from social games represent about 9% of total revenues.
In previous blog posts dated June 12, 2012.and July 18, 2012, I described in great detail how Zynga's users are ditching it for other online gaming destinations, and that monthly active usage has plummeted to record lows. This information correlates with AppStats's findings for the year 2012. Zynga will probably make the transition from hosting its games on Facebook to its own social network over several months (probably well into 2013).
Courtesy of an article dated December 20, 2012 appearing in ValueWalk
Zynga Inc (NASDAQ:ZNGA), according to news released today, will no longer receive special treatment on Facebook. The market responded poorly to the news, the firm’s shares dropped by around 13% before recovering later on in the day. Zynga Inc (NASDAQ:ZNGA) stock now stands at around $2.50, down just 5%.
Zynga Inc (NASDAQ:ZNGA) share price as of morning of December 3, 2012 - Google Finance (Click Image To Enlarge)
So is the announcement really that bad for Zynga? Our own analysis published earlier, framed the announcement as a move by Facebook Inc (NASDAQ:FB) to distance itself from Zynga as the firm’s fortunes change. Zynga Inc (NASDAQ:ZNGA) was not always seen as Facebook’s little brother, however. A look at the history of the relationship between the firm’s is certainly worth the effort for investors.
Zynga Inc (NASDAQ:ZNGA) released its first Facebook game, Zynga Poker, in July of 2007. It wasn’t until 2009 that the firm’s fortunes, and its relationship with Facebook Inc (NASDAQ:FB) really took off. In April of that year Zynga became the social networking site’s top developer. In June it released Farmville.
That game, and those related to it, have been the real jewels in Zynga’s crown. The company has relied on the freemium model perfected in those applications to supply it with revenue. In June of 2012, Facebook saw the advantages of social gaming and laid out a five year partnership with Zynga Inc (NASDAQ:ZNGA). That partnership was dissolved today.
It was just weeks before that deal was signed that Zynga threatened to leave Facebook altogether. The firm had set itself against the Facebook credits model of monetization, but after negotiations in which it was guaranteed a competitive advantage over other game developers, the company joined hand in hand with Facebook Inc (NASDAQ:FB).
During that conflict, Zynga CEO Mark Pincus announced that Zynga Inc (NASDAQ:ZNGA) would launch its own social network dedicated to gaming. The terms of today’s deal would allow them to do just that. It gives them the same freedom as any other application developer on Facebook’s platform.
The deal announced today is a preliminary decoupling of Zynga’s fortunes from Facebook’s and vice versa. The companies are still highly connected, however. Zynga Inc (NASDAQ:ZNGA) provided Facebook Inc (NASDAQ:FB) with around 14% of its revenue in 2011. There are no other social networks with the ability and user base to give Zynga a strategic impetus to leave Facebook.
There are several ways to interpret the deal.
This is an attempt by Facebook Inc (NASDAQ:FB) to distance itself from a dying company.
This is an attempt by Zynga Inc (NASDAQ:ZNGA) to protect its future plans from Facebook’s control.
The company’s first game, Zynga Poker, is being touted as the company’s saving grace by some analysts. If Internet poker is legalized in the United States, the company could begin to multiply its revenue in a very short period of time. If Zynga Inc (NASDAQ:ZNGA) were to take full advantage, Facebook Inc (NASDAQ:FB) might be an impediment.
Denying Facebook Inc (NASDAQ:FB) control over the firm’s activities is a sensible move in the current atmosphere. Allowing exclusive hosting of the company’s games to the social network would leave online poker revenue taxed, and might result in other obstacles.
Today’s agreement will be viewed differently depending on the company’s future success. It could be the day the firm began to die, or it might be the day the firm finally threw off the shackles of Facebook. The interpretation will depend on the company’s management, and the decisions they make.
COMMENTARY: It's about time that Zynga permanently cut its ties from Facebook. Facebook exercised just too much control over Zynga, and takes a 30% commission from every dollar spent on virtual goods by Zynga game players. This has always been a bone of contention for Zynga CEO Mark Pincus. For the nine month period ending September 30, 2012, Zynga has coughed up approximately $275 million in commissions to Facebook. For the calendar year ending December 31, 2011, Zynga paid Facebook $330 million in commissions. If Zynga hosted all its games on its own social network, Zynga would've generated a profit of $114.22 after-taxes.
In my opinion, this is a win for Zynga for the reasons given above. Zynga will also be able to retain all of the ad revenues running within its social games, and not have to share anything wth Facebook.
On the negative side of the ledger, cutting its ties from Facebook carries numerous risks. It no longer has access to those 1 billion users. It will have to find a way to get its users to switch over to its new social network where the games will be hosted. Social gaming has peaked and Zynga has failed to create new big winning games like Farmville and Mafia Wars. Like Facebook, Zynga has to switch all of its games for use on mobile devices so that it can game back users lost from the desktop. In previous blog posts dated June 12, 2012.and July 18, 2012, I described in great detail how Zynga's users are ditching it for other online gaming destinations, and that monthly active usage has plummeted to record lows. Zynga will probably make the transition from hosting its games on Facebook to its own social network over several months (probably well into 2013).
Monthly active users are up year-on-year by 37 percent with 311 million compared to 228 million in Q3 of 2011 and up 2.3 percent from Q2 2012′s 304 million MAU. Daily active users are up 10 percent at 60 million from 54 million from this same quarter last year, but down 16 percent from Q2 2012′s 72 million and down 3.3 percent from Q1 2012′s 62 million. Meanwhile, monthly unique users are up 27 percent year-on-year from 151 million to 192 million, up 5 percent from Q1′s 182 million. Monthly unique users are up 17 percent year-on-year from 151 million to 177 million; this is down 7.8 percent from Q2 2012 and 2.7 percent from Q1 2012. Monthly unique paying players were down from 4.1 million in Q2 2012 to 3 million in Q3 2012.
Zynga Monthly Active Users, Daily Active Users and Monthly Unique Users - Q1 2010 through Q3 2012 - Zynga (Click Image To Enlarge)
Zynga will have to wait until the individual states legislate legalized online gambling before it will ever make a significant amount of revenues from its Poker game. Zynga will probably need to partner with another major player in the gambling sector, and this is going to take sometime to negotiate, plus it may have to pay another commission. Zynga will also have a lot of competition to deal with in the legalize online gambling market, so there is no guarantee that it will make buckets of cash from legalized online gambling.
In a blog post dated October 8, 2012, I reported that Wall Street differs on how the collapse of Zynga will affect Facebook's share price. It certainly will affect Facebook's revenues beginning in 2013, when it is anticipated that Zynga will begin hosting its games on its own social network. In 2011, social games represented 14% of Facebook's total revenues. The effect will be a lot less in 2013, but it remains to be seen whether Facebook can succeed in fully maximizing the potential from monetizing mobile. So far Facebook's stock has rallied from a record low of 17.72 on September 4, 2012 and has climbed back to 27.85 as of today (10:30 am PST).
Courtesy of an article dated November 30, 2012 appearing in ValueWalk and an article dated November 30, 2012 appearing in ValueWalk and an article dated October 24, 2012 appearing in Inside Social Games
From its aerie in sylvan Finland, Rovio gave us Angry Birds. Now it wants to be the Disney of the Internet age.
For more than 200 million people every month, Angry Birds land is a state of mind: a digital immersion in addictively cheerful destruction, a refuge from the boredom of subway commutes and doctors' waiting rooms, where the fine art of sling-shotting tiny, brightly hued birds at wooden fortresses to vanquish pigs taking shelter inside makes eminent sense and is incredibly gratifying.
Over the past three years, this not-so-peaceful pastime has amassed legions of followers, incited fierce battles between parents and their tablet-weaned children, and won professions of love from the likes of Justin Bieber via Twitter and Dick Cheney on the Today show.
Rovio CEO Mikael Hed, and his cousin Niklas Hed play with some of their merchandise menagerie at company headquarters in Espoo. | Photographs by Markus Henttonen (Click Image To Enlarge)
But what I'm experiencing now is not just a state of mind. I am being hoisted 50 feet up into the clean air of Tampere, Finland, and as I rise, I gaze upon the physical manifestation of Angry Birds mania: a carousel ride with the familiar red fowl as mounts, bouncing up and down as if in flight; a soaring, wooden-framed play area with winding tubes, slides, and monkey bars; giant, spherical green hogs with bulging eyes, perched above replicas of small towns with attractions like the Pig Popper, which lets visitors shoot swine with plastic balls for prizes. And then, as I'm suspended over the real Angry Birds Land here at Säerkäenniemi Amusement Park, the upward trajectory of my drop-tower ride stops with a jerk--at which point, like many a phenomenon that has reached its zenith, we plummet to the ground.
Espoo, about 100 miles south of Tampere, Sweden doesn't feel like the kind of place that would spawn the next major entertainment franchise. It is a supremely peaceful city and, though only about a half-hour drive from the Finnish capital of Helsinki, surrounded by a vast pine forest. Yet Espoo is home to Rovio, the creator of Angry Birds, which, since its debut in the Apple App Store in December 2009, has set the standard of success for mobile apps. The game notched 50 million downloads in its first year and sat atop the paid app charts for 275 days. Angry Birds Space, a follow-up that features pig-popping birds amid distant planets and galaxies, rocketed to the No. 1 spot in the App Store in 116 countries after its release in March and recorded the fastest launch of any mobile game, with 50 million downloads in 35 days. Along with two other sequels, Rio and Seasons, the Angry Birds menagerie has been downloaded more than 1 billion times.
Angry Birds Merchandise By Steve Heisler These lovable if not emotionally unstable fowls have shot from iOS purgatory into the marketing utopia of band-aids, doggy toys, and Cheese Nips. We sought out to test the old maxim: Is an Angry Bird in the hand(held device) worth two pairs of children’s underpants in the bush? The culprits, stars earned for brand ambassadorship:
Angry Birds Merchandise (Click Image To Enlarge)
Now Rovio wants to build on its App Store superstardom. In August, when I meet with its management team--Mikael Hed, the company's CEO; Niklas Hed, its founder; and Peter Vesterbacka, its chief marketing officer--the company is working on several app projects: Angry
Birds Toons - A weekly series of animated shorts spun off from the promotional trailers Rovio posts on its wildly popular YouTube channel (which boasts more than 750 million views).
3-D Animated Movie - Secheduled for release in 2015 or 2016 (to be executive-produced by David Maisel, the guy who sold Marvel Entertainment to Disney, in 2009, for $4.3 billion).
Rovio is solidifying its status as a merchandising giant, with nearly 40% of its roughly $200 million in revenues coming from its licensing operations.
To support these plans, it has ramped up employment from 28 last year to more than 450 today, staffing a growing number of departments with names like books and learning, animation, and consumer products. Besides Tampere, the company has opened offices in Shanghai; Stockholm; Tokyo; Seoul, South Korea; and Santa Monica, California. Tellingly, Rovio has changed its name from Rovio Mobile to Rovio Entertainment. Some analysts have reportedly valued the company at $9 billion, sparking rumors of an IPO soon.
Angry Birds stuffed toys include the famous Angry Bird characters and the Pigs (Click Image To Enlarge)
If that sounds like a fledgling version of that Magic Kingdom across the sea (Disney's market cap: $93.4 billion; revenue: $41 billion), you're not far off the mark. Rather than merely licensing toys, Rovio is looking to create a universe that spans mediums, with each realm supporting the others. Several members of the Rovio flock, including Vesterbacka, have publicly acknowledged the company's ambitions to be a 21st-generation Disney. Mikael is only a little more circumspect. He says.
"From our starting point to right now, we've always thought, What is the biggest business we can build out of this? And I sincerely believe we can build this into a very major entertainment company."
In his polite Finnish way, he is telling Disney CEO Bob Iger, I'm coming for you.
Angry Birds includes kids apparel like these T-shirts in several sizes and colors, and printed with the Angry Bird characters (Click Image To Enlarge)
The vaulting ambitions have engendered a good deal of skepticism. Disney has created hundreds of properties that have put it at the forefront of movies, television, merchandise, and tourism for decades. Rovio has yet to replicate the success of its single-game franchise, which features animals that can't even talk; its big hope for the summer, a new game called Amazing Alex about a boy and his Rube Goldberg-like machines, did well initially but quickly fizzled. So to many, the Rovio boys seem like the App Store equivalents of a Mega Millions lottery winner, guys who got lucky and struck it rich overnight. In fact, the gestation period of Angry Birds was just a little bit longer.
Angry Birds also includes a broad selection of bags of all types printed with the Angry Bird characters (Click Image To Enlarge)
Mikael Hed, 36, Rovio's CEO, in many ways embodies Scandinavian modesty. A slender, looming figure, he pours me a cup of coffee before we sit down on the sectional couch in his large corner office. On his desk, I notice a Walt Disney World baseball cap covering one of Rovio's products--an iPod speaker in the shape of a villainous pig from the Angry Birdsgame. When I point out the irony, he takes a deep breath and stares pensively out the window at the bay behind the building. (He will do so many times during the course of our interview.) Hhe says.
"All that we've built on the back of Angry Birds has been a very deliberate thing,"
If his attitude sounds sober for a one-hit wonder, I should point out that Angry Birds was the company's 52nd release.
While it's the enterprising Helsinki-bred Mikael who has driven Rovio's rapid expansion from gaming to everything else, it is his small-town 32-year-old first cousin, Niklas--a gamer's gamer who doesn't hesitate to proclaim his distaste for the business side of the enterprise--who started things off. Blond, blue-eyed, and sprightly, almost childlike, he'd much rather roam the office, reviewing game demos and products, than manage schedules and negotiate with partners. When I first interviewed Niklas in 2011, he seemed ambivalent about the various extensions of the Angry Birds brand. And at the Rovio offices, during what seems to be a serious meeting with Mikael and a couple of other executives, I can see through the room's glass walls that Niklas is flipping a bottle of water in the air. "When you're having back-to-back meetings, you don't feel that creative anymore," he tells me later.
Niklas founded Relude, as Rovio was originally called, in 2003, with two classmates at Helsinki University of Technology after they won a game-development competition sponsored by Nokia and HP, which netted them a suite of mobile devices and software-development tools. They caught the attention of Peter Vesterbacka, the founder of the competition, who encouraged them to use their winnings to launch their own game-development studio. Niklas says.
"It was the kick-start to everything. I just wanted to make the best games in the world."
They worked out of their dorm rooms till Mikael, who had an MBA from Tulane, in New Orleans, joined the company and helped the team set up an actual office. His entrepreneur father, Kaj, invested 1 million euros in the startup and became chairman. Kaj also renamed the company Rovio, which is Finnish for "bonfire."
Rovio marketing chief Peter Vesterbacka has his sights set on Disney. | Photograph by Markus Henttonen (Click Image To Enlarge)
The company did well in work-for-hire jobs, developing games for Electronic Arts, Nokia, and Real Networks. But Rovio struggled when it tried to create its own games. It attempted to carve out a niche in the hard-core horror and shoot-'em-up genres. The games consistently flopped, and Rovio foundered. After clashes over the direction of the company, Mikael left in frustration, and in 2008, Rovio slashed employment from 50 to 12. Niklas says.
"It was the worst time of my life."
Then Apple introduced the iPhone and the App Store, and everything changed. Niklas saw the App Store as the perfect way to sell a game. He would no longer have to haggle with manufacturers and mobile carriers or modify games to be compatible with different devices. If the company could get just one good game into the App Store, it would instantly have millions of potential customers. Niklas persuaded Mikael to return and set Rovio's developers to work on small-format games.
They struck pay dirt with their first idea. Rovio's lead designer, Jaakko Isalo, showed the team an image he created of a group of round, frowning, multicolored birds walking toward a pile of like-colored blocks. A player would tap a block, and a bird of the corresponding color would jump on the block and destroy it. The team added a slingshot so the birds could fling themselves at the structures, heightening the fun factor and taking advantage of the iPhone's touch screen. Pretty soon, everyone in the Rovio office was addicted; employees started keeping score of their intramural games on spreadsheets. No one at Rovio knew anyone at Apple, so the company brought in Chillingo, a U.K.-based games publisher, to negotiate a deal and market the game.
When Angry Birds was released, in December 2009, a few hundred downloads were enough to make it No. 1 in Finland, Sweden, and Norway. The following February, after Chillingo finally persuaded Apple to feature it as the game of the week on the App Store's front page, Angry Birds shot to No. 1 in the United Kingdom. Five months later, it rose to the top of the U.S. charts as well. The free Android version launched in October 2010; it racked up 2 million downloads in three days, crashing the servers of GetJar, an app market for independent developers. The game, which took only $100,000 to develop, was a global hit.
Winning fans is one matter; holding on to them is another. Rather than pour money into sequels, Rovio's strategy has been to keep the game fresh by adding levels to it. Angry Birdshad 63 levels when it was released; it now has more than 360. The upgrades are free, but they pay off by keeping the users engaged; the game remains the Apple Store's all-time best-selling app. Mikael says.
"Now we have real fans who live and breathe the thing that we created."
That loyalist army has let Rovio push beyond games.
Branded Merchandise - In the fall of 2010, Angry Birds soft plush toys and T-shirts reached U.S. shelves. Within a week, about 40% of the inventory had been sold. Besides keeping the birds top of mind, Rovio's update strategy also generates new characters to sell against. The company adds levels pegged to holidays, too, supporting sales of greeting cards, costumes, and other real-world products. Rovio now has more than 400 partners, from Coca-Cola to Intel to Kraft; collectively, they have developed 20,000 products on sale just about everywhere except Africa. Lisa Shamus, executive vice president at Commonwealth Toy & Novelty, a New York manufacturer that makes Angry Birds plush toys, magnets, snow globes, and key chains says. "The guys at Rovio have a true category killer."Shamus projects that retail sales of its Angry Birds merchandise will double to $400 million worldwide this year.
Food and Candy - To that lode, according to Chicago market research firm SymphonyIRIGroup, you can add $6 million of Angry Birds fruit snacks and gummy candy from Healthy Food Brands.
Consumer Electronics - A $100Angry Birds video-streaming box that also lets you play the game on your TV, now Roku's most popular product.
Kids Toys - $15 million of Angry Birds squishy toys and night-lights by Tech 4 Kids.
Kids Apparel - Angry Bird underwear by Fruit of the Loom is the highest-selling item at Kohl's and Walmart.
Licensed Branded Merchandise - Angry Birds is now the locomotive pulling Mattel. Lutz Muller, a toy industry analyst and founder of Klosters Trading Corp., estimates that the company's Rovio license bumped up its market share in board games from 4% to 12%. Rovio receives royalties for all of it, ranging from 5% to 20%, suggesting that total sales of Angry Birds merchandise might approach $650 million or so.
But wealth, like beauty, has a price. Sorting out hits and misses has become a major time commitment. I bear witness to the travails on the consumer-licensing floor in Espoo, where I visit what Rovio affectionately calls the chamber of horrors--several tables spilling over with product prototypes, including a pair of boxers that asks for "angry kisses." A team of six employees sifts through the backlog of 10,000 submissions.
Niklas admits,
"We have so many initiatives, and some of those are complete shit. But it doesn't matter, because we will learn from them, and we're willing to take the risk."
When we meet on his first day back from his four-week summer vacation, mandated for all Finns. (The day is also his first as "founder"; he stepped down as chief operating officer because the job became overwhelming and exacerbated his compulsion to inspect and perfect.)
While in Espoo, I visit a playground that looks much like any other in any country in the world. Located between an apartment complex and the site of a future elementary school, it contains slides, tire swings, and a wooden rope bridge. The difference is that this one is adorned with Angry Birds characters and panels that make it look like a pig fortress from the video game. When I arrive, only a few kids are scattered about, climbing and jumping. But within 20 minutes, the place is buzzing with the laughter and screams of nearly 50 children; school has just let out. Kate Sevelius of her 4- and 5-year-old granddaughters, Linnea and Stella says.
"They play the game and heard about the park, and they've been so excited for me to pick them up from day care."
Stella tells me, in Finnish, that she loves playing Angry Birds on her father's iPad, before dashing back to the tire swing.
Candy, toys, and books are the fodder of traditional licensing programs, but Rovio's newest brand-spreading mission is to make Angry Birds part of daily life. The playgrounds, or activity parks, as Rovio calls them, are essential to this exercise. The park I visited is one of 11 Angry Birds-branded playgrounds that the company has developed with the Finnish company Lappset. The playgrounds are financed by cities or apartment complexes--Lappset builds them and makes the equipment; Rovio gets a licensing fee. In all, Rovio and Lappset have lined up deals expected to yield several hundred playgrounds within a year.
In May 2012, Angry Birds Land opened inside Sarkanniemi Amusement Park in Tampere, Finland (Click Image To Enlarge)
Aerial view of Angry Birds Land inside Sarkanniemi Amusement Park in Tampere, Finland (Click Image To Enlarge)
The playground gambit is a clear break from Disney's centralized, collectivist road map. Disney started local; in the early 1930s, Disney built community with the Mickey Mouse Clubs, in which hordes of kids would gather on a Saturday afternoon in a movie theater to recite the Mickey Mouse pledge, sing with the Mickey Mouse band, and watch Mickey Mouse cartoons. But in the mid-'30s, when nationwide membership surpassed a million, Disney began phasing out the clubs because of the trouble of administering them. Instead, the company pulled in. By the 1950s, it had brought the club to TV and opened Disneyland.
Rovio intends to keep the action close to the customer's home. Vesterbacka, 44, the Rovio marketing chief, who joined the company in 2010 says.
"We want to create a distributed model. Instead of fans visiting a theme park every three or four years, the brand is right here where people live."
This model might have been the one Walt had followed if he had lived in 21st-century Finland. The distributed plan fits well with the Internet age, when little things matter as much as the big ones. Not unlike creating links on the web, Rovio aims to support its real-world push by connecting the physical and digital realms and blurring the boundaries between them. A line of Angry Birds toys from Hasbro will come with an alphanumeric code that will unlock additional levels of the game, as do new toys from Mattel when swiped over the surface of an iPad. The toys are a follow-up to a scavenger hunt that Rovio and Walmart ran earlier this year, pegged to the launch of Angry Birds Space, in which customers went through the store and scanned product bar codes that revealed clues within the game.
The apotheosis of the digital-real world connection will be Angry Birds Magic Places, a game feature that will use the GPS or near-field-communications technology on players' phones to reward them with power-ups and hidden levels when they visit certain physical landmarks, including the Angry Birds activity parks. Rovio piloted Magic at Barnes & Noble last year. The bookseller wouldn't reveal how many customers the trial brought into the stores, but Rovio has lined up other commercial partners to participate, including 1,500 McDonald's in China.
Rovio is embedding Angry Birds in everyday devices, too. Earlier this year, Rovio teamed up with Samsung to include a motion-controlled Angry Birds game on its smart TVs. In November, the company will launch the Rovio Channel, letting users of the Samsung sets download games as well as the coming Angry Birds Toons show and a comic-book series. (The channel is independent of cable service.) The potential audience is big; Samsung is on track to sell 25 million of the TVs by the end of the year. Vesterbacka says.
"Every smart TV will get the Angry Birds update. It gives us massive distribution."
The channel will also launch on Mac, PC, iOS, and Android devices, but the TV is an object that millions of families use together every day.
The company is also taking a wider view of the world than Disney did at its inception. When I meet Vesterbacka, he's hours away from hopping a plane to China--his third trip there in a month--where Rovio has been expanding aggressively since the 2011 launch of its Shanghai office. Over the summer, the company opened three retail stores in Beijing and Shanghai to sell its merchandise, with 200 more planned within the next year. It will have three playgrounds in the country by the end of 2012, too. Vesterbacka says.
"Over time, China will be our biggest market. It's important for us to be very local. We want to be more Chinese than the Chinese companies."
China is far from Finland; then again, so is just about every country in the world, psychically if not geographically, and some wonder whether Rovio might have trouble judging overseas opportunities from its Nordic aerie. It sometimes seems to latch onto partners mainly because they are famous, without a clear understanding of how the project would advance Rovio's franchise. It has formed partnerships with Lucasfilm (for Angry Birds Star Wars, which merely swaps bird avatars for the familiar characters in reenactments of the films), the Philadelphia Eagles (presumably birds of a feather, for an Angry Birds game set at the Eagles' stadium), and even with the punk-rock group Green Day (in which the band members appear as green pigs).
Fans and critics swiftly declared that Rovio had jumped the shark with the cobranded web games. "The Philadelphia Eagles-Branded Version of Angry Birds Looks Terrible," read one headline from Deadspin. "Cute mobile game now suffers from overexposure," went another pan from IT World. Of the Star Wars game, Petri Jaervilehto, Rovio's executive vice president of games, says:
"The basic concept is that we take two of the biggest brands on the planet and create something unique."
The partnership could deliver big merchandise sales, but though the game is fun, even some of his colleagues find it a little corny, including Rovio's director of development, Kalle Kaivola, with whom I battle Sith lords. he laughs as he calls down a Millennium Falcon to clear out all the pigs.
"This is one of those moments where you're like, Okay, guys, Jesus."
A lot is at stake, for all the plush toys and playgrounds and foreign incursions in the world will be forgotten if Rovio can't fashion another hit game to keep the franchise fresh. And finally, it has a contender: Bad Piggies.
This time around, the pigs get the spotlight, with nary a bird or slingshot in sight. They are stranded on a desert island, and after they spot a stash of eggs--the ones they notoriously pilfer in Angry Birds--they plot a route to reach them. Their map gets shredded, though, and the player must help the pigs build vehicles from random items and tools like balloons, crates, and soda bottles to retrieve the scattered map fragments and make their way to the eggs. The most appealing aspect of the game is the fun-loving, goofy personality of the pigs. As endearing as the angry birds, they give Rovio a new set of franchise characters. Fans seem to agree: Within three hours of its September launch, Bad Piggies was No. 1 in Apple's U.S. App Store, beating the record set by Angry Birds Space.
However long Bad Piggies stays aloft (it was still in first place in October), Rovio has colonized new territory. It is the first company ever to build a major entertainment franchise from an app. And the competition is paying attention. Two years ago, Disney declared that it needed to start looking beyond princesses in order to find the next great character. It then adopted Rovio's template, creating a mobile game, Where's My Water, featuring Swampy the Alligator, soon to star in his own cartoon series. In one small instance, the student has become the master.
Before I leave Finland, I ask Mikael about a critical blog post that was getting a lot of attention, called "The Fall of Angry Birds."
"I know the article that you refer to."
Mikael says flatly, then swiftly jumps from his desk to a dry-erase board and draws, in green marker, two arcs--the first, a narrow curve with a pronounced fall-off from its peak; the second, a much broader curve triple the height of the first. He says, drawing an arrow to the crest of the first figure.
'A lot of our competitors have an equally myopic view. They've found this hill, and say, here's the maximum amount of money you can make with a mobile game. But what we're building (he moves to the other arc) is about the lifetime value of a fan. That picture is much more interesting."
COMMENTARY: I am not a game player, either online or via mobile app. However, in June 2011, Google launched its Google+ social network, and the newly-launched social network included about a dozen free games for its users. One of those games was Angry Birds. I have to admit that I got hooked for about a day. Was actually able to get to level 9 before those mean spirited Angry Birds beat me. I decided right there and then, that I would not play Angry Birds ever again for fear I would become inescapably addicted, and thereby contributing to the huge "time suck" that Angry Birds has unleashed on society and businesses in general. I wrote about Angry Birds in a blog post dated January 15, 2012, which reported how Angry Birds had become the No 1 most downloaded mobile app of 2011.
In May 2012, Rovio reported 1 billion in combined downloads of Angry Birds across all platforms (iOS and Android dominate) including both regular and special editions, the game has been called "one of the most mainstream games out right now","one of the great runaway hits of 2010",and "the largest mobile app success the world has seen so far". At $0.99 per download, this translates to $1 billion in revenues since Angry Birds was first introduced in December 2009.
As you can clearly see, the Angry Birds franchise is not just about games starring those Angry Birds and the Pigs, but a strategy built on brand extension. It's similar to what Tylenol has done with its pain-killer pills or what Disney has done with its kids animated characters, to name a few. Rovio is developing products built around the Angry Birds brand that will get the biggest pop and reach the largest number of young children. That they have been able to do this in such a haphazard manner is a miracle in itself. Rovio has been able to do this because Angry Birds has become an iconic brand that is universal appeal and brand recognition by munchkins throughtout the world. Even the parents and milions of other grownups have gotten in on those Angry Bird thing. I almost got hooked myself. So what if it has some losers along the way, the guys at Rovio are having a lot of fun building a small empire. And, when you love what you are doing, and it all seems to work, its not so much about the strategy, but about the tremendous pulling power of the Angry Birds brand name. This is a billion dollar brand, people. Mark my words.
Courtesy of an article dated November 26, 2012 appearing in Fast Company and an article dated May 9, 2012 appearing in TheNextWeb
August typically equals unbearable heat, last-minute vacations, and a lot of catching up with family and friends. With that said, we want to catch up with you and share what we’ve been up to over the past few months.
First off, we partnered with a number of dynamic private companies over the last six months who utilized our capital introduction or transaction management services to help them create liquidity programs tailored to their goals and objectives.
Capital Introduction: When a company wants to utilize SecondMarket to bring buyers to a transaction, we work with the company to define the size of the potential investment and the desired investor profile. We then find buyers that fit the profile through our curated network of accredited and institutional investors, and present the buyers to the company, who decides which investors to include in their liquidity program on SecondMarket.
Transaction Management Services: Companies utilize our online enterprise solution, which provides a centralized platform for automated transactions and better efficiency. Companies are increasingly using the services to perform block trades of stock, tender offers and company buy-back programs.
So why did companies use our services? Well, we surveyed our clients and found that they partnered with us in 1H 2012 for a number of reasons. Some companies’ sought to re-align their investor base in order to replace early shareholders with new strategic investors who are supportive of the company’s long-term vision. Other companies used SecondMarket as an effective tool to attract and retain key employees, and some simply wished to satisfy liquidity demands of their shareholders.
Although we don’t publicly divulge specific names of our clients, we are excited to reveal a six month company snapshot that, for the first time, paints a detailed portrait of the “typical” private company that uses SecondMarket. This composite was created by using data from the companies that we partnered with to create customized liquidity programs in the first half of 2012.
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Industry Breakdown
The next chart is a breakdown of the first six months of 2012, by industry of the companies. Companies in the Gaming industry made up nearly half of the liquidity events in 1H 2012, with 48.3%, and Consumer Web and Social Media came in second, with 21.8% of liquidity events. The Education and Financial Services sectors represented 21.8% and 10.9% of liquidity events, respectively, and the Entertainment and Music industry rounded out the pie with a small sliver of 0.6% in completed liquidity events.
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Buyer Type
The following chart provides detail on the types of buyers on SecondMarket in 1H 2012. Hedge funds comprised the lion’s share of transactions by dollar value, with 47.9%. Family offices followed suit (21.5%), with asset managers (15.3%), issuers (8.9%), accredited individuals (6.0%), and private equity funds (0.3%) among the investors who joined the companies’ shareholder bases.
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Seller Type
As for sellers, companies allowed a large percentage of current employees (59.8%) during the first half of the year to secure some liquidity and taste some of the success they created. Former employees (24.1%), investors (13.8%), and a small number (0.6%) of founders were also approved by the companies to obtain a controlled amount of liquidity through SecondMarket.
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We allow institutional and accredited individual investors on SecondMarket to submit Indications of Interest (“IOIs”) in private companies (regardless of whether the companies are currently running liquidity programs). Companies can use this information to help guide their decision-making and timing for capital raising and/or secondary liquidity.
Buyside Demand by Industry
The chart below breaks down the buyside IOIs by industry in the second quarter of 2012. Consumer Web and Social Media maintained the top spot in Q2, with nearly $265 million in buyside demand. Software saw nearly $50 million of interest from potential investors, and Mobile followed with $38 million of demand. Other industries, like Music and Entertainment ($23 million), Financial Services ($22 million), and Payments ($20 million) also saw increased buyside interest in the second quarter.
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Buyside Demand By State
We have also created a heat map that indicates investors’ demand based on their location. The map below highlights California, New York, and Texas as the top three states with the most investors submitting buyside IOIs on SecondMarket in Q2, but fair numbers of investors from burgeoning tech sectors like Washington, Illinois and Massachusetts also indicated their private company investment interests on the platform.
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Rising Stars
And now it’s time for the SecondMarket Rising Stars! Every quarter, we calculate the VC-backed startups with the largest quarter-over-quarter percent increase in total watchers on our platform, and provide you with a ranking of the most exciting startups. Previously a SecondMarket Newbie, Airtimescored the top spot in Q2, with a 207.7% increase in watchers (who says blowout, celebrity-filled launch parties are overrated?!). Warby Parker(+127.9%) and Stripe (+117.2%) held onto their second and third place spots, respectively. SoCal-based open-data platform,Factual, and Palo Alto-based creator of the Learning Thermostat, Nest, also graduated from the Q1 Newbies and made their debuts to the Q2 Rising Stars.
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Newbies
The SecondMarket Newbies list is all about momentum. These startups begin the quarter with less than ten watchers and gain significant traction over three months. Video “capture and share” startup Viddy, with 99 watchers, and video startup SocialCam, with 48 watchers, held the top spots on the Newbies list in Q2. SocialCam was subsequently acquired by Autodesk in July 2012. Cambridge-based Localytics, a mobile application analytics platform, stole the third spot in the Rising Stars ranking, and iCouch, a video-counseling site located in NYC, took fourth place. Rounding out the list was MyLife, an online personal relationship manager based out of LA.
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COMMENTARY: After reviewing SecondMarket's Q2 2012 Report, there are some glaring changes from SecondMarket's Q3 2011 (See my blog post dated November 1, 2011), when Facebook, Twitter, Groupon, Zynga and Foursquare ranked #1, #2, #3, #4 and #5 respectively among the most watched startups. Facebook had their IPO in May 2012, and we all know what a disappointment that was and continues to be. Groupon and Zynga also had their IPO's, but they have also been huge disappointments and are now trading in low single digits. Groupon has yet to generate a profit and Zynga is losing gamers at incredible rates. Poor foursqure. The last time I looked, foursquare had 15 million users, but where are the revenues? LBSN's are mostly a fad, they were interesting when they first appeared, but their time has come and gone. In 2011 I predicted there would be a "train wreck" among LBSN's, and I think I am dead-on again.
Consumer web, gaming and social media continue to dominate the list of private companies but let's get real, there are no "real" stars among the private companies listed as stars by SecondMarket. Facebook acquired Instagram for an unheard of price of $1 billion (most of it stock). That's a key reason why social media did so well in Q2 2012. Poo, poo. I am willing to bet you a case of Chateau Margaux that not a single one of those so-called stars has generated significant revenues or even a profit. I am truly disappointed that startup companies like Airtime, Warby Parker, Stripe, Factual and Nest were listed as the "stars." If these are the best, then the tech IPO market is truly in trouble. It's sad, but I doubt that SecondMarket is doing as well as it once was. Their old stars are all losers, every single one of them with the exceptions of Yelp and LinkedIn. LinkedIn continues to maintain its high valuations, but for how long? I am afraid that Facebook fucked it up for everybody.
Courtesy of the Q2 2012 Secondary Market Report issued by SecondMarket
Social gaming company Zynga posted second quarter 2012 revenues and earnings that missed expectations, sending its stock cratering after hours.
In its July 26, 2012 press release, Zynga Inc. (Nasdaq:ZNGA), the world's leading provider of social game services, announced financial results for the second quarter ended June 30, 2012. Here are some of the highlights:
Revenues: $332 million, up 19% year-over-year, six months year-to-date revenue of $653 million, up 25% year-over-year
Bookings: $302 million, up 10% year-over-year, six months year-to-date bookings of $631 million, up 12% year-over-year
Net Income: $22.8 million net loss, down 1,728.57% year-over-year, six months year-to-date loss of $108.162 million , down 659% year-over year. The net loss for the second quarter of 2012 included $95.5 million of stock-based expense compared to $33.1 million of stock-based expense included in the second quarter of 2011.
GAAP EPS: ($0.03), down from $0.00 in the second quarter of 2011, six months year-to-date GAAP EPS of ($0.15), down from$0.00 in the first half of 2011
Non-GAAP EPS: $0.01, down from $0.05 in the second quarter of 2011, six months year-to-date non-GAAP EPS of $0.06, down from$0.16 in the first half of 2011
Zynga CEO Mark Pincus had this to say:
"The company achieved some significant milestones in the quarter including the launch of Bubble Safari, which is now the number one arcade game on Facebook, and the launch of The Ville, now the number two game behind Zynga Poker. Our advertising business continued to show strong growth with revenue up 170% year-over-year. Our games reached record audiences, achieving over 300 million monthly active users. We grew our mobile footprint five-fold in the year to 33 million daily active users making Zynga the largest mobile gaming network. We also faced new short-term challenges which led to a sequential decline in bookings. Despite this, we're optimistic about the long-term growth prospects on mobile where we have a window of opportunity to drive the same kind of social gaming revolution that we enabled on the web."
UPDATE: Zynga's (NASDAQ:ZNGA) stock plummeted on the bad news by $1.90 or 37.48% to $3.17 per share at the end of trading, Thursday, July 26, 2012.
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Zynga also is lowering its guidance for 2012, because of delays in launching new games and faster than expected decline in existing games and because of Draw Something. The company said:
“We are lowering our outlook to reflect delays in launching new games, a faster decline in existing web games due in part to a more challenging environment on the Facebook web platform, and reduced expectations for Draw Something.”
For full year 2012, the company now expects bookings in the range of $1.15 billion to $1.225 billion and non-GAAP earnings per share of 4 to 9 cents. That’s down from Zynga’s guidance of $1.425 billion to $1.5 billion and non-GAAP EPS of $0.23 to $0.29. For comparison, analysts had expected 6 cents in just the second quarter of 2012 alone.
Revenues breakdown as follows:
Game revenue - $291.5 million, up 10% from the year-ago period but notably was a decrease of $1.2 million from the first quarter of 2012.
Advertising revenue - $40.9 million, up 170% from a year ago and up 45% from the first quarter of 2012.
Zynga, which has titles such as CityVille, FarmVille, Zynga Poker and Words With Friends, last month rolled out more developments for its own gaming platform as it seeks to diversify from Facebook. Some of Zynga’s existing longstanding titles have been dropping in users so the company is seeking to crank out new hits. The company recently launched new titles such as The Ville and ChefVille.
One area to watch is mobile, where Zynga has been seeking togain an edge as more and more users play games on mobile devices. Zynga recently paid $180 million to acquire OMGPOP, maker of mobile drawing game Draw Something.
Zynga priced its initial public offering at $10 per share in December 2011. The stock hit a peak of about $16 per share in March during the run-up to Facebook’s IPO, but since then the stock has languished. The stock closed the regular session at $5.08, up $0.18 or 3.56%, in trading on the NASDAQ Wednesday.
Other user data from the release:
Daily active users were 72 million in the second quarter of 2012, up 23% from 59 million a year ago.
Monthly active users were 306 million in the quarter, up 34% from 228 million a year ago.
Monthly unique users were 192 million, up 27% increased from 151 million year-over-year.
Average daily bookings per average DAU $0.046 in the quarter, down 10% year-over-year from $0.051.
Monthly Unique Payers were 4.1 million in the second quarter of 2012, up 16% sequentially from 3.5 million in the first quarter of 2012.
In the first quarter of 2012 Zynga had daily active users of 65 million, up 6% from 62 million year-over-year. Monthly actives were 292 million, up 24% year-over-year from 236 million. Monthly unique users (excludes duplicate players and games) were 182 million in the quarter, up 25% year-over-year from 146 million.
COMMENTARY: Zynga CEO Mark Pincus, on a conference call with analysts Wednesday, July 25, 2012, gave three main reasons for the earnings.
Zynga’s existing web games such as CityVille and CastleVille performed worse than expected. Pincus blamed Facebook for changing how Facebook promotes games on its platform. Zynga officials said that Facebook is promoting newer games over older games, which decreased engagement on Zynga’s older titles. This includes things like friend requests, bookmarks and presumably, notifications, in Facebook’s News Feed. John Schappert, Coo of Zynga said. “Our users did not remain as engaged and did not come back as often.” However, Zynga said that the Facebook changes weren’t the main reason for its games declines, focusing on its own games as the reason. Schappert added that Facebook’s focus on new games made its new Bubble Safari game quickly popular, with 4.5 million installs in the first day.
Zynga launched its new title “The Ville” later in the quarter than it expected, launching in open beta in June. Officials didn’t say why the game launched late.
Draw Something, which Zynga recently acquired for $180 million, “underperformed.” In other words, the number of users have been rapidly declining.
As far as future games, Zynga said it will diversify its mix of games with future releases, particularly focusing on male gamers with games in areas such as sports and player versus player (shooters). The implication of that comment being that Zynga has done well among the female demographic but not as well among males.
As far as real-money gambling type games, Pincus said Zynga is actively developing a gambling game that it plans to launch in the first half of 2013. That will be a major change for the company. Pincus would not say where that new game would launch but indicated that it would likely be outside of the U.S., since such games are not allowed in the U.S.
One analyst asked Pincus why people should buy Zynga stock, with its price now at about $3, and this is what he said.
”We are the most optimistic long-term believers in the opportunity for social gaming and play to be a mass market activity–as it’s already becoming,” Pincus said in part of his response. We think social gaming is just starting to grow quickly on mobile and we think it has the potential to be the most important part of the experience on mobile and an even bigger business in the future.”
If you've been a regular visitor to my blog, I have regularly commented on Zynga's earnings reports, strategies and performance of its social games since they had their IPO. Pincus seems to overlook one glaring fact: Zynga is simply not creating hit games like Farmville and Mafia Wars, and is losing game players in droves. In a blog posts dated July 18, 2012 and June 12, 2012 I provided a body of evidence that explains Zynga's the above problem as clear as mud. For the month of June, Zynga placed nine games in the Facebook Top 25 by MAU, the most in a while, but they lost a combined 23.4 million users between June and May 2012.
Analysts also seem to forget that only about 3% of Zynga game players actually pay. The other 97% are freeriders. It's difficult to grow revenues when the vast majority of your players are not paying.
Although advertising revenues for the second quarter 2012 were $40 million, an increase 170% from the prior year's second quarter, advertising just isn't going to pay the bills. Zynga needs to change its revenue model to reduce the number of freeriders by a significant number of it ever hopes to grow revenues sufficiently to generate a profit. It's new move into gambling is a possible solutino, but in so doing it is drifting away from its social games business model. I have never trusted online gambling sites and find them slimey, interested only in taking your money.
Zynga pays Facebook 30% of all virtual goods sales, the principal way it makes money off of its games. It can
Courtesy of an article dated July 25, 2012 appearing in Forbes and a press release dated July 26, 2012 issued by Zynga and an article dated July 25, 2012 appearing in Forbes
Here’s the Top 25 Facebook game list for July 2012 from insidefacebook.com (AppData), according to Daily Active Users (DAU) and Monthly Active Users (MAU).
Daily Active Users (DAU)
Zynga’s Bingo and King.com's Candy Crush Saga were the biggest gainers during the month of June 2012 with increases of 1.8 million and 1.4 million users respectively. Disney's Playdom's Marvel: Avengers Alliance placed third among gainers with 920,000 users in June. The two biggest losers during the month of June 2012 were Zynga’s CityVille and Hidden Chronicles--down 1.4 million and 1.1 million users respectively.
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Monthly Active Users (MAU)
King.com's Candy Crush Saga and Disney Playdom's Marvel: Avengers Alliance were the biggest gainers during the month of June 2012 with increases of 5.2 million and 3.5 million users respectively. Zynga’s CityVille, Hidden Chronicles, Castleville, Farmville and Texas Holdem Poker were huge losers during the month of June 2012--down 6.2 million, 4.3 million, 3.3 million, 3.0 million and 1.7 million users respectively. Another big loser was Rovio's Angry Birds Friends--down 4.3 million users during the month of June 2012.
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COMMENTARY: Zynga placed nine games in the Facebook Top 25 by MAU, the most in a while, but they lost a combined 23.4 million users between June and May 2012. In a blog post dated June 12, 2012, I said,
"Well, it appears that not only are Zynga's "ville" games like Farmville, Cityville and Castleville losing users, but the entire Zynga social game lineup is losing huge numbers of users in the AppData.com's Top 25 Facebook Games rankings."
Zynga's disasterous trend of losing users continues into the reporting month of July 2012 (For the month of June 2012). This is the sixth straight month of losses.
I just looked at Zynga's stock price and it peaked at $14.69 on March 2, 2012, but the price has declined rapidly week-to-week. Zynga's stock peaked at $4.925 in very earling trading today (July 18, 2012), but ended at $4.61 with a total market market cap of $3.4 billion by the end of the day.
In a blog post dated June 29, 2012, I reported that Zynga was planning to operate Zynga With Friends, its own social network, an apparent strategy to unhinge itself from Facebook. It supposedly will offer its games on both platforms. However, it is doubtful that having its own platform will stop the hemorraging.
Zynga has failed to generate a profit since it had its IPO in mid-December 2011. Zynga's social games business model and management team led by Mark Pincus is under severe attack by stock market analysts and shareholders alike. Mark Pincus, has voting control, thanks to the way the IPO was structured. Zynga is obviously operating well below the breakeven point due to very high R&D costs to develop new games. Zynga just announced an earnings call report scheduled on July 25, 2012.
Courtesy of an article dated July 4, 2012 appearing in AppData
Zynga, the titan of time-wasting, is broadening its distribution base with a new social network called “Zynga With Friends,” where players can build profiles and connect with other players while wasting epic amounts of time, according to the company, which announced the plans on Tuesday. In addition to giving gamers a new go-to destination for flushing their lives down the toilet, the move is interesting because Zynga With Friends will be an alternative to Facebook, where most Zynga games are currently played.
Indeed, it’s worth noting that Zynga With Friends replicates many of the features and capabilities offered by Facebook, including profiles with pictures and interests, messaging, chat, and status updates. It also offers real-time multi-player mode, for simultaneous collaborative game-playing. Zynga With Friends can be accessed via multiple platforms, including laptops, smartphones, and tablets.
In a bid to spread buzz and build traffic, the company is opening Zynga With Friends to other game developers, including Phospher Games, Sava, Crashlab, Fatpebble, and Atari (yes, you read that right: Atari is producing a game for Zynga to commemorate its 45th anniversary).
Zynga has long hinted that it would like to lessen its dependence on Facebook, which takes a 30% cut of revenues generated through sales of virtual goods to casual gamers. These revenues, in turn, still make up a substantial part of Facebook’s bottom line -- some 11% of total revenues in the first quarter, plus another 4% from advertising on Zynga games. While Zynga still relies on Facebook’s payment system for sales on its own site, strengthening its own site may be a preamble to setting up its own payment system, heralding the end of revenue sharing with Facebook (at least for games played outside Facebook).
That would be more bad news for Facebook, which is struggling to demonstrate sustainable growth to Wall Street analysts and investors. If advertising revenue growth continues to slow, this would leave Facebook all the more dependent on revenue streams like Zynga’s virtual goods sales -- just as Zynga is pulling away.
COMMENTARY: It's about time that Zynga unhitch itself from dependance on the Facebook platform. According to Zynga, it has 232 million monthly active users and 60 million daily active users. Its social games include:
Bubble Safari
Castleville
Cityville
Empires & Allies
Farmville
Hidden Chronicles
Pioneer Trail
Mafia Wars 2
Zynga Poker
Words With Friends.
In a blog post dated June 12, 2012, I posted a body of evidence that strongly suggests that Zynga's best days may be over. Nearly all of its games, including its two biggest winners, Farmville and Mafia Wars, have experienced drastic drops in monthly/daily active users between Janaury and May 2012. These are not good times for Zynga. It's IPO on December 16, 2011 was considered a flop. Shares came out at $10.00, but dipped to $9.50 at the end of trading. It's share speaked at $14.69 on March 2, 2012, but have declined dramatically since that date. As of today, Zynga's stock (NASDAQ:ZNGA) have dropped to 5.44, with a market capitalization was only $4.01 billion. Rumors that they maybe acquired by Facebook are rampant. Analysts have downgraded the stock believing that its business model is not sustainable.
Whether Zynga With Friends will allow it to keep its traffic numbers and retain most of its revenues remains to be seen. Most of the articles I have read believe that unhitching itself from Facebook, could be a huge mistake. Facebook will also feel the loss.
Zynga's gross revenues for the year ending December 31, 2012 were $1.140 billion.
It paid Facebook 30%, or roughly $330 million.
It ended the year with a net loss of -$404 million.
R&D for the year ending December 31, 2012 was $727 million.
Zynga needs new hit games with lasting power. However, recent trends show strong evidence that social games are losing popularity, and users are flocking to other gaming or entertainment sites.
I have yet to find a single social media or stock analyst that believes in Zynga anymore.
Courtesy of an article dated June 27, 2012 appearing in MediaPost Publications The Social Graf
(Reuters) - Shares of Zynga Inc fell more than 9 percent on Tuesday, to their lowest level since going public last December, on increased concerns that the craze for games on Facebook has already passed its peak.
The San Francisco-based producer of games such as "Farmville" and "Hidden Chronicles," which are played by millions of Facebook users, is suffering as gamers switch to their mobile phones for entertainment.
Zynga's daily active users dropped 8.2 percent to 54.2 million in May, according to App Data that tracks apps on Facebook and mobile platforms.
Cowen & Co analysts wrote in a research report released on Tuesday,
"We believe that interest in Facebook-based gaming may have reached a negative inflection point as more casual gamers migrate to mobile platforms."
The analysts wrote.
"The market for games on Facebook was in an accelerating user tailspin."
Zynga took advantage of the enthusiasm for Facebook and interactive online games with an initial public offering in December, which valued the company at $9 billion.
Since then, Facebook's messy IPO has dampened investors' appetite for consumer Internet stocks, while Zynga has struggled to ignite further growth and insiders have sold more than $500 million in stock.
Zynga shares were down 10 percent at $4.94 in afternoon Nasdaq trading.
COMMENTARY: The last time I blogged about a Zynga social game was on January 4, 2012, when I profiled the launch of "Hidden Chronicles," a new "hidden objects" game that was created to compete against Disney's "Gardens of Time." The object of both games is for the player to find as many hidden objects that are embedded within a mosaic or scene. At the time, I said somewhat prophetically,
"Many of their "ville" games are losing monthly average users in huge numbers so Zynga must continue to create new hit games with a lot of stickiness if they are to continue to grow revenues and profits, otherwise their business model will begin to crack."
Well, it appears that not only are Zynga's "ville" games like Farmville, Cityville and Castleville losing users, but the entire Zynga social game lineup is losing huge numbers of users in the AppData.com's Top 25 Facebook Games rankings.
If you review the Top 25 Facebook Game rankings for March, April, May and June 2012, you get a much clearer picture of what is happening to Zynga's audience.
June 2012 (Actual for May 2012)
As was the case in May 2012 (Actual for April 2012), Zynga’s CityVille and Hidden Chronicles were the biggest losers measured in daily average users (DAU). CityVille dropped by another 1.4 million DAU's, while Hidden Chronicles lost 1.1 million DAU's. Recently-launched Zynga Bingo was the biggest gainer with 1.8 million DAU's. For the month of June 2012 (Actual for May 2012), Zynga had 9 games in the Top 25 Facebook Games by DAU rankings, but they recorded a combined net loss of -2.7 million DAU's.
May 2012 (Actual for April 2012)
CityVille and Hidden Chronicles had the largest losses on the Top 25 Facebook Game by DAU for May 2012 rankings. CityVille was down by 1.4 million DAU's, while Hidden Chronicles dropped 1.2 million DAU's. For the month of May 2012 (Actual for April 2012), Zynga had 8 games in the Top 25 Facebook Games by DAU rankings, but they recorded a combined net loss of -5.1 million DAU's.
April 2012 (DAU during March 2012)
Castleville, Cityville and Words With Friends had the largest losses on the Top 25 Facebook Game by DAU for April 2012 rankings. Castleville was down by 1.2 million DAU's, Cityville dropped 1.1 million DAU's and Words With Friends was down by 1.1 million DAU's. On a more positive note, Zynga's Slingo, its first licensed game (licensed from casual gamemaker Slingoand launched in mid-February 2012) had 3.6 million DAU's. For the month of April 2012 (Actual for March 2012), Zynga had 9 games in the Top 25 Facebook Games by DAU rankings, but they recorded a combined net loss of -1.6 million DAU's.
March 2012 (Actual for February 2012)
Castleville and Cityville had the largest losses on the Top 25 Facebook Game rankings. Castleville was down by 400,000 DAU's, while Cityville dropped 300,000 DAU's. Only Zynga's Words With Friends and Hidden Chronicles had gains in DAU's. Both had 100,000 DAU's For the month of March 2012 (Actual for February 2012), Zynga had 9 games in the Top 25 Facebook Games by DAU rankings, but they recorded a combined net loss of -1.0 million DAU's.
Zynga is still tops in the Top 25 Facebook Games by DAU rankings with 8 or 9 games in the Top 25 during the rankings for the months of March through June 2012 (Actuals for February through May 2012). However, if you are keeping count, Zynga's social games in the Top 25 Facebook Games by DAU rankings for the above period have a combined net of -10.4 million DAU's.
Zynga's social games have clearly established a very negative trend based on DAU's, and this should send a clear signal that quite possibly social game usage is waning (at least on the desktop) and that Zynga must create big hit mobile games for its very survival.
LEARN THE FUNDAMENTALS OF CODING BY LOSING YOURSELF IN THESE SIMPLE-BUT-DEVILISH PUZZLES.
The key to learning to code is learning to think like a computer--which is a hard thing to do. Game developer Rui Viana says.
"It requires structured thinking, ability to abstract details away, and there’s little margin for error--one little typo and your program might do something entirely different from what you wanted. The real world just doesn’t work like that, so it’s hard to get your head around it."
Which is precisely why Viana created Cargo-Bot, a simple iPad app that turns "thinking like a computer" into a genuinely addictive puzzle game. It’s like Angry Birds crossed with Codecademy, and it’s total genius.
Most of the press that Cargo-Bot has gotten so far focuses on the fact that the game was itself programmed entirely on an iPad (using another app called Codea). That’s pretty great, but it’s missing the larger point: who cares what device you can or can’t program stuff on, if you never want to program anything? That’s the problem that Cargo-Bot so brilliantly solves. It’s designed to make programming seem not just doable, but fun: something you’d want to do just to enjoy yourself, not as a means to some other end ("This is how I’ll make the next In$tagram!"). Not even Codecademy manages that.
Cargo-Bot’s Tetris-like simplicity is the key to its charm. The goal is to tell a robot arm how to move colored boxes around on a platform into different patterns. That’s it. It does contain a few technical-sounding terms (like "program" and "loop"), but mostly, says Viana,
"I wanted it to be a game about moving blocks around with a claw, and make you forget that you are in fact programming."
Click Image To Enlarge
The first time I played Cargo-Bot, I lost myself in it for an hour--but not because it magically turned me into a good programmer. Quite the opposite: I spent most of that time "debugging," or correcting malfunctions or inefficiencies in my code. In most coding tutorials, this feels like drudgery--your program doesn’t work, you don’t know why, and you have no choice but to scour each barely intelligible line of code to find the error. But in Cargo-Bot, debugging is the fun part. By watching the cartoony robotic claw execute your instructions, you can literally see your code in action--and see exactly where and when it fails. Watching the claw do something you didn’t expect, or crash into the side of the wall and break, immediately makes you want to fix it. Even better, Cargo-Bot rewards you not just for solving puzzles, but for solving them efficiently: shorter programs earn you more points.
"Cargo-Bot is a great way to demo what programming is about in a fun and visual way. If you 'get’ Cargo-Bot, you can go through other coding tutorials and pick up a lot from them by yourself."
In other words, it’s the ultimate gateway drug. Consider this five-star review of the app in iTunes:
Happiness is pair programming with my son. What a way to celebrate his fourth birthday!
That nearly brought a tear to my eye. Four years old. Cargo-Bot isn’t just fun. It’s damn near noble.
COMMENTARY: Cargo-Bot is the equivalent of Zynga's Farmville, except instead of growing crops and grazing sheep, you are building games. The end result depends on your "coding" skills. I like the fact that you immediately see how the game performs as you build sequences and functions into the game. I believe that the potential for learning mechanical engineering and designing products could be exploited. That's the potential of this mobile app. In my opinion, Cargo-Bot goes beyond game building, but product engineering and design. It actually makes you think like an engineer, not just a programmer.
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