Harvard Case - Zynga and the Launch of FarmVille
"Zynga and the Launch of FarmVille" Harvard business case study is written by Amir Goldberg, Debra Schifrin. It deals with the challenges in the field of Strategy. The case study is 29 page(s) long and it was first published on : Mar 3, 2016
At Fern Fort University, we recommend that Zynga continue its aggressive growth strategy through a combination of organic expansion and strategic acquisitions, focusing on diversifying its portfolio with new game genres and expanding into new markets. This strategy should be supported by a robust data-driven approach to game development, a strong focus on user engagement, and a commitment to responsible monetization practices.
2. Background
Zynga, founded in 2007, quickly rose to prominence in the social gaming space with its popular titles like 'Texas HoldEm Poker' and 'Mafia Wars.' The company's success was driven by its innovative use of the Facebook platform, leveraging social networking to create a viral gaming experience. In 2009, Zynga launched 'FarmVille,' a casual farming simulation game that became a global phenomenon, attracting millions of players and generating substantial revenue.
The case study focuses on the challenges and opportunities facing Zynga as it seeks to maintain its competitive edge and achieve sustained growth in a rapidly evolving gaming landscape.
3. Analysis of the Case Study
Strategic Analysis:
Porter's Five Forces: The social gaming industry in 2009 was characterized by:
- High Threat of New Entrants: Low barriers to entry due to the availability of free development tools and the growing popularity of the platform.
- High Bargaining Power of Buyers: Players had numerous alternatives and could easily switch between games, impacting pricing power.
- Moderate Bargaining Power of Suppliers: Zynga relied on Facebook's platform, but the platform itself was not a significant cost factor.
- High Threat of Substitutes: The rise of mobile gaming and other entertainment options presented a constant threat.
- High Competitive Rivalry: Rapidly growing number of competitors vying for user attention and market share.
SWOT Analysis:
- Strengths: Strong brand recognition, established user base, expertise in social gaming, data-driven approach, strong financial position.
- Weaknesses: Reliance on Facebook platform, limited game genres, potential for user fatigue, concerns about monetization practices.
- Opportunities: Expansion into new markets, development of new game genres, mobile gaming, integration of social features, strategic partnerships.
- Threats: Competition from established gaming companies, changing user preferences, regulatory scrutiny, potential for platform disruptions.
Value Chain Analysis: Zynga's value chain was primarily focused on game development, user acquisition, and monetization. The company leveraged its strong data analytics capabilities to optimize its marketing efforts and understand player behavior.
Business Model Innovation: Zynga's initial success was driven by its innovative business model, leveraging the Facebook platform to reach a massive audience and monetizing through in-game purchases and advertising. However, the company faced challenges in adapting its model to the evolving gaming landscape.
Financial Analysis:
- Zynga's financial performance was strong in the early years, fueled by the popularity of 'FarmVille' and other successful games. However, the company faced challenges in maintaining its growth trajectory due to increasing competition and evolving user preferences.
Marketing Analysis:
- Zynga's marketing strategy focused on leveraging social media and viral marketing to drive user acquisition. The company also employed targeted advertising and partnerships with other companies to reach new audiences.
Operational Analysis:
- Zynga's operational efficiency was critical to its success. The company invested heavily in data analytics and technology to optimize its game development process and manage its user base.
4. Recommendations
Diversification and Expansion: Zynga should diversify its game portfolio by developing games in new genres, such as action, adventure, and strategy. This diversification will help mitigate the risk of relying on a single genre and attract a wider audience. Additionally, the company should explore expansion into new markets, particularly in emerging economies with high growth potential.
Strategic Acquisitions: Zynga should consider strategic acquisitions to gain access to new technologies, talent, and intellectual property. This could involve acquiring smaller studios specializing in different game genres or acquiring established companies with strong market positions in specific regions.
Data-Driven Game Development: Zynga should continue to invest in data analytics and use data to inform its game development process. This includes understanding player behavior, identifying trends, and optimizing game mechanics to enhance user engagement and retention.
User Engagement and Community Building: Zynga should prioritize user engagement by fostering a strong sense of community within its games. This can be achieved through social features, events, and competitions that encourage interaction and collaboration among players.
Responsible Monetization Practices: Zynga should adopt responsible monetization practices that balance revenue generation with user satisfaction. This includes offering a variety of monetization options, providing value for in-game purchases, and avoiding predatory practices.
5. Basis of Recommendations
Core Competencies and Consistency with Mission: Diversification and expansion align with Zynga's core competencies in social gaming and its mission to create engaging and entertaining games for a global audience.
External Customers and Internal Clients: Developing new game genres and expanding into new markets will cater to diverse player preferences and provide opportunities for growth.
Competitors: Strategic acquisitions and data-driven game development will help Zynga stay ahead of the competition and maintain its competitive edge.
Attractiveness: Diversification and expansion into new markets offer significant growth potential and can lead to increased revenue and profitability.
6. Conclusion
Zynga's success in the social gaming space was driven by its innovative business model and its ability to leverage the power of social networking. However, the company faces significant challenges in maintaining its growth trajectory in a rapidly evolving gaming landscape. To navigate these challenges, Zynga should focus on diversifying its portfolio, expanding into new markets, and leveraging data analytics to enhance its game development process. By implementing these recommendations, Zynga can position itself for sustained growth and continued success in the long term.
7. Discussion
Alternatives:
- Focusing solely on organic growth: This approach could be slower and less effective in a competitive market.
- Merging with a larger gaming company: This could limit Zynga's independence and potentially lead to cultural clashes.
Risks:
- Failure to attract new players: Diversifying into new genres and markets carries the risk of failing to attract new audiences.
- Integration challenges: Acquiring new companies can present integration challenges, potentially disrupting existing operations.
- Regulatory scrutiny: Zynga's monetization practices could face increased scrutiny from regulators.
Key Assumptions:
- The social gaming market will continue to grow.
- Zynga can successfully develop and market new game genres.
- Zynga can identify and integrate suitable acquisition targets.
8. Next Steps
- Develop a detailed strategic plan: Outline specific targets, timelines, and resource allocation for diversification, expansion, and acquisitions.
- Establish a data-driven game development process: Invest in data analytics tools and personnel to optimize game design and user engagement.
- Implement a responsible monetization strategy: Develop a clear framework for in-game purchases and advertising that balances revenue generation with user satisfaction.
- Monitor and evaluate progress: Track key metrics such as user acquisition, engagement, and revenue to assess the effectiveness of the strategy.
By taking these steps, Zynga can navigate the challenges of the gaming industry and position itself for continued success in the years to come.
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Case Description
In June 2009, the online gaming company Zynga launched the free social game Farmville on Facebook, which set a new record by reaching one million Daily Active Users four days after launch, skyrocketing to 30 million in six months. The case takes an inside look at how Zynga created FarmVille in just six weeks, including the important strategic and technical decisions Zynga made, the sometimes tense team dynamics, and the challenges Zynga's founder and CEO Mark Pincus faced within Zynga. The company's experienced game developers had strongly resisted his idea to develop a farm game because farm games performed poorly on traditional game consoles and were considered an inferior gaming category. But Pincus believed they afforded access to new audiences and wanted to seize the strategic opportunity offered by the convergence of advances in technology and the meteoric rise of Facebook. These combined well with Zynga's advanced data analytics capabilities, which allowed the company to aggressively advance a new business model "Games as a Service," in which developers continuously added features to make a social game consistently compelling. Post launch, FarmVille was continually evolving and adding new features. But after a few months, the quality of the code and the ideas for new features were getting worse, more bugs and quality assurance problems arose, and users were complaining that new features were late and the game was getting rote. This case is set in late December 2009 as user numbers started to drop, and Pincus and the FarmVille team tried to figure out how to turn this trend around. Zynga's leadership team had to figure out how to reinvigorate FarmVille so that it would continue to be the goose that laid the golden eggs.
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