Consultant Analysis for Company Zynga
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Zynga provides social video game services. It was founded in July 2007 with its headquarters in San Francisco, California. The company produces social games that operate on mobile phone platforms such as Android, Windows Phone Apple iOS, and its official website as well as through social networks such as Google+, Tencent QQ and Facebook. Zynga’s mission is “connecting the world through games” (Zynga, 2016). The company was named in honor of the CEO Mark Pincus’s diseased bulldog, Zinga. The company owns several top social media games for tablets/mobile systems such as Zynga Poker, Mafia Wars, Farmville and Words with Friends. (Adam, 2014)
Company’s financial performance and assets’ liquidity are still favorable. Technologically, the company is way ahead its market. It is one of the leading game developers, which holds its gaming rights and in most cases, the coding to those games (Zynga, 2016). Organization has several geographical locations, which are strategic in terms of its production. Considering the human resources of Zynga, it is quite clear that the market for good programming and coding talent is small. New game development is essential to the long-term success of Zynga. In terms of creativity and innovation, the company is well prepared for the growth in online gaming evidenced by the move to their website. However, this can only be achieved with new and exciting gaming products. Considering company’s reputation from consumer’s point of view, Zynga is a leading game developer. According to company’s management culture, its growth depends heavily on the efforts of talented employees. There is a spirit of competition within each unit of operations that aims to provide new ideas, games, and products.
USA gaming industry is said to be performing well. For instance, in 2013, the financial record shows that 92 percent of iTunes revenue were obtained from the gaming industry. Global video gaming industry is predicted to cost $82 billion in 2017 proving it a good business sphere for new ventures (Gaudiosi, 2012). Moreover, mobile gaming revenues were expected to increase by 16.5% reaching over $3 billion in 2015 due to its expansion among the genders (Brennan, 2015). The history of gaming industry shows that many small companies are entering the market every quarter.
Zynga has four major competitors. One of them is the technology firm DENA CO., LTD established in Japan in 1999. Company’s best-known game is Ant Smasher. Company’s profile states that they “develop and operate a broad range of mobile and online services including games”. It competes with Zynga in the mobile game service market. The second competitor is Gree Games also found in Japan. Gree is a huge mobile company, whose activities involve social media, licensing, social gaming, merchandising and advertising, and venture capital. It also provides a small catalog of online games. The third competitor is the Electronic Arts (EA) found in U.S. in 1982. It is a large software company offering console, online, computer and social media games. The company owns several successful titles including Zuma, Plants vs. Zombies, and Bejeweled, which has recorded $3.8 billion revenue in 2013. The fourth company is the Gameloft started in 1999 by Ubisoft and Michael Guillemot in Europe. By 2003, Gameloft provided games to over 100 mobile phone models. It was the first company to render games in the iPhone app store when it launched in 2008. In 2013, Gameloft’s “Despicable Me: Minion Rush” game was their paramount title reaching 100 million downloads.
The company has a user base of 1 million people spending a lot of time on its platform monthly (Zynga, 2016). Their freemium business model has worked effectively attracting more customers and enhancing company’s brand. Company’s partnership with Bwin, which is a top online-betting company, is a major advantage for Zynga diversifying company’s revenue base. Reduced dependency on Facebook is a greater company’s strength, which means that Zynga does not have to cover revenue sharing fees for gaming in non-Facebook programs anymore. The company will have to keep its 30% fees to share with Facebook for gaming services. The other strength is that Zynga has managed to increase its mobile growth and monetization. The number of active users of mobile applications has grown up to 75% constituting 72 million users in 2012 (Zynga, 2016).
A number of Zynga’s daily users reduced to 133 million from 331 million by the end of 2012 (Sharf, 2014). Another major weakness is Zynga’s weakened ties with Facebook that is directly responsible for driving a lot of users to Zynga’s platform and generating its major revenue. This may negatively influence user perception as well as the amount of time they spend on online games. Another weakness is a lack of recurring purchases. Zynga’s business model revolves around stimulating users to play the games by buying these social products. Often, users may refuse to purchase these products on a regular basis, which is a negative implication for the company. Lastly, the company has a weakness of persistent losses since 2012 though they have decreased substantially. In 2012, the net loss constituted $57 million because of the decline in monthly active players, which was constant from 2012 (Sharf, 2014).
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Significant opportunities for the company depend on its ability to enter the real money gaming market in U.S. as it hopes to build up an online ecosystem for actual money gaming and has already asked for a license in Nevada. It can use its technical know-how for ensuring long term success. Also, Zynga can increase its advertisement revenues by hiring professionals with expertise. The Internet advertising revenue in 2012 in the USA was $36.57 billion, which represented an annual 15 % growth of 2011 (Silverman, 2013). The company also has an excellent opportunity of introducing new 3D games, which can lead to vast revenues. Also, it has the capacity of attracting new players from young generations and thus, they should employ more advertising techniques to target them. It also has a chance of expanding its social platforms and creating a new business relationship with other online platforms like Google and Nintendo.
The company faces a significant threat from other gaming platforms provided by its competitors. The other threat is the lack of creativity or originality. Moreover, the company may be operating in an underperforming market hence making no financial progress. The company also experiences a challenge of being unable to retain new talents. Lastly, the company may face a threat of copyright, patent infringements and counterfeit gaming.
According to the SWOT analysis, Zynga has more strengths and opportunities than threats and weaknesses. There is still hope for the organization to make tremendous changes in the market. The company needs to utilize its opportunities and minimize its threats and weaknesses. However, some recommendations might be useful. First, Zynga needs to scrutinize its cost structures and business model compared to the competition and find out the cause of its losses. Secondly, it needs to find long-term game platform(s) to ensure sustainability. Thirdly, Zynga has to differentiate itself from its competitors (license new/old characters). Fourthly, Zynga might consider a potential sale or merger. Additionally, Zynga currently specializes in both mobile and social media gaming. Fierce competition requires Zynga to re-focus on what makes them the actual market leader and generates higher profits. Lastly, the company should increase its advertising/marketing expenses to raise public awareness about Zynga brand.