Technology Stocks : Zynga, Inc.
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To: stockman_scott who wrote (107)3/1/2012 2:26:59 PM
From: Glenn Petersen1 Recommendation   of 344
A Friend in Need, Supplied by Zynga

New York Times
March 1, 2012

SAN FRANCISCO — There is an old saying that if you have two friends, you should count yourself lucky. No doubt. But you are going to have a hard time playing FarmVille.

Zynga, the creator of FarmVille, Words With Friends, Mafia Wars and other wildly popular social games, is going to start supplying friends for those who are lacking. The company announced a new gaming platform on Thursday that will match up players who do not know each other but who have a mutual interest in getting the crops in, spelling words with J, Q and X and rubbing one another out. The point is to make gaming even easier for everyone.

The platform will be introduced in a trial version on later this month. The move is likely to reduce Zynga’s reliance on Facebook, something analysts have said the company needs to do. Most Zynga games are played on the social network, which derives 12 percent of its revenue from Zynga. Now, players will go to Zynga’s own site, finding not only Zynga games but games from independent developers as well.

But in the short term, the mutual interdependence will only increase; the platform could even be seen as extending Facebook’s dominance. When players want to buy something on the Zynga site, they will use Facebook credits. While Facebook has been experimenting with letting other Web sites use its currency, Zynga Platform is a big move forward in this regard.

The platform is also part of Zynga’s effort to extend the torrid growth of the last few years. Zynga games have about 240 million monthly users. Now, executives talk casually of reaching a billion.

But to get anywhere near that number, the platform will have to be a huge success. Its chief selling point is that everyone is there for the same thing, unlike on Facebook, where people do many things.

Players have been complaining to Zynga that they want more instant gratification, the company says. If they have only five or 10 minutes to play — while standing at the bus stop or taking a coffee break — they want to accomplish something. That is not always possible while playing on Facebook, where your friends might have other things to do besides shipping virtual goods to you. People spend a huge amount of time on Facebook, but they have offline lives, too.

“If you’re playing CityVille right now, and you send out a request, ‘Please send me a cargo plane,’ it might take a couple of days for your friends to respond,” John Schappert, Zynga’s chief operating officer, said. “You’ll be in a holding pattern to get that airport built. But on the platform, you’ll immediately get more cargo planes than you’ll know what to do with.”

That is because players on the platform will be publicly ranked on their willingness to help others.

“It’s the concept of balance of trade,” Reed Shaffner, lead product manager of, said. “There is this feeling, when you hit a profile of someone who plays every day, ‘He’s helped his friends 21 times this week, and I’ve only helped 12.’ Players will say: ‘Am I as helpful to my friends, or should I help them more? Do I need to interact with them more?’ ”

Some analysts have been skeptical of Zynga’s prospects. Morningstar concluded this week that the company’s competitive advantages were not sustainable and that the stock should have a valuation of about 75 percent of its recent price.

Even company officials say they do not know exactly how the platform will work. If play is easier and quicker, players might have less need to buy the virtual goods that compose most of Zynga’s revenue. The reason is that virtual goods are free if given as gifts; Zynga collects payment only if you buy them for yourself.

But a bigger audience also offers many possibilities. “If we can get you to love our games more, we will make more money over time,” said Manuel Bronstein, general manager of Zynga Direct, a division that focuses on building direct relationships with players.

Players on the platform will use their Facebook identities. The integration between the two sites is intended to be seamless; players will be able to move from Facebook to the platform with no interruption in the game.

There has been tension between Facebook, which is awaiting its public offering, and Zynga, which issued shares to the public in December, over how the money from the sale of virtual goods is split between the two companies. But for this announcement, all was upbeat.

“They are our key partner, and we think we are one of their key partners,” Mr. Schappert said. “This is another logical evolution of our relationship.”

Sean Ryan, Facebook’s director of games partnerships, said, “We’re thrilled to see Zynga use our login and payments platform to expand the possibilities for people to play games in more places with their friends.”
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