generalZynga's transformation: How once-struggled game giant plans to plan for the year...

Zynga’s transformation: How once-struggled game giant plans to plan for the year ahead

Zynga became public in the year 2011, and it quickly grew thanks to social games such as FarmVille. However, it began to slide after 2013, then started to decline. Frank Gibeau, a former Electronic Arts executive, joined as CEO in 2016 succeeding Mark Pincus, the original CEO who was replaced by his replacement, Don Mattrick, who was Gibeau’s former coworker at EA. (Did you read the entire story?)

It was a long and tiring process however, Zynga has seen an improvement. Gibeau said this week in an interview with GamesBeat that Zynga’s “turnaround is now complete.” Zynga has made it to profitability at $1778 with employees. The company is now 39 percent more bookings in the year 2019.

A large part of the solution is acquisitions. Beginning in November 2017 Zynga started making purchases, including purchasing Peak Games board and card games for $100 million. The company also bought a game studio in May. Zynga acquired Merge Dragons maker Gram Games for $250 million. Later, the company bought the majority of Small Giant Games which is the maker of Empires & Puzzles, for $560 million.

However, Zynga has increased the number of its “forever franchises” (those that can reach $100 million within an annual period and run the business for at least five years) and has driven growth in existing games such as Words With Friends and CSR Racing 2. Zynga Poker is still kind of limping, however, 9 new titles are currently in the making.

Gibeau will be speaking during a fireside chat with Michael Metzger of Drake Star Partners at our GamesBeat Summit 2019, which will take to Los Angeles on April 23-24. This is the edited transcript of our conversation.

GamesBeat GameBeat HTML0: seems like you have had a great time in the quarter.

Frank Gibeau, This was a good quarter and a great year. We beat the top and bottom. We even beat our revised estimates in the first quarter. We’re in the right place to have an extremely strong year in 2019. The company has plenty of momentum. One thing we’re particularly thrilled about is how Gram along with Merge Dragons along with Small Giant with Empire of Puzzles will fit well into the portfolio along with Words With Friends, CSR 2 along with Zynga Poker. We have a solid selection of games that form the foundation of our games and we’ve got an additional nine games in development currently that will be coming out in the next couple of years, along with several games coming in a soft launch

It’s a thrilling time. We’re done with the turnaround. We’re done. There’s still “Spill on aisle three!” Cleaning up the mess. We’re focused on expanding our business and making games. It’s enjoyable. Mobile is the best place to be at the moment.

GamesBeat: You’ve always had the decline of Facebook desktop business and the increasing mobile. Have things gotten better or is that it’s still taking place, slowing overall growth?

Gibeau: There are several ways to look at it. We’re 93-plus percent mobile now. When we first started, I believe was in the mid-60s. In the past couple of years, we’ve seen a rapid move to mobile. It’s part of how we cleaned up the turnaround. It was to begin to move on and concentrate on the areas where we saw the greatest growth. This was mobile.

The positive side is that over 90% of business is mobile. However, we still face a hurdle from what we refer to as legacy internet and mobile. We must overcome the issue when we discuss how we can expand the business. It’s falling. The market hasn’t yet reached its bottom however, it’s as close to the lowest point as it’s been in the past. If you consider the way we did this year, and what we’ll be able to do the next year, we begin with a 50-$70 million headwind to revenue loss from these companies. In addition, we add the expansion of our evergreen franchises and the new games that are coming into. We’re getting close to the end however it’s an artifact we need to confront.

GamesBeat: Are you already more certain about Empires and Puzzles than acquisition time?

Gibeau: Last week, it was in the top 10 of Android. Merge Dragons was among the top 20. We’re seeing a lot of growth in these two franchises, particularly on Android and internationally which, as you’ve guessed, is a major approach for us. We’re getting more and more in love with these players every single day.

If you think about the next year, we’re predicting that we’ll increase the size of the business by 39 percent over the top of the line. We’re hoping to get to $1.35 billion at the top. The year ended just a little less than 1 billion. This is a 39 percent increase percentage in bookings. This should be one of the fastest-growing game companies if we’re not the fastest-growing public game company in the coming year. We should be set for future growth beyond 2020.

The main focus includes Empires and Puzzles and Merge Dragons. You’ll be seeing growth from Words With Friends and CSR 2. The poker is in good shape as well. We’ve got a new set of games to come. We’ll be releasing a lot of them in the coming months, and some of them within the coming weeks. The games will comprise Star Wars and Harry Potter, Game of Thrones, CityVille, FarmVille. There will also be Games by Gram as well as Small Giant.

We’ll end 2018 with a little over 1 billion dollars of revenues from our five top franchises and five franchises that will last forever. These will continue to increase, and then you’ll add new games. We’re thrilled about the prospect that we’ll continue to grow over the coming years.

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