Don’t Count Out The Grasshopper
Rifkin points out that Facebook right now is similar to the Ant — in it for the long haul, cautiously spending, and storing their cash hoard for the future when times may not be so good. On the other hand, Zynga is the Grasshopper — living in the now, enjoying the times, spending lots on acquisitions, and cashing out investors wherever possible.
While good to think through Adam’s points, I do think this is being a bit too simplistic. Not to say that Zynga hasn’t made mistakes. They certainly have. Pincus’ own sale in the secondary offering being the top one. (Although I’d argue since he some much personal wealth tied up, it would have been irrational for him not to. Still, investors don’t like to see it.) Their acquisition of OMGPOP is also questionable. Time will tell if that studio comes out with more hits.
But I know from firsthand experience at a Mark Pincus interview that Pincus does have the long-term view. He wants Zynga to become an “Internet Treasure” and I think they are well on their way to becoming that.
Here are a few things that the Grasshopper has going for it:
Delivering Hits — While gaming is a hits based business, Zynga seems to have found the formula to deliver on those hits fairly routinely. They have huge network effects with the “With Friends” franchise and other games from which they can drive installs for their newer games. So Zynga consistently gets new games into the top 10 with relative ease and not too much marketing spend.
Crossing Generational Gaps — Zynga has also done a better job at crossing generational gaps than lots of companies (e.g. think playing Matching with Friends with your Mom). I think there will eventually be huge value in that.
Online Gambling Prospects — Once online gambling becomes legal (which it eventually will because governments are losing too much money) Zynga will have a huge cash cow in the form of Zynga Poker and Zynga Slots.
Social gaming is going to be around a long time. As much as people argue about Zynga games being a waste of time (“shouldn’t we be learning to code or reading instead?”), the fact is people love playing games. In 10, 50 and 100 years, people will still enjoy playing games with their friends. I’m not sure about 50 or 100 years, but right now Zynga is in a good position to lead the social gaming charge for at least the foreseeable future.
All that is to say, don’t count out the Grasshopper. I think he still has a few things going for him.