{"id":4162,"date":"2012-07-31T09:58:12","date_gmt":"2012-07-30T23:58:12","guid":{"rendered":"http:\/\/blogs.unsw.edu.au\/knowledgetoday\/?p=4162"},"modified":"2012-07-31T09:59:14","modified_gmt":"2012-07-30T23:59:14","slug":"farmville","status":"publish","type":"post","link":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/blog\/2012\/07\/farmville\/","title":{"rendered":"Betting the Farm on FarmVille: What happened after the IPO?"},"content":{"rendered":"

From the Knowledge@Wharton today\u00a0blog<\/a>.<\/strong><\/p>\n

Analysts are taking another look at the online social games industry after Zynga missed the mark in its second-quarter earnings report. The San Francisco-based creator of such popular online games as FarmVille and Mafia Wars had a dizzying market capitalization of $8.5 billion after its IPO last December. That has fallen to $2.21 billion following its latest results and outlook announcement last Wednesday. The firm\u2019s second-quarter revenues were $332 million, lower than analysts\u2019 expectations of $343 million.<\/p>\n

The company, which claims 60 million daily active users, also lowered projected bookings for the year (the amount users pay up front for virtual goods they consume while playing) to between $1.15 billion and $1.23 billion from an earlier forecast of $1.47 billion. Zynga blamed its setbacks principally on \u201cdelays in launching new games [and] a faster decline in existing web games due in part to a more challenging environment on the Facebook web platform.\u201d The firm\u2019s share price has plummeted from about $15 in early March to about $3 at Friday\u2019s close.<\/p>\n

Zynga mainly hosts its games on Facebook, although recently the company began offering games on its own site to reduce its dependence on the social network giant. \u201cZynga can\u2019t afford to put all its eggs in Facebook\u2019s basket, but neither can it live without the enormous push that it gets from its Facebook relationship,\u201d said Wharton professor of legal studies and business ethics Kevin Werbach<\/a> in a previous Knowledge@Wharton article<\/a> about the game developer\u2019s prospects.<\/p>\n

According to Eric Clemons<\/a>, a Wharton professor of operations and information management, Zynga\u2019s real problem is the lack of staying power that its products seem to have. He compares social games by Zynga and others to a fad like pet rocks \u2014 plain rocks that were sold by the millions in 1975 as \u201cpets\u201d in boxes before they quickly faded from view. In a bid to boost revenues, Zynga recently partnered with toy maker Hasbro to merchandise its games, but Clemons isn\u2019t impressed by that, either. \u201cPet rocks were not followed by pet erasers\u201d or other merchandising that were able to extend their lifecycle in any way, he notes.<\/p>\n

Clemons points out what he sees as another shortcoming in Zynga\u2019s business model: FarmVille players have to pay for plants, livestock or tractors to cultivate their virtual farms. \u201cFarmVille never made any sense to me,\u201d he says. \u201cI have no use for games where you pay to improve your performance.\u201d It could serve its purpose as a transient distraction from boredom, he concedes, but predicts that fickle users will require new distractions to keep them engaged. In fact, CityVille, which was launched after FarmVille, has already eclipsed FarmVille\u2019s popularity, and the firm launched six new games last quarter.<\/p>\n

In the previous Knowledge@Wharton article on Zynga, Wharton emeritus management professor Lawrence Hrebiniak<\/a> warned of that very challenge. \u201cZynga\u2019s business model depends on developing cool games and new titles to replace older ones,\u201d he noted. \u201cHow long can Zynga do that? By the time [its] Facebook deal expires, Zynga may not be viable.\u201d<\/p>\n

This blog was previously posted in Knowledge@Wharton today\u00a0blog<\/a>: Zynga\u2019s Potentially Losing Game<\/a><\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

From the Knowledge@Wharton today\u00a0blog. Analysts are taking another look at the online social games industry after Zynga missed the mark in its second-quarter earnings report. The San Francisco-based creator of such popular online games as FarmVille and Mafia Wars had a dizzying market capitalization of $8.5 billion after its IPO last December. That has fallen […]<\/p>\n","protected":false},"author":336,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-4162","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/posts\/4162","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/users\/336"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/comments?post=4162"}],"version-history":[{"count":3,"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/posts\/4162\/revisions"}],"predecessor-version":[{"id":4164,"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/posts\/4162\/revisions\/4164"}],"wp:attachment":[{"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/media?parent=4162"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/categories?post=4162"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/tags?post=4162"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}