Zynga’s fall from grace—its shares closed at $2.99 following Mr Pincus’s announcement compared with $10 at the time of its initial public offering in 2011—is all the more striking given that more and more people like playing relatively simple games online. According to an estimate by eMarketer, a research firm, the number of Americans playing games like Farmville and Words With Friends, two Zynga offerings, is expected to grow by more than 5% this year.
So why is Mr Pincus swinging the axe? The answer is that Zynga built its business model around desktop-computer gaming, which was all the rage in the years after the firm was founded in 2007. In particular, Zynga flourished by leveraging Facebook’s applications platform to reach hordes of new users. But more and more social gaming is now taking place on fast-growing mobile platforms such as smartphones and tablet computers, where Zynga is far weaker.
The company has been trying to prop up its games tailored for desktops while at the same time developing new mobile offerings. The result has been internal confusion and conflict. In a post to staff announcing the job losses, Mr Pincus alluded to these problems. The scale that helped the firm to dominate social gaming, he wrote, “is now making it hard to successfully lead across mobile and multiplatform, which is where social games are going to be played”.
