Ted Simon Says

Marketing blog offering insights on brands, strategy, social media, technology, innovation and new products.

Splat! - Thoughts on Zynga's 20% layoff

I just finished reading Kara Swisher's article on AllThingsD regarding the huge layoff at the formerly hot game company, Zynga. As a guy with roots in the games industry (I was formerly a VP Marketing at Kabam and Broderbund Software), this really hit home for me. So much so that I had to take just a marketing minute to share what Ted Simon Says on this matter.

It's a sad day for the 500 plus people hitting the street. But, to those who have been in the industry, this is not a total surprise. Much is being said about management issues and such, and it's no secret that this company has been viewed as "questionable" in terms of management style and its approach to business. 

However, I don't much talk here about the failure to properly read the market and create a strategy/plan to adjust to the changing market conditions. Quote Kara: "the fall has been fast and hard for Zynga, as it struggles to cope with a massive consumer migration to mobile that happened faster than its management — or, to be fair, anyone in the Internet business — could cope with."

Mobile growth is part of the issue, but another part of the problem can be traced to the change wrought by Facebook when it introduced its 30% tax on games revenue. Zynga has not effectively extricated itself from its reliance on FB, a platform that went from an extremely profitable platform to barely profitable (or worse).

This sad news for hard-working employees demonstrates a couple thing (at least!):
1) Facebook killed a golden goose by instituting the steep tax on games revenue. It ruined the ecosystem and opened door to mobile as a more attractive path for game companies. This clearly hurt Zynga, who couldn't adapt quickly enough. It will also hurt Facebook in the long run (if it hasn't already).

 2) Some companies think further ahead than others. SuperCell is making a killing by focusing games exclusively for iOS devices and ignoring FB.  Kabam 's push to rapidly move as much of its business off FB as possible, while embracing mobile and other platforms looks pretty smart right about now. (Disclosure: I was at Kabam when this strategic decision was made). 

There's always more to a move like this than outsiders will ever know. That said, in this instance, the tea leaves clearly pointed to a potential train wreck. As others have commented in Kara's article and elsewhere, in instances like this it seems too frequent that those who make the strategic decisions often seem to walk away from the train wreck in one piece while those in no position to impact the outcome go splat.  

That may be a reality, but it's a very sad reality.