Social gaming company Zynga seems attached to Facebook at the hip.
The vast majority of Zynga’s 120m monthly users come from Facebook, and the slightest change in the Facebook news feed can have a major impact on how Zynga promotes its games.
As of December, Zynga and Facebook even share the same investors.
Mark Pincus, Zynga’s chief executive, sat down with the FT to talk about Facebook, the iPad and the future of social gaming.
Zynga’s biggest news of late was the $180m investment it took in December from Digital Sky Technologies, the Russian investment group that has made big bets on Facebook.
Mr Pincus said he chose DST in the hope that they will be a long term partner and collaborator, rather than just another investor willing to write checques. “I want inventors who want to add value added relationships, not those offering the highest price per share we can get today,” he said. “I’ve done this long enough to know that the guy offering you the highest price per share — like hedge funds — might be fickle.”
Such investors might also pressure Zynga — which has been profitable for 11 quarters now — to go public. But Mr Pincus all but ruled out the possibility of an IPO in 2010.
As to the fact that one of DST’s major investors is Alisher Usmanov, the controversial Russian oligarch, Mr Pincus said he was unconcerned. “We did diligence on DST and its backers, which also include Goldman and Tiger [Global],” said Mr Pincus. “I know there’s been press about Usmanov being a colourful oligarch, but I didn’t spend a lot of time worrying about that.”
More important, said Mr Pincus, was DST founder Yuri Milner’s vision for the future of the social web. “He believes the opportunity could be to be the dominant social network and the largest social gaming company.”
Those companies, of course, would be Facebook and Zynga. Mr Pincus has been a pioneer in social networking, founding Tribe Networks in 2003 and investing early in Friendster and Facebook. While new niche sites may emerge, Mr Pincus believes that Facebook has largely won the battle to become the dominant platform.
“It’s hard to for me to imagine how anyone will challenge Facebook at this point,” he said. “The fact that Facebook has already brought all your friends to the cocktail party makes it feel intractable.”
Yet his relationship with Facebook is not perfect. When Facebook recently stopped allowing games to send notifications, Zynga lost a crucial mechanism for staying in people’s minds. “Any time you have two separate for-profit companies that are coming together to provide a service there will be some tension,” he said. “There’s little things on the back and forth that anyone can get frustrated about.”
But overall, Mr Pincus said the relationship was mutually beneficial. “I’m on a different mission than Facebook, and i think the two overlap positively,” he said. “They are becoming the social plumbing of the web, and I want to create a branded network of hit games.”
“Whenever I step back, how can I not be happy?” said Mr Pincus. “It’s like asking HBO if they’re happy with cable networks.”
As for how Zynga will continue to grow beyond Facebook, Mr Pincus said he believed other sites around the web would begin to integrate social gaming in the coming years. He is not, however, rushing to bring Zynga games to the iPad.
“I think that the iPad represents a really exciting game platform,” he said. But Mr Pincus said, “it’s not going to be an opportunity for us for a fairly long time. It just doesn’t fit well with my business model.”
It may seem odd for a major gaming company to turn it’s back on the iPad. But Zynga makes its money through incremental in-game payments from users, not one time purchases for an application. This freemium model — where users play games for free and have the option to buy virtual goods — has proven a hit enough to make it one of the hottest private companies in Silicon Valley.
A condensed version of our conversation is embedded below.
