In just six years Zynga has revolutionized the gaming world and built a $1.82 billion company in the process. Zynga has acquired users at a faster rate than other gaming company in history. Consequently it has a lot to teach aspiring entrepreneurs about acquiring customers. They have also forged a uniquely viral marketing strategy that has turned their own customers into brand ambassadors. Here we will look at the secrets to Zyngas fast growth and what it can teach us about growing our own businesses.
Focus On Your Key Customers
The percentage of Zynga players that actually purchase something is only 2.5% of all the players. However Zynga still managed to earn $317 million in revenue in the third quarter of 2012. It is estimated that there are approximately 182 million unique users of Zynga’s games a month . This means that the 4.5million users that actually purchased something spent on average $70.40.
That’s a pretty high spend when you consider they are only purchasing virtual goods. It also demonstrates the value of concentrating on your core customers. Zynga is a free game and thus has a lot on of non paying users however these results will be similar for many other businesses as well.
Most businesses have a few highly profitable customers. It makes sense to focus on attracting more of these key customers and maximizing their spend. It is also important that you give these customers more opportunities to spend their cash. With Zynga games there is always something else that these hard core fans can spend their money on.
Don’t Give Up
Before Mark Pincus launched Zynga he had already experienced three other failures. One of these was an online advertising company called TagSense. Another was Tribe.net which he founded in 2003. This was an early social network that was in Pincus’s words “Facebook meets craigslitst”. It wasn’t until Zynga that he found a successful business model.
This demonstrates the importance in not giving up before you find something that works. Mark Pincus when asked about the cause of the failure of those earlier business models said that they occurred because although he was able to get them funded the ideas themselves were only marginal at best. He noted that in order for a company to be a success on the scale of Zynga it needed to be based on a great concept.
Be Careful About Accepting Funding
One of the lessons that Pincus drew form TagSense and Tribe.net was the dangers of accepting venture capital funding. He said that while many entrepreneurs blame VCs for changing the direction of the business it is actually the entrepreneurs themselves that are at fault. When you accept VC funding you are agreeing to give up some element of control over your business.
With Zynga, Pincus entirely self funded the business for its initial growth. He noted that he would rather have a business which had half the valuation and own the whole thing than have a VC backed company. It is tempting when starting a business to accept funding from any source in order to grow it as large as possible in the shortest space of time. But as Pincus has shown there are consequences to taking VC money.
It also shows how quickly you can grow a business, even a self funded one, when you have unique business concept and sound marketing plan. When Pincus did eventually start taking investors money he was able to negotiate very favourable terms because the business was already profitable and growing quickly. The common shares that were issued only had 1/10th the voting power of the shares that Pincus held. When the company had its IPO the shares that Mark Pincus held gave him 70 times more voting rights than those issued to the public.
Turn Your Customers Into Your Promoters
In any Zynga game their will come a point when in order for the player to progress they must invite their friends to join in on the game. Zynga has also made it possible to gift items to your friends. While users may not want to bother their friends to play the game, the idea of an altruistic act of giving presents can be converted into an effective marketing tool.
In order to ensure that there is a large pool of promoters for their new games, Zynga spends heavily on Facebook advertising in the initial push. This creates a critical mass of players who then draw in their own friends and thus spread the game virally. While we may not all have businesses that lend themselves so neatly to viral marketing the idea of using our customers as advocates is something that all companies can incorporate.
Back The Right Horse
Zyngas early games were released on the MySpace platform, where many companies were creating free games based on an advertising model. However Pincus was early to recognize that Facebook would be the social network of the future.
The first game for the Facebook platform was released in 2007 and since then it has focused its attentions there. As Facebook’s own user based quickly grew, Zynga was able to ride the wave of popularity. Zynga would never have been such a big success if it hadn’t aligned itself with Facebook so early on.
While there is some element of luck involved, there were many other companies that failed to recognize the opportunity that Facebook posed or that it would be such a clear winner over MySpace. Companies that want to grow quickly should look for markets that are set to explode. It is easier to grow your own business at a fast rate if the market you are targeting is also expanding rapidly.
Zynga has a quick development process and launches new games often. However if a game is not working, Pincus is happy to kill it off. The company spent 3 months developing a role playing game. When the game didn’t become viral sensation like Farmville or Poker, Zynga was quick to eliminate it. By launching often and eliminating what doesn’t work Zynga is able to concentrate on growing the winners. The willingness to fail quickly is something that all businesses can learn from.