The world of online gaming can be competitive and cutthroat, with popular games coming and going often as new players flock to others. Amid this turmoil, however, one company has managed to stick around as one of the top video game producers in the industry—Zynga Inc., with their most well-known game being Farmville, one of the most downloaded games on Facebook. How did they manage to keep up in such a competitive field? Well, they have several advantages that have helped them get where they are today. Let’s take a look at ‘Zynga’s competitive advantages’.
List of Zynga’s Competitive Advantages
- Video Gaming
One of Zynga’s biggest assets is its ability to tap into a large customer base, especially for its core product: online video games. This platform is appealing to customers because it gives them something fun and exciting to do when they’re bored, or when they want a break from reality. It also allows Zynga to collect data about those customers and offer them highly relevant advertisements.
- Zynga’s Strong Cash Position
Another advantage is Zynga’s cash position. Since 2011, Zynga has generated over $1 billion in free cash flow and has paid out nearly $500 million in dividends to investors. This means that Zynga has a lot of operating capital available as it explores new opportunities. It also indicates that they are serious about returning capital to shareholders and hopefully soon re-investing those proceeds into new projects. In addition, ZNGA stock trades at a significant discount to peers (using price-to-earnings multiples), indicating market uncertainty regarding its future business prospects. This creates an opportunity for smart investors who believe that ZNGA is undervalued by current trading levels on Wall Street.
- Mobile Gamers are Hungry for New Games
Another advantage that Zynga has is a huge mobile base. Mobile gaming usage has been skyrocketing, and it’s not just casual players who are interested in it. According to data released by Gartner Inc., mobile gaming accounted for 48% of video game sales in 2012, totaling $13 billion. And those numbers are expected to grow: The research firm expects mobile gaming revenue to reach $25 billion by 2015.
- Social Media Platforms Drive Traffic to Zynga
Zynga already has a partnership with Facebook, where Zynga’s games are connected to customers’ Facebook accounts. With more than 900 million active users, that social network gives Zynga access to a massive number of potential gamers. They can also advertise their products directly on Facebook and grow their user base through word-of-mouth marketing.
- Mobile & Social Gaming is Disruptive Technology
Mobile gaming is a disruptive technology because it changes user behaviour from using PCs to using smartphones and tablets. And social games are even more disruptive in that they allow users to play games with other people, which provides a better experience than playing against computer-generated opponents. And disruption can create opportunities: Disruptive technologies typically follow an S-curve pattern, where early growth rates are very high. But then follow an exponential curve as adoption by mainstream customers increases over time.
Long-Term Licensing Agreements
Unlike its competitors, Zynga has entered into long-term licensing agreements with third parties to gain access to its games. These partnerships give it exclusive rights over specific titles for years at a time. Recently, for example, it inked an agreement with EA that allowed it to launch The Ville as a Facebook game in August 2012.
This deal gave Zynga full exclusivity over The Sims Social IP until 2014—at which point other publishers could create similar games on Facebook again. This was one of many deals negotiated by CEO Mark Pincus’ friend and partner Don Mattrick—now President of Interactive Entertainment Business at Microsoft—that are likely helping fuel Zynga’s growth.
Through these relationships, Zynga also has maintained constant access to high-quality games—which is more important than you might think (more on that later). In 2013 alone, it’s set to release new versions of Farmville 2 and DragonVale; both are based on former top 20 Facebook apps. There’s no doubt about it: Keeping a lock on quality mobile gaming franchises for longer periods is a big part of what makes Zynga so successful.
New Production & Technology
Facebook may be getting all of Zynga’s attention at present, but social gaming is far from its only trick. The company still provides a place for traditional PC gamers to get their fix with titles like Mafia Wars and Farmville—the games that jump started Zynga’s meteoric rise. And while many casual game developers are moving toward downloadable offerings on mobile devices, Zynga seems to be staying put on desktop PCs and laptops; it doesn’t seem likely they’ll completely abandon what made them such an attraction in the first place. Finally, most people associate Zynga with one word: Social.
Conclusion
Zynga has few direct competitors. Zynga makes up for its lack of direct competition by having a large variety of games that are fun to play and can be played with friends. Another advantage is their partnerships with social media platforms such as Facebook, making it easier to recruit new players and retain current ones. Most importantly, they have found ways to deal with external issues like government regulations effectively, which allows them not only to stay in business but also profit from new ventures. Overall, Zynga has many great strengths that give them an edge over its competitors and solidify its place in today’s market.
FAQs
- Why are Zynga’s games so successful?
One of Zynga’s biggest competitive advantages is its established game library, with several hit titles that continually generate revenue for years to come. Farmville has been Zynga’s biggest moneymaker, but many of their other games have been successful as well.
- What Discount Offers are Given By Zynga?
In addition to a wide selection of free games, Zynga’s apps are available at a discounted price. These discounts vary depending on your location and device, but it is not uncommon for there to be weekly sales offering up to 70% off.
- What is a Game Card / Gift Card?
Game Cards can be purchased in many retail stores and also online. They work with all Zynga games, including Words With Friends, Chefville, Mafia Wars, Farmville and more. You do not need to download any apps or sign up for an account; just enter your unique code into Zynga’s website to access your digital game card(s).
