Zynga CEO on Blockchain Gaming & Advertising Challenges
Zynga Achieves Record Revenue and User Growth
Zynga has surpassed both market expectations and its own projections, announcing record third-quarter revenue totaling $705 million.
This represents a substantial 40% increase when compared to the revenue generated during the corresponding period in the previous year.
Furthermore, the company experienced significant growth in its mobile audience, reaching an all-time high of 183 million monthly active users.
This figure demonstrates a remarkable 120% year-over-year increase in user engagement.
Overcoming Apple's Privacy Policy Challenges
Despite prior warnings regarding the potential negative impact of Apple’s privacy policy modifications, Zynga demonstrated resilience.
These changes had initially triggered a significant 30% decline in the company’s stock value between August 5th and November 4th.
However, Zynga’s stock price experienced a positive surge today following the announcement of robust user acquisition results.
The company is now positioned to conclude the year with strong performance.
Strategic Expansion and Adaptation
TechCrunch recently engaged in a conversation with Zynga CEO Frank Gibeau to discuss the company’s strategies.
The discussion focused on how the mobile gaming leader has successfully navigated the current advertising challenges.
Gibeau also detailed Zynga’s ongoing efforts to broaden its reach across multiple platforms and its foray into blockchain technology.
These initiatives are key to the company’s future growth and diversification.
Zynga is actively adapting to the evolving landscape of the gaming industry.
Navigating the Post-IDFA Landscape
A significant shift occurred in the mobile advertising world on April 26th. Apple’s implementation of its IDFA (Identifier for Advertisers) changes, coupled with the requirement for developers to utilize the ATT (App Tracking Transparency) framework, fundamentally altered how user tracking operates across iOS applications.
This change triggered considerable disruption within the mobile ad ecosystem. The influx of new users experienced during lockdown periods diminished as pandemic-related restrictions eased. Simultaneously, the increased difficulty in precise ad targeting led to a substantial rise in user acquisition expenses.
Marketing firm Consumer Acquisition reported that many companies experienced a revenue decrease ranging from 15% to 20%. Platforms such as Snapchat, alongside advertisers like Peloton and Zynga – which functions as both an ad platform and an advertiser – were particularly impacted by these developments.
Zynga's Response and Recovery
According to Gibeau, speaking with TechCrunch, the middle of the year presented substantial challenges. Zynga was among the first companies to encounter the combined effects of the IDFA changes and the surge in demand following the easing of lockdown measures.
To adapt, Zynga reduced its advertising expenditure and initiated experimentation with innovative tools and strategies. By September, the company observed a return to typical yield levels.
Gibeau explained that the launch of FarmVille 3 was deliberately delayed until user growth rates stabilized. Following its release on November 4th, the game quickly achieved the top positions – No. 1 and No. 2 – in the free iPad and iPhone app store charts.
Leveraging First-Party Data and Partnerships
“We are pleased to announce that we believe the most challenging period is now past,” Gibeau stated, adding that Zynga is increasing its investment in new game advertising as the fourth quarter begins. A crucial element in navigating this period has been the effective utilization of their first-party data in conjunction with the Chartboost platform.
Zynga acquired the Chartboost ad network earlier in the year. This acquisition provides valuable insights into player behavior within their games, including in-game events and advertiser activities within their existing ad inventory.
“Our extensive data allows us to construct predictive models, forecasting potential returns and identifying advantageous auction opportunities,” Gibeau elaborated.
Furthermore, Zynga is actively collaborating with industry leaders such as Unity, Google, and Iron Source to refine player targeting methodologies.
Looking Ahead
“Numerous talented individuals are currently focused on resolving this issue. A solution is primarily a matter of time, rather than feasibility,” Gibeau asserted. He expressed confidence that Apple is developing a robust platform capable of supporting a thriving advertising market while simultaneously safeguarding user privacy.
“We are committed to collaborating with Apple in this endeavor,” he concluded.
The Rise of Hypercasual Gaming at Zynga
Zynga derives the majority of its income – around 80% – from subscriptions and microtransactions originating from purchases within its games. However, advertising constitutes a significant and rapidly expanding portion of their revenue, representing approximately one-fifth of the total.
This growth in advertising revenue is largely fueled by the increasing popularity of hypercasual games. These games are characterized by their straightforward interfaces and short gameplay loops, often completed in under 30 seconds.
Significant Revenue Increase
During the third quarter, Zynga experienced nearly a doubling of its advertising revenue compared to the same period in the previous year. This success has been directly linked to the acquisition of Rollic, a game studio based in Istanbul.
Zynga acquired Rollic a year prior, and the studio has been instrumental in establishing the company as a leading publisher within the hypercasual game category.
Hypercasual's Market Position and Future Growth
According to Gibeau, hypercasual games represent the largest category in terms of app store installs. These games are typically low-cost to develop and attract substantial player bases.
Their primary revenue model relies on advertising, making it a highly profitable area for Zynga. Furthermore, these games serve as a valuable source of new users for Zynga’s broader network.
Gibeau stated that Zynga aims to build a large-scale publishing and advertising platform. This platform is anticipated to be a key driver of growth, extending into 2022 and beyond, leveraging the reach of hypercasual titles.
The Expanding Reach of Zynga: A Metaverse Strategy
Zynga is preparing for the release of Star Wars: Hunters, its newest title, which will initially be available on Android in select regions next week. Testing phases are scheduled for iOS and Nintendo Switch platforms in the coming year, as stated by Gibeau.
This launch marks a significant step for the company, representing its inaugural cross-platform game release on console systems. Furthermore, FarmVille 3 was previously launched as Zynga’s first cross-platform title on macOS.
Expanding Beyond Mobile
Gibeau articulated the rationale behind Zynga’s strategy of extending the availability of its mobile games to other platforms.
The widespread popularity of both FarmVille and Star Wars necessitates a platform-agnostic approach, ensuring accessibility for players across numerous devices. Zynga fundamentally operates as a social gaming company, believing that shared gaming experiences are inherently more enjoyable than solitary play.
Consequently, innovation and experimentation are deeply ingrained within the company’s culture.
Exploring New Platforms
Since 2020, Zynga has broadened its presence to include platforms such as Snapchat, Google Nest, and Amazon Alexa. Recently, the company debuted its first game on TikTok, Disco Loco 3D, a free-to-play title centered around music and dance challenges.
Remaining adaptable to emerging platforms is crucial in the gaming industry; failing to recognize the next significant platform can have substantial repercussions. Therefore, Zynga has proactively developed experiences for various social platforms to gauge user interest.
Collaboration with Snapchat involved assisting them in integrating gaming more effectively into their ecosystem, with promising early results. Gibeau emphasized that these ventures primarily serve as proof-of-concept initiatives rather than immediate revenue streams.
Potential Partnerships and Netflix Gaming
With the launch of Netflix Gaming on November 2, spearheaded by former Zynga chief creative officer Mike Verdu, Gibeau commented on the opportunities.
Netflix is still in the process of understanding the optimal approach to subscriptions and user engagement within the gaming space. While the possibility of integrating third-party content remains uncertain, Gibeau expressed a willingness to explore potential collaborations in the future.
Zynga remains open to partnerships with platforms like Netflix, Roblox, Epic, and Valve, provided they offer a suitable avenue for content distribution and audience reach.
Venturing into Blockchain Gaming
A key strategic move for Zynga involves the appointment of former EA executive Matt Wolf to lead its new blockchain gaming division. The growing popularity of NFTs within the gaming industry has fueled significant investment in blockchain startups, such as Mythical Games, Animoca, and Forte, which are assisting developers in creating persistent, collectible in-game items.
Gibeau highlighted the influx of both capital and talent into this sector as the driving force behind this decision. The company’s founder and chair, Mark Pincus, and long-serving board member, Bing Gordon, are strong proponents of blockchain technology and its long-term integration into gaming.
Wolf is currently establishing a dedicated team to explore the most effective strategies for leveraging blockchain technology. This includes investigating how ownership of in-game assets, such as farms within the FarmVille franchise, could enhance player engagement and retention.
“We intend to operate with Zynga’s characteristic agility, and expect to unveil initial projects in the coming months,” Gibeau concluded.