The Zynga IPO is coming and, with it, questions. Is the business sustainable? Or is Zynga a flash in the pan and going to fall by the wayside? What does its dependence on Facebook mean?To find out, we spoke with someone who knows the business in and out: Mathieu Nouzareth, who co-founded two social games companies, Weka Entertainment and FreshPlanet.
FreshPlanet is based in New York while Weka is publicly traded in Paris.
(Keep in mind Nouzareth is in the industry so he has an interest in talking it up. That being said, he has no interest in Zynga itself.)
Here’s what we learned:
- Social gaming is very profitable. The reason why Zynga isn’t so profitable is probably through a combination of having to invest a lot (e.g. in their own datacenters) and the special way virtual goods revenue is recognised (over time). But over the long run it’s going to be very profitable.
- Facebook’s scary deal with Zynga is actually fine. Nouzareth tells us “I wish I could” trade an exclusive over games with minimum unique users, and that people in the industry “suspected” Facebook and Zynga had a deal like that. And, “Facebook and Zynga need each other. Like China and the US.” So Facebook won’t kill Zynga.
- Zynga is going to grow beyond Facebook. It’s not just Google+. Zynga is doing very well on the iPhone after struggling for a while.
- Zynga’s competitors are doomed. Big companies like EA and Disney bought Zynga’s competitors, and they don’t know what they’re doing. Traditional games are products, and social games are services, and that means they work completely differently. The games companies can only hope to catch up “in their dreams and fantasies.” In reality, Zynga’s king of the hill for a long time.