What I find interesting about Electronic Art’s (ERTS) acquisition of Playfish and the recent blow up over incentivized offers in Zynga games is how both things happened as a result of different strategies employed by social games industry leaders Playfish and Zynga.
As an entrepreneur your company becomes an extension of what motivates you, your priorities, and consciously or subconsciously, how you pursue your end goal.
Playfish and Zynga present a case study in how two entrepreneurs and their respective companies pursued their first mover advantage in the social games space.
Case 1: Playfish
Playfish emulated the consumer friendly look and feel of the Wii. They built all their own games in-house and strived for a small number of extremely well produced games. You knew from their look and feel when you were playing a Playfish game and every game was built with a well organised sense of craft and artistry. Playfish never claimed to have the most games but every game was quality.
They were measured and careful and that is why they never implemented offers until the very recently. In fact you could argue that the arbitrage between Playfish revenues and Zynga revenues could be attributed to the latters aggressive use of offers.
Even on panels at the various game conferences, the Playfish management was exceedingly polite and modest. They kept their heads down and focused on making a small number of good products for their users and letting their revenues grow organically.
Case 2: Zynga
Zynga, as many people might not realise, started as a roll up. They acquired Poker, they acquired Yoville, and they rolled out as many games as they could. If they saw that something worked, they copied it and spent money in that genre.
There’s nothing wrong with the approach per se. It was a classic win at all costs, dominate the market approach which had less to do with the product and more to do with the selling. Zynga above all else wasn’t about the games or the users, they were about revenues (and letting the tech press know) and as such they pushed the envelope in all directions.
Sometimes those moves were questionable, as in the current offers mess, and sometimes they were simply ingenious. They completely changed the way that any social game maker thinks about inviting friends and incentivizing daily activity through time based game mechanics (if you don’t come back, your crops will die). There is not a player in the space now who doesn’t play and study Zynga games.
Now put yourself in the shoes of the EA management
So there are two leaders in the space. Do you want to buy a skill set, track record and social game know how or do you want to buy revenues?
For better or worse, that’s how the companies were positioned. In the end Playfish had a successful exit, and Zynga most likely will as well. But each clearly organised their priorities: love of the product and customer versus love of the bottom line. As an entrepreneur you can always get there faster. Online, Tagged showed that, Zynga showed that, and plenty of other folks offline such as Ticketmaster have used aggressive, though legal, tactics to grow users and market share.
As an entrepreneur it takes enormous discipline when you know the aggressive approach of a competitor might be generating five times the revenues you are generating and it may be tempting to run towards the bottom line. After all that’s what business is about. But as both Playfish and Zynga have shown, there are different choices you as an entrepreneur can make in your pursuit of a new market, and I am sure as we will see, multiple ways to profit in the end from those different approaches.