Zynga tanks

Zynga CEO Mark "just copy what they do" Pincus dumped $200m worth of company shares recently, safely in time for its stock to tank. Yahoo:

In April, Zynga conducted a "secondary stock offering" in which insiders dumped 43 million shares of stock at $12 a share, raking in about $516 million. Yesterday, four months later, Zynga reported a horrible quarter, and the stock plunged to $3. In other words, Zynga insiders cashed out at exactly the right time.

Though its treadmill-like browser games are crummy enough, I always thought gamers' collective hatred for Zynga oftentimes sprang from a misunderstanding of the company's business. Many saw it as a creator of low-quality, highly addictive products that were supplanting the market for well-made traditional computer games.

But Zynga isn't the new Civilization, even if Brian Reynolds did take a job there. Zynga is the new Video Poker--also technically a computer game, but so completely alien in marketing and demographic terms that no-one who plays games would ever notice that there was a billion dollar market out there for that sort of thing.

So, gamers, feel free to stop worrying about Zynga! Unless you invested in it, in which case you now have my permission to die.

Zynga Insiders Who Cashed Out Before The Stock Crashed [Yahoo. Photo: Joi Ito]

• [dethbird]

  I still believe in the low-quality clone games made for real life zombies. Who wants to start Zynga II ?

• [corydodt]

  > I always thought our collective hatred for Zynga sprang from a misunderstanding of the company’s business

  Not sure if serious…? Our collective hatred for Zynga springs from a very, very clear understanding of its business, and the myriad ways it is sleazy for both customers and the creators of games.

  • [Rob Beschizza]

    You’re being very, very unspecific!

    But I’ll hazard a guess that the myriad includes things that, while nasty (e.g. plagiarism), aren’t at the heart of its business, or are things most people don’t realize are at the heart of its business–namely, that the products exploit consumers the way sleazy casino machines do, not as competition to traditional computer games.

    (I made an edit to the post though, to make clear that there are many perfectly valid reasons to hate Zynga on other grounds)

    • [Aeon Chaosfire]

       I think the fear was that the Zynga model would suck in money that would otherwise go to real games instead of money sinks. I was listening to a podcast (8-4 play for reference) where a guest(I forgot who, but he kept droning on about free to play games being the future) told a story where a games studio in japan wouldn’t consider any new game series that were not a mobile game or a social game; if a new game was to be made for a console it would have to be a spin off from a mobile game or social game.
      On a happier note, I think Pop cap games is a good example of a game company that people originaly distrusted but came to trust once they realized that the company was staffed by people who wanted to make good games, and genuinely tried to(Plants versus Zombies was a very enjoyable game by pop cap, for some good support for them).

      • [Rob Beschizza]

        “I think the fear was that the Zynga model would suck in money that would otherwise go to real games instead of money sinks”

        Exactly, and what I’m saying is that this is (in my view) a misunderstanding. Zynga isn’t sucking money from gamers or the video gaming industry — it’s sucking money that otherwise goes into “exploitation gaming” that we usually ignore, such as slots, video poker and compulsive ebaying, etc.

        I wonder if companies with expertise in traditional video gaming who are attracted to Zynga’s model often do poorly for similar reasons — because they don’t understand that it’s an entirely different market, with different consumers.

        • [JiveBowie]

          While I do take your point, the truth is it does suck money away from game developers who actually want to make interesting games and connect with an audience (and not just their wallet). Zynga could if they wanted make games that are both addictive and lucrative. However their stated philosophy of game design, as you mentioned above, is just outright theft.

          I think clones are and always have been good for gaming, but only so long as they’re iterative. You have to add something back to the mix. Zynga doesn’t and whenever a person sends money their way that’s money that doesn’t go into the pockets of people who genuinely want to advance the art. This is also harmful in the way it make game cloning seem like a problem that needs fixing, perhaps through patents or litigation. I wouldn’t want to see that.

          As a product Video Poker is very obvious. I would argue that what Zynga does is more Video Poker in sheep’s clothing. They watch for neat ideas and then make a cheap costume of them and dance around shaking money out of people’s pockets. I don’t even particularly have a problem with so called exploitative gaming, but that’s money these same people would have been just as or even more satisfied in giving to the original company with the creativity. Zynga doesn’t have that passion and is just a vulture in this space. I’m happy to see their stock price fall and hope to see their influence in gaming continue to diminish.

          And boy is that Pincus a huge dickhead anyway. Who smiles like that but a rat?

        • [Rob Beschizza]

          “it does suck money away from game developers who actually want to make interesting games and connect with an audience”

          So does your local casino and sleazyoffshorepoker.com! You’re still stuck with this idea that Zynga and traditional game publishers are accessing the exact same consumers, people who see their choice as “I will either spend $40 today at Steam or I will spend it at Zynga.”

          I’m sayin, those people in that overlap do not exist in the numbers feared. Few who spend money on Zynga games would ever have spend it on “interesting games”. It was always an illusion. And we’re now seeing that the “spend it at Zynga” circle in that unlinked venn diagram is not getting any bigger.

          The same illusion is seen in ebooks, people who think that 50 shades of gray is ‘taking’ something away from better literature.

          But it ain’t. It’s as dangerous and as significant as something with Fabio on the cover, books which were always just as badly written and just as nasty–and bought by readers who would never buy or read anything else.

        • [Aeon Chaosfire]

           It’s not the consumer money that would have been taken away, but the money and talent for development, and there is a finite amount of that. This has been going on with the japanese game industry, with titles like Shenmue being transformed into social games(largely due to the Japanese game industry falling hard this console generation). The concern is that some idiot CEO decides it’s more worthwhile to put the resources(money and manpower) into making joyless money sinks like “farmville rip off” than real games. That would mean less games for Video/Console gamers that want real games. Zynga tanking probably assuages those fears by showing the market for money sinks is saturated, but untill recently it looked like fertile soil for business. Admittedly now the CEOs are probably going to try to rip off Activision with some call of overly expensive duty clone, but at least it would be a genuine, sincere(ish) game instead of a glorified slot machine. The 50 Shades of Gray analogy doesn’t work as the author didn’t get publisher support to start the series, and her book is one of many published; unless suddenly cash that would go to advances for authors of things other than erotic fiction(advances were never that  common as far as I know anyway) or other books aren’t published and shelved so that more 50 shades of Gray can be written and published, this analogy doesn’t work.

      • [NNelson]

        Boing Boing contributor Leigh Alexander has a pretty good breakdown of the investor issues over at Gamasutra right now. 

        I quote:

        “It would be a shame if this massive mis-estimation of Zynga has a negative impact on other social game investments that might offer the alternative approaches that Facebook so desperately needs.” http://gamasutra.com/view/news/174827/Opinion_Zyngas_headaches__did_we_not_see_this_coming.php

      • [william.smith.clark.iii]

         I believe the game company you refer to, horror of horrors, is Sega. However, they’re owned by a pachinko (slot machine analogue) company now, so it’s no surprise either.

    • [Robert Drop]

      Although a lot of gamers hate Zynga for irrational reasons (that I suspect have to do with Zynga bringing a new, non-traditional audience under the umbrella of “gamer”), Zynga is arguably damaging traditional computer games, or at least represents a damaging trend.  Many parts of the traditional game industry have been hard hit, with a fair number of studio closures, while Zynga and it’s ilk have done amazingly well.  As someone working in the industry who has looked for work within the last few years, I can attest to the fact that the new jobs that are being created are all for developing Zynga-style games.  A good percentage of former coworkers have gone from console/AAA PC development to social games.  A great deal of resources and talent have moved to social games, with a corresponding drop in the number and quality of more traditional offerings.  Zynga is on the forefront of, even if it’s not entirely responsible for, this shift.

      • [Funk Daddy]

        I don’t see it that way. For the simple reason that the new, non-traditional audience never represented a prospective market for those you say are affected. (edit- for instance in my post below I admit my mom and 1 sister play these social grind games, despite never having shown an interest in gaming before, despite the trs-80 games, early consoles through to Eve and minecraft and WoW that could be found in my mom’s house for the last 40 years due to my stepdad and me)

        If that were the case and Zynga+other social grind game were suddenly out of the picture then there would be a glut of developers, would there not?

        It’s same-same but different for why I don’t give a rat’s patoot when people complain about “brain drain” from Canadian medical establishments to US medical establishments. I hold that those who chase the dollar for it’s own sake were not necessarily offering better care than those medical professionals who entered into the field to be medical professionals.

        So far my experience with front line providers has supported my theory.

        • [Robert Drop]

          I think you’re misunderstanding the level at which this is a problem – it’s not like doctors moving from Canada to the US, it’s as if all the hospitals and medical research facilities were relocating and taking all the jobs with them.  The game industry normally has a lot of churn – people moving jobs, companies closing down and new ones starting up.  In recent years, (traditional game) companies have been shutting down at an alarming rate and the new companies springing up are almost all social games.  Talent is moving there because they have no choice; I know almost no one who wants to be in social game development.  If you wanted to start up a console or traditional PC game development company right now, you’d be out of luck – you no longer could get the money to do so.

    • [corydodt]

      Ah! Good edit, now I understand your point.

• [Dave Pease]

  I’m a little ashamed to admit how sad I was to find that the guy who made Alpha Centauri–still the best Civ family game all these years later–works at Zynga now.

  • [ocker3]

     I hearts me Alpha Centauri so much, keep pulling it out to play it again, especially with the Alien Crossfire expansion

• [Henry Pootel]

  Zynga Tanks – what a great game name!

  • [technobach]

     That what my first thought was.  A Zynga game where you have maintain your tank and constantly post so that you can get ammo.

    • [bcsizemo]

      No, other people have to post so you can get ammo or fuel, or some other part you need.

• [Cyran0]

  Tanks for nothing, Zynga!

  (Yes, I completely agree that their games are exploitative towards customers.)

• [jhoosier]

  So is this going to be investigated as insider trading?  Can it be?  The company has questionable business practices (cloning games and marketing the hell out of them to push the original creators under), which would lead me to believe they wouldn’t have any qualms about knowingly dumping stock.

  • [Xof]

    I believe a lawsuit is de rigueur in this situation. It would considered be rude *not* to sue.

  • [Antinous / Moderator]

    There should be limits on stock dumps like that, but they seem to have ignored them or gotten around them.  It certainly seems like insider trading.  Of all the sleazy things done in the stock market, that’s the one thing that does actually tend to get prosecuted.

    • [billstewart]

      Insider trading is different – it’s what happens when the insiders have information that’s not available to the investing public (e.g. latest product will be a year late.)  Zynga’s insider stock dumping is what happens when they know that (a) they’re fundamentally a popularity bubble (b) popularity is their only real asset so get your money out while you can (c) most of the products suck and customers will eventually get tired of them.

      The limit on stock dumping is the 6-month window after the IPO when insiders can’t sell.  It’s over.  Too many people in the first internet boom didn’t sell out when they should have, and rode their stock down the tubes.  (And too many others had stock that tanked before they were allowed to sell.)

  • [Robert Cantero]

    Insider trading is actually very rarely prosecuted. For every one Raj Rajaratnam that faces prosecution, a hundred are ignored (source: just made it up). Follow the options market for any period of time and you’ll notice a large number of highly-leveraged bets with very coincidental timing. The recent acquisition of Nexen (ticker: NXY) by CNOOC is a great example; during the week before the purchase, three enormous options spreads were put on. One spread turned $632k into $18.9M in three days. Link:

    http://www.optionshawk.com/blog/?p=366

    That said, this particular case doesn’t strike me as something that warrants investigation. Secondary offerings by recent IPOs are extremely common; oftentimes new issues will trade poorly/tepidly because investors expect insiders to dump more shares onto the market. Once the secondary is issued, investors can more confident that they won’t be diluted again in the near future.

    • [Funk Daddy]

      Relative to prosecutions of securities fraud on Wall St at all, it is probably right up there.

  • [Max]

    I believe the massive sell off was just after the end of the last quarter, when insiders are usually allowed to sell.  Not saying they didn’t have any idea the company was doomed, just that they were probably within the rules.

• [KvH]

  I love you linked to the article written by Henry Blodget, himself charged with securities fraud in 2002. And how he tries to justify their actions.

  • [Rob Beschizza]

    I didn’t even notice it was Blodget! It’s been syndicated by Yahoo Finance.

• [Funk Daddy]

  According to the FB statuses I have seen on my shared FB account, one of my sisters and my mother have been compromised and are now zombied by Zynga. 

  It’s sad, but they live far away and my own small tribe is protected by a combination of an interest in real high quality games and a complete lack of interest in games, interchangeably.

  Plus, if they visit I can remotely disable the wifi if I want them to go back to their hotel early.

• [Marko Raos]

  Garbage people.
  I don’t blame the dude who made it with 200 mil. He’s a crook and that’s it.
  I blame the cynical sociopathic investors who put money, the resource of humanity, into these things because “well the “consumers” are cattle, you see, they don’t deserve any better” and they do need to send THEIR children to the best of schools. I do hope they hurt now. The “banality of evil” and all that.

  • [Funk Daddy]

    I tend not to blame investors as a body because I probably am one somehow, somewhere. Certainly anyone I know with a pension is and that’s a lot of decent working people.

    Besides, why would you fail to blame the crook for the act? The act made possible by the system made possible by the act will keep you up nights to no end. It still may, but hey, there’s -a- crook, you can totally blame him for -an- act.

• [HubrisSonic]

  Gaming companies…  You will never find a more wretched hive of scum and villainy

• [Aaron Gilliland]

  Is he giving us a perfect TROLLFACE or did someone use their MS Paint skills?

  • [Andrew Rockefeller]

    I made this back when they were busy ripping off Tiny Towers pixel for pixel.

• [Ladyfingers]

  http://www.youtube.com/watch?v=zpZl801QJnc

  • [Felipe Budinich]

    That short animation is epic, I love it.

• [Guest]

  Couldn’t have happened to a better bunch of stealing folks. 

• [dhl]

  Fixed it for you.

• [AviSolomon]

  No gaming corporation can duplicate the creativity of independent game designers like Jason Rohrer, may he and his kind flourish:
  http://hcsoftware.sourceforge.net/jason-rohrer/

• [beemoh]

  “I always thought gamers’ collective hatred for Zynga oftentimes sprang from a misunderstanding of the company’s business.”

  Really? I always thought it came from, y’know, just not enjoying Zynga’s games.

• [Daemonworks]

  Can we please stop refering to zynga’s products as games? Activities yes, games no.