The Internet and social media websites have provided lucrative business opportunities for many companies. However, one particular success story is Zynga, a gaming company founded by Mark Pincus and a group of entrepreneurs. Zynga is currently the leading developer of social network games, such as CityVille, Texas HoldEm Poker and Farmville. Zynga uses Facebook as its main network and relies on the social media aspect of the website to attract potential gamers to play their games. Clearly this method works, as the three games listed above are the most frequently used applications on Facebook. Statistically, Zynga’s games have 250 million monthly active users, of which generate 3 terabytes of data per day.
However, what is unique about Zynga is not their large playerbase, but the way in which they use the ladder of inference format to process the huge amount of data into information and knowledge. Zynga rely heavily on their ‘Business Intelligence’ which can be defined as an Organization’s ability to take all its capabilities and convert them into knowledge. This again can be referenced back to the ladder of inference and a company like Zynga’s ability to convert raw data into knowledge, which can then be used to improve their product.
Zynga starts with a game, but then studies data to determine how its players play, what ypes of players are most active and what virtual goods the players buy. It then uses the data to get players to play longer, tell more friends and even buy more goods. Zynga identify data as one of the essential factors in creating business improvements via their reporting and analytics teams. They have identified 3 main metrics that drive the economics of social gaming, which are; •Churn Rate – The loss rate of game players
•Viral Coefficient – The measure of the effectiveness of existing player in bringing in new players •Expected Revenue Per User – An estimate of expected revenue, based on monthly revenue per user and the churn rate.
The viral coefficient is an important factor in Zynga’s success. Originally their applications provided too much “wall spam” which made it difficult for users to see posts from friends. Facebook then demanded the gaming firms reduce their wall spam and therefore decreased the viral coefficient. After this Zynga turned to social graph analysis, which looks at the relationships between friends and adjusting their methods of communications appropriately. Zynga are able to do this 50-100 quicker than other competitors due to their use of Vertica’s Massively Parrallel Processing (MPP) system, which is unique n the way is stores and graphs data. This allows Zynga to quickly identify the frequent players from the part-time ones and adjust the amount of communication and also the bonuses available to those players. Zynga are now able to identify groups of users with similar behavioral patterns for even more precise targeting of game-related promotions and activities. Since using MMP Zynga’s revenue has increase from $121 million in 2009 to $600 million in 2010.
What we can refer from these facts is that Zynga appear to be a highly technical company, with the huge amounts of data needed to be processed into information and knowledge, which is then used to improve the three bullet points identified above. They also rely heavily on people’s attitudes toward the company. Such as the wall spam mentioned earlier and Zynga’s constant need to improve their users experience to decrease churn rates and increase viral coefficiency. From the facts, we can also see that their relevant criterion for success is related to user experience and retention. They have identified that user retention and positive experience increase the amount of expected revenue.
In reality, Zynga don’t really relate to people’s attitudes but rather people’s data. Although many people believe Zynga is not really a gaming company, the statistics and data they use to consistently produce revenue don’t lie. The data shows that people enjoy playing their games and spending their money to progress deeper into these games. This data shows that the majority of people’s attitude toward the company must be positive, despite Zynga having many critics due to their data hording methods. The facts also show that Zynga’s power and influence is growing rapidly. The case states that many gaming powerhouses, such as Blizzard and Activision are trying to imitate Zynga by using social media platforms for new games. This shows that Zynga are becoming a powerful competitor in the gaming market.
However, despite Zynga becoming a hugely profitable gaming company, the company is not perfect. One root problem at Zynga is that it relies on Facebook as its platform and this means that it also relies on Facebook staying popular to ensure its own success. Not only does it rely on Facebook staying popular, it also relies on the fact that Facebook continues to allow it to leech of its platform. Should they ever decide Zynga is no longer a profitable part of Facebook, they would have to find another platform or way of hosting their games, which poses huge problems to the success of their social media style of game and data analysis. Despite this problem, we still do not have enough information available to say that Zynga do not already have other methods of hosting their games or if Facebook relies on Zynga as much as Zynga does on Facebook.
Zynga relying on Facebook is currently not a problem. But should it ever become one, they would need a contingency plan in place. Zynga would need to identify a method in which they could host their games on their own. One solution could be that they produce their own social media network strictly for gamers. However, one immediate issue this would give is that the viral coefficient might decrease due to it being strictly a gaming social media network, unlike Facebook. They would then have to rely on user referrals and advertising, which would increase company expenses. Facebook is a huge factor in Zynga’s success. However, nothing can be taken away from Zynga as it has used its own business intelligence to identify Facebook as a platform for its game, not the other way around.
Currently no decision needs to be made as to a solution to the problem, because it is not yet become a problem. But Zynga do need a contingency plan in place to ensure they are able to continue functioning should Facebook ever become unpopular. The idea regarding Zynga becoming self-sufficient mentioned above is a good starting point, but they would obviously need to analyze their data further to see how much of an impact Facebook has on their current revenue and how much their viral coefficient would decrease without it.
In conclusion, Zynga’s use of business intelligence has created a huge competitive advantage for them as a company. Their simple yet addictive games, coupled with their constant production of information and knowledge from data to improve user experience has been a huge hit. Many bigger gaming companies focus on people who have large amounts of time available to play and enjoy complex games. However, Zynga has identified that the large majority of the population don’t have that time or the ability to play such complex games.
Instead they prefer simple but rewarding games through a platform they more than likely already use, Facebook. Zynga’s business intelligence has definitely paid off. This is even more noticeable when large gaming companies such as Blizzard begin to imitate Zynga’s methods. The future is definitely bright for Zynga, but business intelligence cannot solve all its problems. For Zynga to continue to grow, is also requires Facebook to do the same, which is out of their hands. Zynga must dedicate a portion of its analytics team toward finding other methods of growth should Facebook ever lose its appeal. It is safe to say, they will still be looking at their data for answers.
Courtney from Study Moose
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