Originally written in July of 2011 and published in early August of 2011.

  • Ramin Shokrizade, a level 0 monster with 107 posts — 1 year ago:

    I wrote this in Jule of 2011 to give 2K Games some insights to how they might want to go about monetizing their CivWorld product. I am publishing it here so that others can more easily access it and make use of the social network game monetization fundamentals discussed herein.

    Zynga Business Model and Game Design Analysis
    by Ramin “Sarcerok” Shokrizade
    July 17th, 2011

    Overview
    Zynga uses a combination of novel and borrowed technologies to achieve success in an environment with minimal competition. Their game designs are largely borrowed (legally or otherwise) from Western independent developers. Their microtransaction methods are largely borrowed from China, with great similarity to the methods used by IGG which I analyzed in 2009 for my paper, Sustainable Virtual Economies and Business Models. What is novel is their combination of these borrowed technologies with social networking systems that allow them rapid (“viral”) and inexpensive market penetration with products that would not be competitive in traditional markets.

    The primary target customer base is those players with difficulty controlling their impulses or saying no to repeated spending stimulus. I call these “OCD Gamers” but “whales” is a term currently in use so I will use this term for the remainder of this article, and the term “whale hunting” as the process of luring and hooking these highly sought-after customers. Secondary customers are novice gamers who have minimal exposure to more traditional computer games and who are unable to realize that the pleasure-to-cost ratio for these products is low. Another secondary customer group is children, which is fairly obvious if you look at how some of the products are presented, especially FrontierVille.

    Children under age 13 are not officially allowed to play Facebook games, and those aged 13 to 17 are required to have their parents agree to the Terms of Service. However, there is absolutely no effort made to enforce the ToS and the use of these products without parental knowledge or consent is facilitated by the sale of prepaid game cards at thousands of retail outlets including WalMart, 7-11, Best Buy, Target, Walgreens, CVS, and RiteAid. I find it fitting that about half of the outlets are drug stores. Based on my quick interviews of local 7-11 store clerks, it appears that customers of any age, even those under 10, can walk into any of these stores and buy a Zynga game card even if it is “officially” forbidden for them to use it. Thus these stores are complicit in the administration of the business model.

    Since only 1% to 3% of Zynga customers are in the target group, the focus is not on quality but rather quantity. If, of the current 750 million Facebook users (a number sure to rise), one third (also a number sure to rise) are playing Zynga games at least monthly, and only 2% of those are whales, you have reached 5 million paying target customers. Through the use of mission lures, these players will be requested to spend up to $20 per capita per day. If their actual spending is only $5 average per day and they quit after a month on average, this would be a current revenue stream of $750M annually. Secondary customers (children and novice gamers, mostly women) can be expected to make up a similar number which will increase as product quality improves.

    Additional revenue streams come from product tie-ins and email address farming (no pun intended). While I will discuss these further in later sections, I estimate these additional revenue streams represent at least 25% of annual gross. Zynga’s reported revenue for 2010 was $850M and I would anticipate this to at least double in 2011. Since Zynga’s business model is extremely vulnerable to competition (for reasons I will discuss later), Zynga is currently hiring social networking game studios at a feverish pace, not only to apply them to new game development, but also to act as a check against them being used to develop competing products. Their recent bid of one billion dollars for PopCap (EA countered with a 1.3 billion dollar offer) reflects just how critical it is for them to monopolize the Facebook market.

    Target Customers
    The most motivated customers in the traditional retail gaming market, often called “hardcore” gamers, are not the target audience here despite having the most dollars to spend. That group is already being served, albeit poorly, by so many sources that the competition for them is great. This means that profits by traditional means will be poor and the risk of innovation is high.

    I must point out that while women on average in the United States have more daily access to computers than men do, Western gaming companies paradoxically do not consider them the prime product group. Their emphasis on first person shooters and sports games (EA and 2K are particularly guilty here) suggest that they have just written off women as potential customers to a great extent. If there is one area where I can admire the work of Zynga’s directors, it is the realization that this makes women gamers the most under-served and profit-capable group in the world.

    Zynga is currently experimenting with ways to best reach the under-served female consumer base. CityVille is the prime example currently, and you can see the refinements over their previous female- oriented product, FarmVille. Empire and Allies, conversely, is their newest product that contains similar refinements to CV but is targeted more at men.

    While whale hunting is still the main source of revenue for Zynga, they realize that that 2% of the population is approaching full exploitation. If they experience competition (or burnout, which may be worse) they will suffer a market collapse and be cut down in their prime. Thus their current strategy is twofold:

    1. Minimize competition: Buying up all available experienced social networking gaming studios is a prime focus, occurring at the dizzying rate of about one a month. While this will allow them to put out new products faster, and with better product quality, the real focus is monopolization of the space. Zynga’s current agreements with retailers give them tremendous market power also, meaning that the only viable threats will come from large companies that have the resources to compete (such as EA with their recent PopCap acquisition).

    2. Enroll the other 98%: You can only hunt whales so long before there are no more whales. Zynga now has the labor and technical resources, capital, and corporate partnerships needed to fund a more sustainable business model. Whether they realize this, or know how to, I cannot yet guess. Not all of this effort is technical. On the political front, Zynga has created a lot of ill will due to its myriad unethical business practices. Changing this will require some PR efforts and various changes to their business model. Products such as CivWorld (Firaxis/2K Games) represent a substantial challenge to Zynga dominance since they target the other 98% right away. Already CityVille advertises that City “Wonders” will be implemented soon. The next Facebook war will be over this remaining 98%.

    The issue of targeting children here is a sticky one. Not only are they a reliable revenue stream that is vulnerable to the additional peer pressure inside a social network, but they also represent future customers that you want to “lock in” just as the tobacco companies do. It is no wonder here that Disney has so aggressively attempted to break into the social network gaming scene with their acquisition of PlayDom in July of 2010. Likewise, it is no wonder that Zynga so aggressively sued Disney (successfully) for attempting to acquire Zynga data directly from Zynga employees instead of using someone like me to just reverse engineer the data using non-software means.

    Here, as an example of children being targeted by Zynga, I wish to showcase what I will call “Dying Bambi”. In the first hour of play in FrontierVille, the player will be confronted by a “wounded baby deer”. Said deer is carefully drawn to appear young, has bandages around its neck and leg, and is lying on the ground but convulsing periodically. The player is told that it was viciously attacked by a coyote and will die without help from the player. It cries huge tears as it feebly convulses. FrontierVille is very cartoonish and simple, with the ultimate objective of marrying your fiancé after you help set up a farm and cabin for the both of you. Everything I can see in the game suggests it is aimed at a very young (female) audience. To subject this group (which Zynga does not even officially allow to play) to the moral dilemma of “pay us $10 [not an abstract number] or this deer [that looks a lot like Bambi] will die” is about as unethical an example of the abuse of children by media companies as I can find. As an adult, I can pass it off as sick humor, but to some young children, this may actually cause them to break the piggy bank and sneak off to Walgreens to buy a playtime card and “Save Bambi”.

    This kind of activity at some point invites public regulation of the private sector. Dr. Leland Yee and Common Sense Media would be very interested in doing so if they saw this kind of activity backed up with some data on how many play cards are sold to minors. Any such regulation would, of course, be a drag on industry profits and possibly open the door to additional regulation.

    Finally, let me explain “whales” in a bit more depth. Understanding your target consumer is extremely critical to formulating products that will appeal to them. Whales have the same personality disorder that sustains the Las Vegas casino industry. Currently, if they gamble, they are officially diseased. If they play computer games, they are not officially diseased. The reason for this is a lack of research on gamers to substantiate the conditions for a diagnosis. I have worked hard to expand this in the academic sphere with little support (Professors Yancey and McCarthy at UCLA being the rare exceptions).

    If you hit these people with enough stimulation to spend, they will spend. They crave social prestige, even if it is unearned, a factor that is capitalized to great effect by IGG in China who has the ultimate whale hunting business model. I described it in my 2009 paper Sustainable Virtual Economies and Business Models, and I called their business model “Deer Hunter Online” for reasons I will not go into here. Playing Zynga’s Empires and Allies game suggests to me that they have been evaluating IGG’s methods and would like to create a hybridized whale hunting game for Facebook. This would be a tremendous feat of economics, business, and software technology.

    I have seen IGG customers spend up to $5000 a month to defeat me and they have a “VIP Club” that requires at least $2000 (or could be $3000, the translation isn’t precise) a year for membership. Similarities in design in Empires and Allies, and the secretive Zynga “Platinum Purchase Program” for heavy (over $500 spent at a time) users suggests to me that Zynga would like to find ways to tap their customers for more than $20 a day and are looking to IGG for more ideas to “borrow”.

    Realize that hardcore gamers (who don’t currently play Zynga games) find the idea of “paying to win” repulsive but will readily spend $1000 or more a year on games if they feel the game is worth it. No company to my knowledge has attempted to tap this willingness to pay a premium since 2002′s Everquest Legends (SOE). I proposed a number of ways to do this in my paper on virtual economics.

    Methodology: Lure and Hook
    Traditional games offer one set price for a product. This makes sense in the real world where people will go down the street to buy oranges or sodas or any other tangible product at a cheaper price. Virtual goods, however, beg for graduated pricing mechanisms. While 80% of your customers may be willing to pay at least $15 a month for your product, a large portion of them will pay a lot more. With a fixed price there is no way to tap that additional revenue/demand.

    Once a customer is immersed/attached to your virtual world, they will pay a premium for your content rather than go looking for a new yet unfamiliar product, unless said new product is undergoing tremendous positive hype. An example of the latter would be anything with the words “Star Wars” or “Harry Potter” in them. Microtransactions, while not being the ideal way to tap this additional demand, are probably the easiest way to tap it. Someone willing to pay $150 a month can be accommodated easily in a microtransaction system.

    While Zynga products are generally inferior in content and complexity, they are superior to traditional products due to pricing flexibility and market penetration. Again I must stress that these business models are not the best way to do this, as explained in my Sustainable Virtual Economies and Business Models. While very few people (as a percent) may be interested in Zynga products, those that are can be milked for precisely the maximum amount they are willing to spend. Further, the viral nature of the Lure and Hook method of social game promotion allows a massive number of people to be solicited to extract the few willing customers–few here being something in the order of 5 million given the size of the total Facebook population.

    Gameplay is initially free but in order to start, you have to give Zynga access to your friends. This is a tremendous exploit in the Facebook system that will have to be modified in the future as spam makes the product undesirable. Right now, however, Facebook is the Wild Wild West for spammers. Yeehaw!

    As you are giving your friends to Zynga, you are also asked for your email address. Currently, if you are observant and careful, you can opt out of giving your real address. I suspect this is a relatively recent option. You will be offered “free stuff” again within the first hour of play in return for your email address. In case this fails, or you are smart enough to opt out of the real email address, Zynga has come up with Rewardville. This site gives you additional free gifts. While Rewardville is linked to Facebook, Zynga farms your real email address from Facebook when you visit it (in violation of Facebook policy, which is an issue for lawyers, not me). The point is that Zynga REALLY wants your real email address and will go to extraordinary lengths to get it.

    While I am still waiting to see who Zynga sells my email address to, I know for sure that once they steal an email address from Facebook, they then reverse-link it back to all Zynga Facebook apps so that they can spam customers directly even if customers were careful to opt out of that. I am sure that 250,000,000 email addresses must have some monetary value and this is part of their revenue stream.

    Within any Zynga game, you will be spammed mercilessly for the following in addition to the email capture attempts described above:

    Friend Spam: In the first 30 minutes of CityVille play, I was asked 20 separate times to share “my accomplishments” with my friends on my/their wall. This means 20 rounds of spam in 30 minutes to all of your friends. I am careful to keep my friend count to 4 or less on Facebook but I am told most regular users have somewhere in the order of hundreds of friends. This means that Facebook facilitates literally billions of spam messages by Zynga every year. You have the option of opting out if you carefully hit the little red “x” instead of the huge green “ACCEPT” button, but they also tell you that rewards will be given to your friends every time you hit “ACCEPT”. Brilliant.

    Friend Invites: In the first 30 minutes of CityVille play, I was asked 5 separate times to invite a specific friend to become a “neighbor” and to interact with their city in the game. These invites take the form of “missions” that you have to complete to advance in the game. You can opt out of this but this essentially halts your play advancement. Further, you can spend on the order of $20 to avoid inviting your friends to play the first day, but you will just be asked in the next round of missions to invite them yet again. Unless you want to pay an additional $20 a day, you’d better get at least 5, and preferably twice that many, friends to play with you in a hurry. Or you could quit.

    Money Missions: In the first 30 minutes of CV play, I only had two missions that required me to spend real money to complete. By the end of the first day, my screen was filled with them for a total cost of about $20. While I could still generate coin (the game generated currency), I could not advance in the storyline at this point without spending real money. Money missions either require you to spend real money or sometimes ask your friends to help you out with an item you don’t have access to. I am not sure if this makes them buy it for you or not. For the purposes of this first paper no real friends or money were used.

    By the second day of play, I had missions that gave me cool new buildings and asked me to place them in my city. Placing the first two of these buildings cost me about $2 of energy (if I had to buy it) and about $3 of city cash (which I would have to buy no matter what). Giving missions that give players negative five dollars of “free buildings” is pretty impressive game design.

    It is interesting to note that the game designs for both Empires and Allies and CityVille now use gatekeeper buildings called “government” and “community” respectively. These control your maximum population which in turn limits your progression through the game. Almost all buildings and missions in the game are limited directly or indirectly by your population. You cannot complete these buildings with game coin alone. You must either spend real money or recruit friends to play (or both) in order to complete these buildings. This simplifies the game design for both Zynga and their customers, allowing greater complexity in other areas and making sure “none shall pass” without paying up.

    In Game Advertising: Zynga will hit you with an advertisement upon every login, then every few minutes while playing. Most of these fill the screen so you have to click to get past them. One banner with a 3rd party ad always runs on the bottom of CV but this is not yet the case with E&A. Some of the game ads give “one time discounts” of as much as 50% on game currency, which will generally be repeated. Some specialty buildings and items will also be offered that are “limited time offers” with a countdown timer on them.

    Additional ads promote RewardVille which, as previously mentioned, is an email farming site which also encourages players to play longer and to play multiple products in order to get “the best rewards”.

    There is also a daily reward which rewards you for every consecutive day that you log in, to promote retention.

    Seasonal missions and items round out the advertising barrage by giving themed things to buy, like 4th of July related items the week I was playing (even though that was more than a week prior).

    The idea is to never miss an opportunity to lure the customer into either paying some money or offering up their friends to Zynga. Once a player has either paid or enrolled their friends, they are on the hook and now daily must decide to either give up or pony up (no pun intended). Giving up means they “lose” the money invested and/or have to face the peer pressure of telling their friends they won’t play anymore. Paying only delays this dilemma one more day. They are hooked. But hopefully they are hooked together with their friends so it’s a shared pain.

    Product Tie-Ins
    Another way to get in-game cash other than buying it outright is to take advantage of “business partners”. These are offers to buy from various vendors that sell pretty much anything you can think of and include Groupon and similar companies that add a whole additional layer of marketing. These offers are updated every few hours; if you are logged into the game longer than this, the game will force you to refresh your browser so that the advertisements can be more easily updated.

    Most of these only pay about 10% of the value of the transaction back in game cash. For instance, in CV, one unit of cash costs about $ 0.10. The more you buy at one time, the cheaper it gets, with small purchases being more expensive than $ 0.10 per unit and the largest purchases being less. Buying a movie ticket for $7.50 gives you 10 CV cash, worth about $1. The best “payout” I saw was for Restaurant.com which was offering 104 game cash for a $20 purchase of a $50 restaurant gift certificate. This came with what seemed like 10 pages of legal conditions. More promising was 176 game cash for new Netflix subscribers, which I didn’t qualify for (not new) and which is a recurring charge.

    On purchases that might involve a recurring charge, there is typically a note saying that the game cash offer will be rescinded if the subscription is canceled. This is of course an empty threat since once that game cash is spent in game there is no way for Zynga to take it back. This of course opens the door for people to exploit Zynga. Conversely, this costs Zynga nothing other than a missed opportunity to sell game cash.

    These kinds of product tie-ins are valuable to all parties (consumer/Zynga/merchant) if they are genuine and not scams. Zynga promoted a lot of scams in the past and claims they are “being more careful” now. Using data mined from Facebook, I would imagine that merchants could be paired more precisely with their target consumers for maximum purchase rates. This is almost a must for any game wanting to use Facebook as their retail space since it is such a powerful opportunity for consumption.

    Design Overview
    When analyzing a design, I would normally spend 200+ hours breaking a design down into its various features, bugs, weaknesses and exploits. For the sake of brevity, it does not make sense to include an intensive design analysis here since there are almost a dozen active games in Zynga’s stable currently. I’m eager to provide this service to any interested patty. Instead, what I describe below is the “backbone” that all of their games are built upon, which simplifies their code and keeps their design time down. Further, I am focusing on their two latest products, CityVille and Empires and Allies, which seem to represent their latest generation design.

    These products have a single player play field that can be populated with housing, decorations, farms, businesses/factories, and community/government buildings. There are additional items that can be built that are unique to each game. Additional common economic features are coin (the common in-game unit of exchange), cash (the currency you have to purchase with real money or product tie-ins), and energy which is a unit of time. Finally, almost every action uses a unit of energy and gives one or more points of XP which allow you to “Level Up” over time. Leveling up unlocks more buildings and such. I will describe all of these features next.

    Housing: The player drops houses of various sizes that raise the population of their city. In E&A these have a fixed value while in CV the population of each house can rise slightly over time, which I think is a nice idea and serves the purpose of player attachment to existing buildings. Higher level buildings are more elaborate looking, and generally hold more people. All buildings produce coin periodically. Gathering this coin requires a click and uses energy. The amount of houses you can build is limited by your city’s population cap.

    Government/Community Buildings: These buildings raise your population cap. They are level-limited so you can’t build the larger ones right away. In addition to coin (and lumber in E&A) these buildings require “friends” or cash to build. Most other buildings in the game are unlocked by population so these buildings act as progression gatekeepers and can be very expensive in terms of real world cost.

    Farms: These are a staple of Zynga games. You place one then select a crop to grow on it. This means you don’t need to build better farms as you level up, you just put better crops down. Crops produce coin in E&A and “goods” in CV. Goods are required to operate businesses in CV, which are your primary source of coin in that game. Farms are the primary source of coin in E&A. Crops have various times they take to mature and if you wait long enough they “wither” and become useless. Friends can apparently help unwither crops but I was not able to test this.

    Factories/Businesses: In E&A factories of various sorts are used to build all of the military units in the game (except cash-only units). They require industrial building inputs like wood, ore, oil, and rare metals, with those industrial buildings acting like farms. Making a military unit takes time, placing it takes energy and space. Businesses are the core of the CV economy. They have to be supplied with goods and then quickly serve your people until the goods are used up. At that point they can be clicked for their coin output. Goods production is fairly complex and specific to CV, so I will not discuss it in depth here.

    Decorations: These are things you can place to make your city more spiffy. These range from flowers and lamp posts to volleyball courts and even “alien invasions”. The more elaborate decorations are of course more expensive and usually require cash, not coin. In CV, some decorations also boost the coin output of nearby buildings. To promote decoration use, many of the missions given in the game require you to place decorations, and many mission rewards are decorations. From a game design perspective, the purpose of decorations is to encourage players to use up space in their city so that they run out. Players then must “expand their city”, which requires plenty of both coin and cash.

    So a new player is given missions to start. This is pretty standard fare though in most games these early missions act as a tutorial to explain how to play well. In Zynga games, these act as a hook to direct a player’s spending of real money. While the first few missions may not require money, in an attempt to build a bit of immersion, the player is soon confronted with friend and cash requests. This is the “lure and hook” method described earlier. In CV it is particularly clever in that you can spend a LOT of coin buying a building at the direction of a mission, then spend a LOT of energy “building” it, then only after all of this investment are you told that you need to provide friends or cash to finish it. This is the hook.

    Presumably it does not take long for the new player to either quit, recruit their friends, or open up their wallet. If they continue to play, they will be directed to place lots of worthless/cheap buildings and decorations that will quickly use up their space and cause them to pay for a larger play area. Missions direct the player to make lots of cheap buildings that give outputs rapidly, so that players will use up their energy clicking on them. Then they are given a pop-up telling them to buy more energy for cash. Energy recharges at the rate of one per 5 minutes and almost every building click you do uses up one. The cap on energy is pretty low so that you cannot bank more than a few hours of it (or as little as one hour in CV at start).

    Better buildings and crops take longer to pay out, and pay out more so that you can conserve energy by using these in the game. To counter this, more expensive buildings and crops actually have diminishing returns so that you make much less coin and get much less XP if you make an energy efficient city. This creates a situation where players that log in frequently will have to make a city that burns a lot more energy to keep them entertained, and thus they have to buy energy with cash. Those that log in infrequently will want the higher end buildings/crops but will advance very slowly so they will have to buy coin and buildings with cash.

    Basically the design focus is to frustrate the player at every turn and to offer to eliminate that frustration quickly and effortlessly in return for cash. Players with more cash than patience are the target audience.

    Music and sound quality are actually pretty good, but to me seem like they were almost identical to that of SquareEnix. All graphics are cartoonish, presumably to maximize appeal to children.

    At the completion of every quest, the game asks you to share your accomplishment and rewards with your friends. If you hit the huge green “ACCEPT” button, your friends get spammed. When clicking on buildings, colorful reward icons fly out and if you click on enough of them fast enough you get an additional coin reward. This acts as an additional minigame and can encourage energy use. Players also get a daily reward for showing up consistently, which not only increases their chance to spend money but also helps to motivate friends to spend money.

    Analysis
    Zynga has added additional content and complexity to both CV and E&A to promote a reduction in churn and increase in payments. If they can add enough complexity then presumably they can make their games more competitive than those produced by other companies and then maintain or expand market share. Their ultimate goal is to generate a near monopoly in the Facebook space through the following mechanisms:

    1.Buying all social networking gaming studios.
    2.Maximizing market power through (ideally exclusive) corporate partnerships.
    3.Attracting top labor resources from rival companies.
    4.Using legal means to allow them to steal IP while preventing others from doing the same.
    5.Creating sweetheart deals with the Facebook parent company.
    6.Raising product and business model complexity to make competition unlikely and expensive.
    7.Expansion to foreign markets.

    Zynga is moving efficiently and aggressively to complete these goals. Zynga and EA have been engaging in a heated battle to buy up all studios that could assist in the battle over Facebook. Disney would also like to be a player, but is falling behind because they do not well understand the space. Acquisition highlights include Playfish (acquired by EA in 2009 for $275-400M), Playdom (acquired by Disney last year for up to $763M) and PopCap. Zynga offered $1B for PopCap but were outbid by EA at $1.3B. Zynga attempted to delay Playdom development through lawsuit and was successful.

    Zynga has recently lured away EA COO John Shappert and executive producer Phil Frazier. I suspect there will be many more in the next month and it is almost certain that investors will be sensing this shift in inertia from traditional game designs to social networking games and asking increasingly sophisticated questions about how each company plans to participate in social gaming production.

    While Zynga products are still both crude and annoying, if they can acquire sufficient design talent and develop more sophisticated business models, they may be able to attract the other 98% of facebook gamers that they are alienating currently. The emergence of competition in the space could be a major confound, especially if that competition uses business models targeting non-whales (the other 98%). This will undoubtedly require capital, and if enough investors shift their assets to Zynga, this may not be possible.

    At this point it is my opinion that competition with Zynga through emulation will fail because:
    1.Zynga has a four-year head start.
    2.Their corporate tie-ins are well established.
    3.They have substantial market power and influence with Facebook directly.

    The good news is that emulation of Zynga is not necessary to compete with them in this space. To see how this is possible, it is necessary to consider the strengths and weaknesses of the Zynga business model:

    Strengths:
    Rapid market saturation via established social networks
    Maximizing customer spending through the use of graduated pricing methods
    Exploitation of vulnerable populations (whales and children)
    Multiple revenue streams from email farming and product tie-ins
    Minimal competition

    Weaknesses:
    Poor product quality
    Poor reputation for spam
    History of unethical behavior
    Low product value
    Vulnerability to child-related regulation
    Nearly saturated target consumer base
    Limited target consumer base (2% of social gamers)
    Vulnerable to competition from non-microtransaction-based business models.

    The only competing product I have seen thus far that can target non-whales is CivWorld (2K/Firaxis). This product has the potential of attracting the other 98% of Facebook gamers that Zynga’s model alienates. If they can attach a non-microtransaction business model to it and weave more social networking functions into the game, it can compete with Zynga by targeting a totally different, and larger, consumer group. While Zynga has been described as the 800 pound gorilla of social networking game companies, their position is fragile and depends on competitors attempting to emulate them. Unfortunately, the industry has done a really poor job of innovating and a good job of emulating the last few years and this trend could finish off the older interactive media companies as I predicted in my 2009 paper on the subject.

    ©July 2011

  • Avatar ImageBrian McDonaugh, a level 1 monster with 1 posts — 1 year ago:

    Wow, this is a really awesome analysis. I have a friend who was a former employee over at Zynga, and is now heading up social game development at another company, and he said “It’s very possible to beat Zynga – you just have to be willing to make a better game.”

  • Avatar ImageRamin Shokrizade, a level 0 monster with 107 posts — 1 year ago:

    Brian thanks! I actually have had two people that have worked for Zynga, including one that designed the economy for FarmVille, read it. They both gave me very positive feedback on its contents. I’ve had some requests to take it further, to the point where their design could be easily replicated. I’ve resisted this because I am not eager to have Zynga replicated, and it’s going to happen without my help.

  • Avatar ImageWayne, a level 7 monster with 4 posts — 1 year ago:

    Thank you Ramin for you absolutely fascinating and inspirational article. I am struck at how corporates immorally exploit young children out of their savings and steal access to our private email addresses and friends through cunning social exploits. I say let’s beat them by making better games for greater humanitarian causes.
    If it’s about money and greed that is the root cause of this awful corporate behaviour, why not change the value system somehow? Sure money and currency is important to us, but it should only be enough of an issue to take it off the table so we are not obsessed with it. We have far more pressing global survival issues to be concerned about. After all money is simply only an exchange of value. I am certain there are ways of exchanging better values for better reasons in better ways.
    This may sound a bit deep and personal as I have children and often wonder what is in future for them in this world of ours. The world is changing so fast and I sometimes try to image an economy where money is about exchanging real earned meaningful value instead of hording huge reserves for the sake of fear. Maybe I am naïve, and I certainly am not an economist, but it seems obvious the real-world economy is already collapsing in any case mainly due to greed and fear of what we may not have enough resources in times of need to survive. Sure, it makes sense to have reserves, but it does not need to be that excessive for so few. It seems we have somehow been conditioned hoard that way. If only we can wake up and recondition our human nature through cultural, agricultural and technological education based on the gameful principals that fully engage us? I believe we can create abundance for all to survive.
    I’ve read Jane McGonigal’s book, Reality is Broken that has inspired me. I now have an ambitious dream of creating or otherwise being involved in a revolutionary gameful economy with a social community that will go viral. Imagine a massive global alternate social system that satisfies humanity’s basic rights and effectively reconditions us to get rid of greed and poverty by means of a carefully designed game that we all play for real. That would be an epic world changing win worthy of a Nobel prise. After all we are limited only by our imagination.

  • Avatar ImageRamin Shokrizade, a level 0 monster with 107 posts — 1 year ago:

    Wayne, thank you for your enthusiasm :) The bottom line is that we as a the gaming community are making such junk that Zynga products are actually competitive. We need to do better, and it isn’t really that hard. Like it or not, the gaming industry is mostly being run right now by MBAs that have very little game experience. They use analytics to try to maximize the monetization of products that barely pass as games or entertainment.

    As I was telling Brian this morning, it is human nature to hoard scarce resources. Think of it as mating dynamics. He with the most resources attracts the most mates. No other species really takes it this far. Beavers probably are the next closest I can think of lol. But our species does not know when to stop and it’s becoming seriously unsustainable.

    I think Southpark Season 14 Episode 1 explains this better than I can. Please do not watch it if you don’t have a sense of humor or are easily offended :)

  • Avatar ImageTristan Ansel T. Angeles, a level 7 monster with 21 posts — 1 year ago:

    Great analysis! Did you post this anywhere else so I can have some of my friends read this?:)

  • Avatar ImageRamin Shokrizade, a level 0 monster with 107 posts — 1 year ago:

    I’ve been sending it out on LinkedIn upon request in the appropriate professional groups. The reason I put it here was to get people to come here, so why not let your friends read it here? Unless games are not there thing, in which case you could just cut and paste it and send it to them? But then if games are not their thing, they probably would not appreciate the article :)

  • Avatar ImageOwen, a level 0 monster with 2 posts — 1 year ago:

    Very cool article. I have always looked at these games as time wasters until I actually tried playing Sims Online the other day. The first couple days of the game are usually the most fullfilling with enough variety to make the game seem interesting. After that its nothing but meaningless fetch quests and requests to send gifts to your friends and share gifts. My only gripe is that people actually think this is a productive type gaming.

    I forgot to mention the energy bar – annoying!

    The new FB settings and the data retention changes should be interesting, Now the game will require you to accept posting stuff to your wall at installation and be free to spam without your permission.

  • Avatar ImageRamin Shokrizade, a level 0 monster with 107 posts — 1 year ago:

    Owen, most games have shady connections to productivity :) Please note that there is close to nothing social about this “social” game. Once we actually start to have social activity in social network games, things will get interesting.

  • Avatar ImageVictor Andersen, a level 0 monster with 6 posts — 11 months, 1 week ago:

    Wow, this is an incredible analysis. It’s sad and a bit angry-making how accurate it is.

    Last year at PAX I was in the audience for a panel entitled World of Farmville, about the rise of social gaming and what makes it different from traditional gaming. One moment that stood out was when Henry Stern (Lead “Designer” at Zynga), who I used to respect when he was at WOTC, gave a surprising answer to an audience question. When asked what he thought about criticisms that Farmville wasn’t really a game, he suggested it didn’t really matter if it was a game or not as long as 50 million people played it.

    *facepalm*

    I just moved to San Francisco from Redwood City after spending 5 of the past 7 years working for EA. I want to focus on my own projects now, the kind of socially beneficial games EA or Zynga will never make. I have been eyeing that Zynga building with its inviting red sign, thinking about the friends I have who work there, all the ex-colleagues at EA who now work there, and have been considering applying to Zynga as a backup plan. I only have about another month to try and raise funds for my own projects before I’m going to have to get another real job to pay the rent. But this article makes me really queasy about sending Zynga my resume. Will they ask me to an interview just to spam me?

    lol :)

    Anyway, great analysis. I will be very interested to see if they do use their current size, influence, and talent to actually make real games and stop being a glorified casino. Knowing only the people from the Sims teams who are over there now, they certainly have staff who knows how to make better games. I challenge them to do so.

  • Avatar ImageRamin Shokrizade, a level 0 monster with 107 posts — 11 months, 1 week ago:

    Victor, thanks for the great feedback. I also read your intro statement and am very impressed. I had to turn down a number of offers this year that included non-competition clauses even though I keep being told that is “industry standard”. My experience of Zynga’s recent work, and EA’s also for that matter, is that no real innovation or even gameplay is coming from that corner of the market. I don’t really think they have any desire to change what they perceive as a winning model.

    I am currently negotiating with a nimble mid-sized developer to use my knowledge of advanced monetization models to gamify some well known franchises. If we do well, Zynga and EA may have some competition next year that will force them to improve the quality of their products. I managed to negotiate a gross revenue royalty so I will be highly motivated to make sure our products make a big impression on Facebook.

    I can’t give any details but the games would be both fair and educational, two qualities that don’t exist in current “social” networking games. If consumers respond favorably, trends could reverse themselves in this space. That would be great because I personally think that Zynga is setting a bad example which EA appears ready to follow.

  • Avatar ImageVictor Andersen, a level 0 monster with 6 posts — 11 months, 1 week ago:

    They definitely lack incentive to make better games. At EA the suggestions of the designers and developers always fell by the wayside as the games were shaped for market. Innovative ideas would be cut if they confused the first group of focus testers (rather than iterate and improve). Boundaries that otherwise would have been pushed were scaled back for ESRB concerns because they had to stay on the shelves at Wal*Mart. In the end, the games seemed shaped more by economics and market manipulation than creative energy or good design. As long as they can still make money selling bland games to bland people (who, sadly, are a large consumer class) they won’t change much.

  • Avatar ImageRamin Shokrizade, a level 0 monster with 107 posts — 11 months, 1 week ago:

    As a virtual economist I certainly understand that if your product does not make money, it’s game over. But designers don’t make games, producers do. The latter group doesn’t always know a lot about games. Big companies tend to be the least adaptable to changing market conditions. The best way to change their direction is to confront them with a more successful product that threatens their market share. Zynga did this and EA did their best to copy them for no other reason than because the producers there did not know what else to do in the situation.

    If someone can introduce a more innovative and constructive design into the marketplace, both Zynga and EA will be forced to copy it if it gains enough market share. This really won’t be that hard to do considering the low quality of products both are currently presenting on Facebook.

  • Avatar ImageVictor Andersen, a level 0 monster with 6 posts — 11 months, 1 week ago:

    True. Both companies are past the point of being able to top-down create innovation. They either have to accidentally allow a division to do something cool they can profit on, or acquire a company doing something cool. Otherwise they’re just copying the ideas of the less risk-averse.

  • Avatar ImageLorraine Hopping, a level 7 monster with 190 posts — 10 months ago:

    Ramin, catching up now to all the fantastic material you’re posting here and on Linked In. THANK YOU!

    The issue of allowing FB apps access came up recently at StoryWorld, where the creator of a transmedia project talked about pros and cons. To him, the sheer volume and numbers and level of connectivity made up for the friction barrier of people (me included) who won’t click on the “permission” button for apps. A fraction of an enormous audience is all he needs and far more than he’d get on a standalone website.

    I haven’t played any of the Zynga games (and have no desire to—they really do sound awful, and I loathe the idea of spamming my friends). Of course, I also haven’t played some of the more interesting sounding games there, either. My loss? Maybe.

    The Night Circus is a good example. The game (by makers of Echo Bazaar) expands the world of a bestselling book, but it requires opening your Twitter account to a high level (shocking level, to me). I wanted to play, but I just couldn’t pull the trigger. I did see a lot of my Tweeps dutifully posting game snippets (which non-players would of course find either intriguing or annoying), along with at least one complaint about having to do this in order to unlock a level.

    I wonder if anyone else has any thoughts on this—and where I fall in the data plot of users who do/don’t allow access.

    I wonder about this barrier in the long term, whether it will continue to be an issue in terms of convincing the 98% to jump in and immerse or we’ll all just get used to giving up our privacy, friend lists, emails, and ultimately our coin to play games. Seeing how the sausage is made, cooked, and served up—thanks to your analyses—has made me even more cautious.

    • Avatar Image
      Owen · 10 months ago· REPLY · Flag

      You are probably in the minority. Fb is constantly monitoring the behaviour of its users, just like a game developer would watch people play his game. As soon as the numbers drop too low they will change something to make it go back up.

      Most people WANT to be gamers and these game are their easiest point of entry, too bad they can’t tell the difference.

      • Ramin Shokrizade, a level 0 monster with 107 posts — 10 months ago:

        @Lorraine: Thank you for your comments! Do you consider all of that spam to be something that makes Facebook games “social”? I consider this to be antisocial. I would propose (and my article on Two Contrasting Views of Monetization might support this) that the designers of these FB games actually have never experienced a social game so for them this is actually social. I think a lot of users would pay a flat fee to avoid both the friend spam and the spend spam.

        @Owen: Since there is very little experimentation going on with friendlier methods of monetization in FB games, the analytics these companies depend on can’t give them any relevant data. Their numbers *are* going down and I would propose that even with all that money Zynga has they will just keep doing the same thing because they don’t know what else to do. Realise that the people at Zynga admit they don’t know how to make games. They know how to sell products. If they aquire other studios that can teach them to make real games, will they let them? All I see so far is that the answer is “no”. I suspect this is due to a clash of egos someplace.

        Anyways, if Lorraine is in the 98% of gamers that are not being effectively monetized on FB, I fail to understand how you can suggest she is part of a minority. Maybe I am misunderstanding which minority you think she belongs to.

        Btw I’ve been testing Star Wars TOR this weekend…. this is going to serious affect the industry. I will have a full report in a few days.

      • Avatar ImageLorraine Hopping, a level 7 monster with 190 posts — 10 months ago:

        @Ramin Anti-social might be a bit strong. A lot of people seem to like the sharing and helping aspect of those games—including virtual gift giving—as a way to reach out to friends and I’d only hope that they truly understand what they are giving up in exchange (your posts will help). I consider it intrusive and annoying, especially when an app says it wants full access to my data. I also don’t want to feel obligated, continuously, to reciprocate. I can see where it would be hard to drop out of a game that peers are still playing—the “leave” option always being present but often overlooked, as the vimeo you posted pointed out. (Thanks for that, too.)

        Friends who “spam” me get a gentle “please don’t, I’m not interested” once or twice, but if they keep trying to sign me up for their games and coupons and quizzes, hackles rise. I also deplore the tech startups who build into their marketing plan the idea that people will help them sign up all their friends, just because. Visualize.me is one example. I was genuinely interested in this product until they tried to put me to work, unpaid, schilling for them—and then kept raising the bar of entry. I dropped out, pronto.

      • Avatar ImageRamin Shokrizade, a level 0 monster with 107 posts — 10 months ago:

        My work on the creation of large scale virtual economies addresses this human desire to work cooperatively towards some greater goal. I believe that people really want this and that there are much better ways to do this, even if they are complex from a design standpoint. That complexity need not be evident to the consumer.

        • Avatar Image
          Lorraine Hopping · 10 months ago· REPLY · Flag

          Wondering about your take on ”games for good” use of virtual currency, social experience. Such as TheBlu, where $$ goes to artists and animators http://theblu.com/. And this new Facebook game, attached to Ellen Degeneres, Save the Children: http://digitaljournal.com/pr/504379I’m guessing people will be happier paying $$ if goes toward public good, but the basic vitual economy and the basic game still need to be solid. ”Better ways to do it”—agreed, and I hope these kinds of groups find them, rather than copy the for-profit formulas.

      • Avatar ImageRamin Shokrizade, a level 0 monster with 107 posts — 10 months ago:

        I think that marketing that suggests that some amount of dollars will be donated when you spend is too detached to be effective for gamers. If you had a game with three faction pvp combat, and each faction generated charity as they played, that would be more interesting. That way when you logged in and saw that your faction had generated $204,382 in the last month for charities, this would be exciting and would give players added incentive to participate. This would be especially true if charity was linked to conflict, such that the contribution amount would spike after an intense multiplayer battle.

        Again how you do this is a bit complex, but if any serious non-profit or socially conscious game company was interested in this I would be happy to discuss it non-publicly.

      • Avatar ImageRamin Shokrizade, a level 0 monster with 107 posts — 9 months, 2 weeks ago:

        Given this: http://www.cnbc.com/id/45655436

        It looks like the Zynga IPO is going to go down the way I predicted it back in July. I will be kicking back on the couch with my popcorn later this week to see how close I got.

      • Avatar ImageLorraine Hopping, a level 7 monster with 190 posts — 9 months, 2 weeks ago:

        Hi Ramin, “Words with Friends” is a Zynga product, and Alec Baldwin just sent it viral (i’m guessing, must be true), by virtue of a few celebrity tweets and an appearance on SNL. How does that factor in the equations? What’s your take? Was this a deliberate product placement, at the expense (or, whoa, mind blown, in subterfuge support of) American Airllines?

      • Avatar ImageRamin Shokrizade, a level 0 monster with 107 posts — 9 months, 2 weeks ago:

        Yea I was following that, and it allowed Zynga to capture the top five spots on FB when Words with Friends passed SimsSocial due to Mr. Baldwin’s activities. I wasn’t there so I can’t say if it was total coincidence or not. If Blizzard can hire Chuck Norris to push World of Warcraft then I guess anything is possible. What I think is more important is how the markets and investors react. I think they will see this for what it is, a very minor fluctuation in data that does not suggest any form of long term promise.

        If anything, the disaster that is unfolding right now with the Star Wars TOR launch exploits and staggered (read unfair) start times is going to harm EA and give Zynga a bigger boost than Mr. Baldwin did. By promising players an unfair advantage if they pre-ordered very early, and then delivering on that promise, that is polarizing the community and perhaps not having the effect they were hoping for.

      • Avatar ImageRamin Shokrizade, a level 0 monster with 107 posts — 8 months, 2 weeks ago:

        Six months after I wrote this analysis for 2K Games, it seems Forbes agrees with me:http://www.forbes.com/sites/davidthier/2012/01/09/why-zynga-is-doomed/

        The Zynga IPO also seems to be turning out as predicted, though perhaps not quite as fast as I had expected.

      • Avatar ImageJ, a level 0 monster with 2 posts — 1 month, 3 weeks ago:

        Your analysis of Zynga and their game systems comes across as bitter and driven by personal bias.

        I regularly interact with people like you in my line of work, and am constantly amazed at what bizarre fantasies they convince themselves of. It sounds as though you believe Zynga has figured out how to penetrate tinfoil hats and control minds, furthering their sinister, manipulative plot to exploit helpless imbeciles. Really?

        Zynga is a business, and businesses are designed to make money. In revealing this you haven’t exposed a wicked conspiracy to the light of day. Are they your government? Are they a charity? Why would they do anything but try to make games which generate revenue? It’s stupid to expect anything else, and they do not “owe it to society” to produce free games which aren’t money-driven.

        At no point do you acknowledge that players are responsible for their own behavior, or that parents are responsible for controlling their children. These people haven’t been brainwashed. They are making conscious decisions to exchange money for entertainment.

        The latest Batman movie cost me $16 for three hours of mediocre entertainment. Where’s your expose on the sins of the movie industry and their unethical, inhumane exploitations? I didn’t get any more or less out of that than these players get out of FarmVille.

        This article reads like a childish, jealousy-driven tantrum with the patina of a disingenuous technical analysis.

      • Avatar ImageRamin Shokrizade, a level 0 monster with 107 posts — 1 month, 3 weeks ago:

        @J: My biggest concern with Zynga is that their business model is inefficient, unsustainable, and more recently, a poor use of investor funding. Last year 57% of all investor dollars went into Facebook game development, mostly by companies attempting to copy the Zynga business model. As this model implodes, as I described in this paper, a great portion of that invested capitol will be lost.

        Granted, Mark Pincus was able to extract a great deal of that by dumping part of his shares in a timely manner, but the legality of that maneuver is in question. If you continue to troll around this forum you will find that I propose a number of solutions to this situation and that my presentation is very light on moralism and that my focus is maximizing return on investment and consumer pleasure. The latter leads to larger allocated gaming budgets and further drives industry investment.

      • Avatar ImageRamin Shokrizade, a level 0 monster with 107 posts — 1 month, 3 weeks ago:

        I would have been more sympathetic to “J”‘s position if he was one of the investors that was lured in by this con. However you feel about investors or capitalists in general, it is in our best interests for these investors to succeed. If they do not, the result is a period of investor anxiety that leads to reduced production and mass layoffs. These layoffs may present a short term opportunity to acquire labor talent on the cheap (the feeding frenzy has already begun at Zynga), but in the long run it causes labor assets to move to alternative, more stable, avenues of employment.

        While I may have been successful in discouraging 2K Games from investing into the space at the time, other players such as EA and Disney (not intended to be an exhaustive list) did not have early access to this paper and were lured into making premium investments that are likely to result in negative ROI. I don’t want to speculate publicly as to what effects this will have on the industry in the next few years, other than to say gamers will be experiencing a lot less variety in the products they can enjoy.

      • Avatar ImageJ, a level 0 monster with 2 posts — 1 month, 3 weeks ago:

        I don’t disagree with the technical opinion — I own a game development studio in direct competition with social gaming companies like Zynga, and I’ve been very successful in learning from and exploiting their failures. Everything that they are doing wrong, we’re doing right, and players love us for it.

        That is the beauty of competition and open markets — Practicing bad business is a self-solving problem. Their investors and employees are responsible for their own actions, their own jobs, and the risk they took in getting involved with a bad company. Poor decision making isn’t worthy of sympathy, nor legal protection; they were stupid for investing in Zynga (or Zynga-like copycats), and now they reap the reward for short-sighted greed. Savvy investors and development studios will fill the void, and do it right while Zynga self-destructs. An evolution of superior products and customer value are the end result.

        My criticism with your article is that you feel making “addicting” games, and generating revenue from those games, is “unethical” behavior. It is not unethical to be successful, to make money from producing something people want, or to aspire to make even more money. Charging real cash for virtual goods is not abusive or immoral — it is simply a different model than asking for $40 or $60 up-front for a game you’ve worked hard to create. The vast majority of users no doubt spend $0 for the use of these products. Why is that provision of free entertainment not celebrated in your article?

        Personally I much prefer that model than buying a game sight-unseen, only to have it be an over-hyped and buggy pile with no lasting value (aka Diablo 3).

      • Avatar ImageRamin Shokrizade, a level 0 monster with 107 posts — 1 month, 3 weeks ago:

        @J: I don’t think that Zynga games are effectively addictive, I personally think my designs have higher addiction potential. If I make any moralistic suggestions in this paper it is that targeting children will lead to regulation (which did in fact occur in Japan recently), and that the targeting of addiction prone individual is likewise a threat to public health. My designs have safeguards included to make sure I am not encouraging customers to hurt themselves. I do this by capping the number of hours a day an account can be played. This also extends our content offerings.

        I don’t tell the player how many hours a day to play, if they want to run multiple accounts I let them. I just don’t give them any incentive to do so. I don’t want to ever put a customer in the position where they have to choose between their health and their game success. I’m betting that customers will prefer this model to the types of games that currently are populating the marketplace.

        We are in agreement on the use of free to play, all of my designs use this feature. Any other comments you made here are addressed in other papers available on these forums

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