Apr

5

Picking Through the Bones of Zynga

Mark Stephens

I admit that we have allowed ourselves a few smirks since Zynga went public and then proceeded to self-destruct. But one good consequence of its decision to go public for the rest of us is that investors want to know the details about how the money is made (or lost in the case of many Zynga games). That means the rest of us learn more about monetisation. Zynga is only interested in making money, but it remains a fascinating creature. And with the information all being public, we are able to freely pick over its bones as the flies start to swarm around the remains!

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Zynga Figures

Don’t worry. I’m not about to send you to sleep with graphs of share prices.

But other statistics about players and the money they spend are interesting for the wider game developing community. How many players spend money exactly and, with player numbers decreasing, how does that affect the percentages? Also, how does that influence game developing strategy in general?

Zynga’s business model depends almost entirely on in-game purchases, with advertising providing only minimal revenue and most of its games free to play. So let’s take a look at how Zynga reports this back to its shareholders…

What Percentage of People Cough Up Money?

This is the key question that investors want to know, along with how much money and why isn’t there more of it?!!! So it’s not surprising that Zynga goes to great lengths to analyse the data.

For starters, as the Daily Finance website reports, it employs two metrics to estimate the percentage of players who make in-game purchases.

These are detailed in every earnings release from the company:

  • MUUs or Monthly Unique Users – the number of unique players of a game on a particular platform within a 30-day period. Multiple games on the same platform count as only one MUU. Over a quarter period, the average figure for the three months is used.
  • MUPs or Monthly Unique Players – the number of unique players of a game who made a payment during the month. Players may be counted more than once if two different platforms were used to play the game during a given month.

Since the second quarter of 2012, both MUUs and MUPs have declined rather alarmingly for Zynga – somewhere between 30 and 40 percent in total. You may not be too surprised to hear this, but it hasn’t affected the percentage of players who make purchases. That has stayed around the same two percent for the past few years.

Why are These Figures Useful?

This two percent figure is useful for developers to work off, as a type of benchmark. Of course there are dangers with this: our games will probably be very different to Zynga games, and Zynga’s main rival, King, has revealed that it is able to monetize about four percent of players.

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However, let’s work off the lower Zynga figure. So if we estimate that, whatever the user numbers, we will get around two percent of people buying in-game purchases, it helps us to make revenue forecasts a little easier.

To see whether we are hitting our targets we can work out:

  • How many game downloads we need
  • How many Monthly Unique Users we need
  • How much we need players to spend

Interestingly, Zynga’s figures also show that 60 percent of its revenue comes from just a few of its games: Farmville 2, Zynga Poker, and Farmville. The last two are notably older games, yet they continue to count for a large chunk of paying users.

This is where Zynga provides us with another useful little lesson: games that are not working need to be shelved pretty quickly or they waste resources.

If a title is clearly not working out it’s often best to stop throwing time and money at it, and to move on to the next one. Zynga has started to recognise some of its errant ways and pulled games like Zynga Slingo and The Ville recently. It has also recently announced that it is making new, mobile-friendly versions of games. This growing emphasis on mobile of course opens up new avenues for monetisation.

As King gets ready for going public, Zynga battles to compensate for its reduced player numbers. Whether its bones have enough flesh on them to spark a recovery we don’t yet know – but either way, there will be plenty for developers to learn about monetising their games along the way.