Zynga’s Mark Pincus Talks About His Management Style, Acquisitions and Mobile

FarmVille. CityVille. Words With Friends.

Zynga is responsible for developing some of the most-played games of the decade.

As its founder and CEO, Mark Pincus has worked quietly behind the scenes since 2007, building an empire that was worth $7 billion in a public offering late last year.

But it hasn’t been all fun and games.

Pincus has been criticized for his hard-driving management style, and the company’s close ties to Facebook can be counted as both a blessing and a curse.

Sure, Facebook has gotten the company to where it is today (and, amazingly, Zynga accounts for 15 percent of Facebook’s revenue), but now it will be looking beyond the social network for its next stage of growth.

On a day like yesterday, when Facebook’s stock dove by 10 percent, the connection between the two was clearly a bad thing. As a result, Zynga hit an all-time low and is now worth $4.5 billion.

All that and more, as D: All Things Digital continues in Rancho Palos Verdes, Calif. Pincus up next!

Live Blog

9:20 am: Game on!

Kara starts with a hardball, saying we are going to start with the bad stuff. What’s up with the stock price?

Mark: We always knew we were going to be a public company. It wasn’t a huge transition for us; we always had quarterly objectives.

What’s changed is we have the quarterly conference call, and then a week later we have an all-hands meeting.

But my job hasn’t changed, I’m focused on products.

Kara pushes a little bit more on the matter. After all, it’s not just Zynga, but other tech companies that are recently not doing well — Facebook, Groupon, for example.

Mark: I’m optimistic about those companies, and I’m not focused on whether the market is valuing them right.

9:24 am: Kara asks him about his relationship with Facebook, far and away the company’s biggest partner.

Mark: From the beginning, we believed in the opportunity to bring “play” to the world, and an opportunity to have a new business where it’s about paying for value that they see in the games.

Facebook, by far, was the best. We grew the fastest with Facebook, and we kept doubling down on Facebook. It was a great accelerator of not just ours, but other businesses and services.

Kara: How important is Facebook to you right now? You make up 15 percent of their revenue.

Mark: Our games are instantly social because of Facebook. That’s an amazing, magical thing that they provide.

On the Web, they’ve been really important for a lot of companies with distribution. Right now, we all have a need for a Facebook on mobile. Mobile is an explosive opportunity, but it’s still really fragmented. For Mary [Meeker], one of the questions is, how do you know that a product will be continued to be used?

Some of it is that it has to be a great app, but also it has to be ingrained in people’s lives. Discovery and the return path to apps still needs innovation on mobile.

9:28 am: Mark: I think Facebook will be important on the Web and the PC, and it has the potential to be important for us on mobile.

Kara: The “potential”? I assume that most of your business will shift to mobile.

Mark: Let’s not forget the opportunity on PCs. A lot of the traffic happens when people are at work, on boring conference calls.

The three drivers of our business and market: Games becoming more free, accessible and social.

He says he doesn’t have the answer for when there will be more revenue coming from mobile.

Just building audience brings revenue, though.

In mobile, we are in the early stage where we are trying to build the audience, and we are doing it with casual experiences like Words With Friends, Scramble With Friends and now Draw Something.

In summary, he says, I think mobile usage can grow a lot faster, but the revenue will take longer.

9:31 am: Kara: You are in a hits-based business, and you won’t be able to keep bringing on the hits.

Mark: That’s partially true.

There’s a component of the games business that is the entertainment business. You see audiences go up and peak, and sometimes fall. Social games can monetize better than TV and movies, and have the ability to be more evergreen.

Poker is an example, and then there’s FarmVille and CityVille, which are more like a hobby.

We build what we call “bold beats,” which get people to play for a few more months. An example is FarmVille Hawaii, where you can do aqua-farming. They are like expansion packs, or new TV episodes.

Kara quips: I’m not going to do that. But I do play Words With Friends.

9:34 am: Pincus brings up Zynga’s acquisition strategies, two acquistions that have been product lines: One was Words With Friends. It had less than two million daily active users, and they grew by five times on our platform. We think that was very successful.

On Draw Something, which Zynga paid nearly $200 million for: What was unique about it is that they innovated on user-generated content. They figured it out and found a way to inspire people to draw. The game still has more traffic today than when we engaged to buy them. We didn’t buy them for the short-term impact that they would have. We have built our company off franchises. We think we can support it for five to 10 years, and we thought this game would do that.

Kara: So the acquisition was successful?

Mark: I think it’s too early to say if the acquisition is successful. I’ll have to tell you in a year if it was successful.

Kara: Did you try to buy Angry Birds?

Mark: We are always in the market, engaging with any successful product or team. We are learning by meeting with these teams, and sometimes there’s a good fit. We’ve talked to them in the past.

Kara: And …?

Mark: That’s it. The vast majority of users and revenues has been organically built. To be the best, we have to be the best developer and operator of social games. Beyond that, we have to be the most powerful and capable in the market.

Pincus is now talking about Zynga.com, its off-Facebook platform for social gaming.

Mark: We think we’ve built the best hosting for social games and deep analytics. You can make your network available to companies through APIs, and we are in the early stages of doing that.

We would be more than a games distributor. We need more aggregated channels, we need more ways for people to find and discover new apps, and find their way back to the apps. We want to be a game network, a lot like Xbox Live.

Kara: Do you want to get into consoles and hardware?

Pincus’s one-word answer: No.

9:40 am: Kara: Do you consider Zynga innovative? Some people really don’t like you. Do you feel like you’re innovative, or do you take things more widespread?

Mark: We’ve had to reinvent gaming, apps and our company many times in five-and-a-half years. I think we’ve been disruptive and done things in our own ways. We value innovation that makes it easier for you to play a game with your family.

“We look for micro beats.”

There’s tons of innovation in our company, from building our own Z-cloud and building our own analytics. I think we haven’t gotten credit for it. I look at innovation, can we create games that engage millions of people. We do hackathons in our studio, and some of the things make it to market. In FarmVille, they’ve created something like Instagram, where you can take a picture of farms and share them.

Kara: What is your biggest strength and weakness as a CEO?

Mark: I need to aspire to be a great CEO and not just a great product engineer. I’ve grown a lot, and I’m learning every week. I seek out a lot of advice from other CEOs.

Kara: You are definitely calmer.

Mark: You can thank my wife for that. I’ve been good at product entreprenuring … It’s hard to manage 3,000-plus people through delegation. If you like our games, give me a good grade.

9:45 am: Time for Q&A with the audience.

First question is about virtual goods overseas, and how do you apply that learning here.

Mark: Asia is ahead of us and behind us. In Japan, they are ahead of us on mobile. They are ahead of us on converting “players to payers.” But they’re behind us on social gaming because most of the games on the PC started off as hardcore.

I think there’s lessons to bring back, but their model won’t map perfectly.

9:49 am: Another question on real-money gaming, a.k.a. gambling.

What makes virtual goods exciting and entertaining is that the decisions you make in the game can affect your real life. I think poker chips in a casino are a perfect substantiation of virtual goods. I think real-money gaming will be incredibly popular with regular consumers. And I think when the regulatory situation makes it available, we’ll see an explosion.

Kara: How big will that be for you?

Mark: Depends on the regulations.

Next question is about multiplayer gaming, where you play at the same time, versus taking turns and passing the game back and forth.

Mark: As we require less from you for gaming, we think we have a chance to become gaming like SMS. It’s a “Poke” with a purpose. That’s where we want to get to.

Final question: How do you lessen your attachment with Facebook?

Mark: There’s nothing stopping us from putting our games in other places. I have a 90-10 rule. When a platform can get you millions of daily active users, then that’s when you invest. Facebook has done that for some time, and now iOS and Android are just getting to that point. I think people have a latent interest in playing, and we will go anywhere where we can make it free, accessible and social.

Follow-up question: How do you become an independent business from Facebook?

Mark: You don’t think we are a business? We see Facebook like a platform, like iOS and Android. We aren’t too worried about getting too attached on iOS or Android. If they became a huge concentration for us, we wouldn’t feel like we didn’t have a standalone business.

That’s it, folks! Thanks for reading.

Just happy Pincus showed up, after bailing on us last year. Second time was the charm!

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