Why Zynga Is Foreclosing on The Ville After Four Months on the Market

Zynga confirmed yesterday that it was “significantly reducing” its investment in The Ville, a game it launched just this summer on Facebook.

The decision was made as part of a significant restructuring plan that is designed to return the company to profitability. The company said it would be phasing out 13 games and laying off about 170 employees.

This afternoon, Mark Pincus, the co-founder and CEO, will talk more about the changes during the company’s quarterly conference call, but in the meantime, here’s an explanation for why The Ville’s life is being cut short.

As detailed in the chart below, compiled by Sterne Agee, you can see that the company’s newest titles have not performed as well as some of its original titles — and that Zynga really hasn’t had a true hit in a while. FarmVille 2 has done the best among Zynga’s latest crop of games, but both The Ville and ChefVille are already starting to decline just months after launch.

A lot has changed since Zynga’s early days. As many already know, Facebook no longer gives game makers unlimited access to its viral channels. That keeps people from unknowingly posting random notes on their friends’ walls, but also makes it harder for people to learn about new games. Since that has been the case for some time, however, there must be greater forces at play.

Even though Zynga’s new games have better graphics and some new mechanics, they are largely variations of the original. It’s a formula that the company has been repeating for the past four-plus years, and now there’s evidence it has run its course.

When The Ville was announced in June, I wrote, “Much like other ’Ville games, which challenged users to build a farm, a city or an imaginary fantasy land, the point of The Ville is to create a character and build a home, complete with swimming pools, workout rooms and state-of-the-art kitchen appliances.” Zynga calls the ’Ville series of games “invest and express,” because the games allow players to invest time — and hopefully money — in their game board.

Initially, the category of games appealed to people who obsessed with owning every item available in the game. Other players enjoyed the decorating aspects of the genre, spending their time and money on making their virtual home something special. It’s a genre other game companies used, and now Facebook is saturated with hundreds of variations and copycats. (In fact, Electronic Arts has filed a lawsuit against Zynga, accusing it of infringing on its game The Sims Social).

Pincus acknowledged the problem earlier this month after revising the company’s full-year guidance: “The challenges we faced in our Web business in Q2 continued in Q3 and while many of our games achieved plan, we still experienced overall weakness in the invest and express category. To address this we’re further investing in other genres like casino where we already lead with Zynga Poker and blue PVP, a category we pioneered with Mafia Wars, and now have the opportunity to reinvent with the industry’s best talent here at Zynga.”

Stay tuned for a much more detailed explanation during the company’s earnings call today at 2 pm PT. For now, here’s the chart:

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