If not, you’re going to have to wait a week.

Here’s the deal: As we wrote yesterday, Twitter is launching its new music discovery app for iOS devices, timed to the start of the Coachella music festival this weekend.

But for now, only a handful of “influencers” are going to get their hands on it.

That’s why Ryan Seacrest was tweeting about the app yesterday.* And that’s why sources say you should expect to see dozens of other celebrities chatting it up over the next few days.

And you, non-famous person with an iPhone? Hang tight for a week.

So that helps explain why we heard contradicting reports about the app’s launch date (Today! This weekend!) yesterday. (They were both right! Sort of.)

And as long as the celebrities don’t spend their time tweeting about how much they dislike the app, it will be a smart move by the Twitter folks: They get to stoke demand and do some last-minute bug-testing** at the same time.

* This is not the first time a big Web company has used Ryan Seacrest in a faux-stealth app marketing push. Apparently it worked well for Zynga, too.

** This might have been helpful for the Vine launch earlier this year.

The Boggle-inspired game, available for iOS and Android, is the first self-published title from Swedish studio MAG Interactive. The numbers behind its growth are seriously impressive, but data obtained by AllThingsD suggests that, like last year’s mobile sensation, Draw Something, its popularity may have already peaked.

For the uninitiated, the game works like this: Two competing players each have three minutes to swipe their fingers across a square grid of letters, finding as many words as they can and scoring points in the process. Each game is divided into three rounds, and each round ends with the ominous, perfectly calculated sound of a tick-tick-ticking 10-second countdown.

First, the good numbers: Ruzzle product manager Daniel Hasselberg said more than 100 million rounds (so, more than 33.3 million games) are played every day. With 28 million active users in January, the game has topped the iOS App Store charts in 30 countries.

Ruzzle players have spent, in aggregate, more than 10,000 years playing the game, Hasselberg added.

And according to mobile intelligence service Onavo — which uses anonymous user data from its popular data-compression app to estimate apps’ market share — 7.51 percent of all iPhones in the U.S. opened the game in January, up from 1.29 percent just one month before.

To put that in perspective: The original Angry Birds, which Onavo ranks as the most popular in the series, was opened by “only” 4 percent of American iPhone owners in the same month.

However, Onavo now says that those January numbers may have been the peak for users’ engagement with the app. Although it is still handily beating Zynga’s similar Boggle-esque title, Scramble With Friends, the number of Ruzzle’s daily active users has dropped consistently since the first week of February.

The second graph in the image below shows the trend. The purple line represents Ruzzle, and the gray line represents Scramble With Friends.

Of course, it’s still possible for the developers to turn that curve around, and Hasselberg promised new features for the iOS and Android versions of the game “over the next few months.”

But just two days after Ruzzle peaked, on February 5, MAG Interactive released a new game called QuizCross that’s already bringing in rave user reviews. Despite its youth, the company seems to understand the M.O. of mobile: Like Ruzzle’s ticking countdown, hits don’t last forever.

As most know, the San Francisco gaming company has struggled to find the right balance as consumer behavior has shifted from playing social games on Facebook to playing games on their phones.

In the third quarter, 60 million people played Zynga’s games on a daily basis, up 11 percent from the year-ago period. But those gains were only possible due to mobile offsetting declines on Facebook. The worry of Wall Street investors over the situation is apparent in the price of its stock, now at $2.66, which remains 72 percent below its initial public offering price at the end of 2011.

But Zynga management believes it knows how to turn things around, including expanding beyond its classic Ville-style titles, like FarmVille, to more genres that appeal to a wider audience, including casino and more hardcore titles.

In a story earlier today, I wrote about the three executives that CEO Mark Pincus has appointed to help turn things around. One of them is Steve Chiang, the company’s new president of games.

Here are some highlights from an interview I recently did with Chiang:

Tell me a little bit about your background.

Chiang: I got into computers early, when I was six or seven, and I was really into videogames and playing games on my computer. And then I got into programming. First, I got into the industry when I graduated from school as a programmer, by creating games for Super Nintendo. That’s when making a game included one programmer and two artists, or two programmers and five artists, so they were really small teams, so you really had to know all aspects of game development.

And then, in 1994, myself and some guys I went to high school with, and John Schappert, started Tiburon. We started making Super Nintendo games, and then we started working on Madden when the contract came up after the other company didn’t ship the game on time. It was the best-selling game on PlayStation that year, which led to the acquisition by [Electronic Arts].

I stopped programming in 1998 or 1999. When I left EA, I was overseeing all sports development for Peter Moore, who was heading up the sports label, and I headed up development across Vancouver and Orlando.

What was the attraction to Zynga?

Chiang: In 2009, when I was thinking of joining Zynga, we had FIFA Ultimate Team, which was a card-based microtransaction mode. It was a $10 mode you paid for, and then you had $1.50 card packs. We quickly saw the microtransaction part of it surpass the $10 for the mode. So you reduce the $10 to free to reduce the friction.

Microtransactions and free-to-play seemed like the future, for sure. The second aspect was time. Having an hour to sit down and play a game is not easy to come by when you have a family, so, as a person who loves games, the idea of playing games for five to 10 minutes with friends was really appealing. I saw myself reconnecting with people from high school, and I saw my parents playing with my kids. The only game my ex-wife will play is Words With Friends, except for SingStar, a karaoke game on PlayStation.

When you are creating a place where women, children and older parents are all playing, it’s an incredible feeling and experience. It’s like the first time I saw “Star Wars” in the movie theatre — that’s what we are creating for people. That’s what we are trying to create on a day-in and day-out basis.

I’ve spoken to people before about the initial draw of Zynga being that so many people end up playing your game, unlike a console title that has a limited audience.

Chiang: Absolutely, in entertainment, you want to make hits. When you are working on sports games year after year, it’s not super appealing. But the idea you get to work on a game played by millions of people? That’s great.

I mean, I always tell people, you spend the same amount of time on a game that gets canceled as one that is seen by millions of people.

Do you believe the definition of a social game is changing?

I do. It’s a moniker, like casual gaming. We label stuff, but essentially the business model is free-to-play, and gaming has always been social. I look at us as doing free-to-play games on multiplatform.

For a while, social equaled Facebook.

Yeah, that’s how I interpreted it, as well. But when you look at Words With Friends, that’s what a social game looks like, where you are interacting with a friend on a daily basis.

Zynga and Facebook just changed their contract language, which is less restrictive and will free you up to do more things, right?

Chiang: I think Facebook is a really valuable partner. We struck a new agreement, which enhances our partnership in some ways, and allows you to invest more in our platform and mobile.

Everyone talks about gaming as a hits-driven business. Is it possible to sustain that over the long term?

Chiang: I think we’ve seen companies like EA and Activision be able to sustain [that]. There’s aways peaks and valleys.

With social, it’s more about gaming as a service — it’s a TV model, if you will. We continue to put out new content every week, and on Facebook every single day. That keeps our players engaged. There’s games like Poker that have been around forever. There are certainly franchises. It’s not that different from a Call of Duty or a Madden Football, which has been going on for 15 years now. We have some of the same characteristics in Poker and Words With Friends.

Tell me about the story arc for Zynga’s Villes. How come some are not as successful as the ones in the past?

What we’ve seen is a few different things. We are seeing consumer tastes changing, and there’s a player movement toward mobile gaming. If you look at just a single platform, you’ll see a peak or a leveling-off of gaming on Facebook. But we are seeing growth on mobile. As we go multiplatform, we may have peaks and valleys on a single platform, but we’ll see overall growth.

That seems to be a platform issue, but is there something about Villes in particular that is no longer popular?

Chiang: When I look at FarmVille 2, it’s reengaging a lot of players, and is off to a great start. There’s an aspect of something new, and so players are saying, “Let’s try that.”

A game like Pokemon peaked at a $1 billion business, but over time, it’s still a big business and it has sustained. Traditionally, you’ll see a massive pop and then it will sustain. It’s a great business, and when we put out great content like FarmVille 2, our players respond and they engage.

Let’s go back to the cross-platform approach. Zynga is going after both Facebook and mobile, and has restructured its leadership team around that. How has your job changed?

Chiang: I took over all of the games business, so I have every game on mobile and Web, and just recently I reorganized around our players and genres.

We have some great leaders, and some of the most experienced in social gaming in the western world. We are going to run our “Invest and Express,” which are our Ville games. We have a new group in PVP (player versus player), which is focused on men 18 to 34.

Then we have our casino group, which is poker and male-skewing, and we have slots and bingo, which is focused on women. And then we have our mobile casual group, which is focused around some of our big franchises, like Draw Something and Words With Friends.

Some critics say that Zynga’s games are not fun. What do you say to that?

Chiang: I think when you look at a game like FarmVille 2 or Elite Slots, we are driving new innovation, and we are continuing to push innovation. At the same time, if we change too much, players complain. We saw it in sports games, and you see it in social gaming, you want a consistent feel and familiarity. You don’t want to redo everything.

Zynga is such a data-driven company, I’m curious what metrics do you look at every day, and which ones are most important?

Chiang: We look at the net promoter score, where we ask players to rate the game from one to 10. A nine to 10 is a promoter, and below a six is a detractor. We certainly look at overall how many people are playing and what our retention is, especially after launch, to check out retention after seven days to see which way it’s headed.

Why didn’t The Ville do well? Zynga announced it was cutting back on it as soon as it went live.

Chiang: I think with The Ville, the team made a great effort. But we did not deliver.

Our players didn’t respond to it as we would have expected. We hit a high DAU (daily active user), but they did not retain as well as some of our other games. We looked at all of that, and applied that to our future games. When you are going for hits, we’ll also have some failures.

Do you have a mantra, or a way to rally the troops right now that makes everyone believe you can create another hit? Something to inspire them? How do you manage the turnaround process?

For us, it’s about focus and getting back to basics. Our team across the board has delivered hits. We’ve had a number of great game makers who have been tied up with games, and now they are focused on new projects. We are reducing the number of games we are making, and focusing on a fewer with the highest potential in Invest and Express, player versus player and casino.

With many departures over the past few months, does Zynga still have the talent to make good games?

Chiang: Absolutely. We had a lot of people joining before the IPO, and some of those folks have opted out, but the bench is still really deep. We are also still attracting a lot of folks. Social is not for everyone, so some people came here to try something, but the future is really bright. We have a strong network of players on Facebook and mobile, and a number of great games in the pipeline that should be — and we’ll see how they do — but are going to be really fun and social.

Is there a message that you’d like to get out to people on Zynga’s game creation? Do you think there is an impression people have that you’d like to correct?

Chiang: I never thought about that. I firmly believe that we have a huge bright future and have the best position for talent, and in terms of our network and in terms of mobile and Facebook players to drive the biggest and best entertainment in the world. We are well-positioned that way, and hopefully you’ll see things in the future that will surprise and delight a lot of people.

J.P. Morgan now owns 2.6 million shares, or less than half of a percent of the social games company. Based on today’s stock price of $2.59 a share, the shares are worth only $7 million.

A big reduction by an institutional investor, like J.P. Morgan, implies that it doesn’t have a lot of confidence that the company can turn things around in the coming months.

The last time J.P. Morgan updated its stake was a year ago. In January 2012, J.P. Morgan said it owned 6.7 million shares, which equated to a 6.7 percent stake. Back then, shares were trading at $9.12, so the stake was worth a whole lot more, roughly $61 million.

It’s not clear exactly when J.P. Morgan sold its share or at what price. Typically, institutions update their records when their holdings drop below 5 percent.

J.P. Morgan’s relationship with Zynga began during its public offering, with the bank serving as an underwriter. As part of the deal, the bank agreed to buy an undisclosed number of shares associated with the IPO.

Since then, the bank’s research department has flip-flopped about the company’s prospects.

In March, three months after the IPO, J.P. Morgan’s analyst downgraded Zynga to “neutral” from “overweight,” which sent shares sliding by 6 percent. A month later, J.P. Morgan reversed its upgrade and returned the stock’s rating to “overweight.”

It was optimistic about the company’s acquisition of Draw Something and Zynga’s management team’s decision to raise full-year guidance based on the performance of the acquired mobile game.

Of course, Zynga’s troubles started shortly after, with the company having to revise its guidance downward more than once. Not only did its Draw Something game fail to meet management’s expectations, but its revenue on Facebook also dropped.

Zynga’s stock jumped 4.4 percent today to $2.59 a share. The 11 cent spike was tied to the news that Zynga’s patent portfolio has increased as it begins investing more heavily in online gambling.

For Zynga, which has struggled to develop a new hit game recently, the strategy has two aims. Obviously, it wants to generate more ad revenue. But, just as important, it wants to give game developers a reason to work with its CEO and founder, Mark Pincus.

Multiple sources familiar with the company’s plans say the platform is still under development, but some of the components could launch by the end of the year. It may not be available to third-party developers immediately. A Zynga spokesman declined to comment.

Up until now, the social game maker has been slow to adopt advertising, opting instead to rely on the sale of virtual goods for the bulk of its revenue.

The advertising efforts will be a part of its push into third-party publishing and will be used as another way to attract developers looking for a complete package when it comes to bringing games to market. Sources said the initiative is being headed up by the company’s long-time CTO, Cadir Lee, who has also been in charge of other major platform projects, including the build-out of its own cloud network.

Over the past year, Zynga has been slowly ramping up its advertising efforts. Recently, it announced a deal where Words With Friends players were rewarded for using Honda-related words on their game board. Another example: A virtual State Farm blimp that players used in FarmVille to revive crops.

Last quarter, ads generated $41 million for Zynga. That’s up 170 percent year over year, and represents 12 percent of the company’s overall revenue.

The spike in advertising over the past year likely has a lot to do with the acquisition of OMGPOP, which was generating massive amounts of ad inventory at the peak of its hit game Draw Something.

But it’s not enough. Earlier this month, Zynga updated its full-year guidance, saying that revenue will fall below previous expectations for the second time this year. Zynga will report final results for the third quarter on Wednesday.

So, what could a Zynga-built advertising platform look like?

The platform could enable the company to expand beyond brand integrations and sponsorships into more lightweight experiences, including banner ads, interstitials, video pre-rolls and incentivized downloads. While it will span both Facebook and mobile, it will likely focus more on mobile games, since Zynga has repeated over and over again that they don’t bring in as much revenue as its social games.

To bolster its efforts in the space, back in April Zynga hired Julie Shumaker (formerly of RockYou and Electronic Arts) to be the VP of global ad sales. Since then, sources say, Zynga has hired a few more direct ad sales employees, and lists several more job openings on its Web site, including roles for sales managers and directors.

It is not entirely clear why Zynga is choosing to compete with so many ad platforms that already exist today, but according to sources, there are a few benefits that may outweigh the costs.

For starters, it will keep more of the revenue that way, without having to work with a middleman — important for a company that has been forced to give 30 percent of its virtual-goods revenue to Facebook.

Another theory is that Zynga wants to ensure that it owns all of its own data. Zynga has an incredibly large audience — roughly 300 million monthly active users — and a lot of rich information about them in terms of their behaviors and their social graph.

The study conducted by Flurry, a mobile-analytics provider, found that social games are among the most intensely used apps, but only for a finite period of time.

In a blog post, Flurry compared the characteristics of social games to mobile dating applications: “For most people, we can assume that finding a long-term ‘significant other’ is the ultimate goal of dating. As a result, the app maker should expect customer churn. While usage may be high during the time when a consumer looks for a suitable partner, once that person is found, usage stops.”

The same goes for social games, which consumers play frequently at first, but then tire of over a period of three months.

Based on a sample of apps used 1.7 billion times each week, Flurry determined that social games are played about 7.9 times a week on average, which is much more frequently than people check the weather (3.7 times per week). But while interest in the weather is abiding, loyalty falls off pretty quickly for games. After 30 days, 47 percent of players are still engaged; after 60 days, 34 percent are still engaged; and after 90 days, 29 percent are still engaged. In contrast, after 90 days, 55 percent of people are still checking the weather.

While this pattern may not be a surprise to some, the most public example of this trend recently was the game Draw Something. After Zynga purchased the company responsible for the mobile-gaming hit, usage immediately started tanking. In the month following the acquisition, Draw Something lost nearly five million daily active users, dropping from 15 million to 10 million. Today, it has closer to two million users. Zynga now expects to write down about half of the $200 million investment this year.

While some chalked up Draw Something’s instant popularity to a fad, it’s now pretty clear that the game was just following the same bell curve that other mobile games follow. In other words, churn and burn, baby!

It’s the latest of several options that have been floated, including whether Facebook or others might try to swoop in to buy the company.

Most of these scenarios are moot, given Zynga’s founder and CEO Mark Pincus controls the troubled company, owning more than half of its shares. It is not clear if he would be willing to give up now.

That said, he has do something — the company’s stock hit a new low on Friday, tumbling 12 percent to $2.48 a share. At that price, investors are valuing the business at very little, since Zynga has the equivalent of $2.10 a share in hard assets.

That price could get lower, with Wall Street investors and many others becoming even more relentless in their criticism of Zynga.

There have been many concerns already that began after its once close partner, Facebook, changed the way it operates, with the result that its platform did not perform as well as it once did for Zynga, especially for its once popular Ville-style games.

It’s been made worse as consumers continue their shift to mobile, which Zynga says does not always monetize as well as Facebook.

To add to the pile, Zynga has suffered mass exodus of talent, some for better and some not. Over the past few months, it has lost several high-ranking managers, including its COO John Schappert and Chief Marketing Officer Jeff Karp, who were both brought on board for their experience in gaming. Last week came the departure of Paul and David Bettner, the creators of Zynga’s enormously successful Words With Friends franchise.

There was plenty of other fodder for criticism this past week, after the company also wrote down the acquisition of OMGPOP by as much as $95 million, or about half of the total price.

In a memo issued to employees on Friday, Pincus wrote that he was disappointed and is focused on rectifying the situation.

In the near term, he said it might mean considering “targeted” cost reductions. And in the longer term, he noted that Zynga would have to invest more in mobile and a platform approach that enables it to publish third-party game titles.

Whether he can do that easily with intense shareholder scrutiny is questionable, and ditching the public markets would have its advantages.

To get a sense of where Zynga stands, and whether going private is feasible, I talked to a handful of analysts and experts, all whom had mixed opinions.

Michael Pachter, Wedbush Securities:

At this price, yes, Zynga can go private, but I don’t think that will happen. That would trigger more unrest by shareholders, who would say you sold shares at $10 and now you want to buy them back at $3? It would have the appearance of some sort of scheme.

If he [Pincus] wants to send a signal to investors that they are done making acquisitions — since they obviously didn’t do a very good job at it — they should take some of its war chest and buy back stock. He should also personally buy stock. We need to see that kind of commitment.

Peter Relan, executive chairman of CrowdStar, which pivoted from social to mobile gaming this year:

I have three solutions: Mobile, mobile, mobile. Mobile gaming this year globally is a $2 billion to $3 billion business and is expected to hit $18 billion by 2016. I don’t think there’s a lack of growth in gaming; it’s more product strategy.

Mark is a competitive guy and he’s going to fight like hell to transform the company and take it to the next level.

Arvind Bhatia, analyst, Sterne Agee:

They need to restructure the business significantly and do it very quickly, too. We think that they are considerably overstaffed for the level of revenue that they’ll be generating in the coming years.

They need to right-size and preserve the cash. Going private won’t solve the problem … the question is, where will the cash be in a year from now?

Rich Greenfield, analyst, BTIG:

They will generate zero EBITDA in the back half of 2012 based on their new guidance and earnings in 2013 and beyond are totally unclear — the company’s assets are literally walking out the door — you see the Words With Friends team left.

Why would they want to lever up and go private — sounds petrifying … Zynga clearly has no idea how to model/project their business/earnings, in turn, going private would appear to be a very dangerous move, don’t you think?

They need to make great games that have staying power.

Players record a 12-second video using their phone’s forward-facing camera to provide clues about a word they are describing. The video is then sent to a friend, who is filmed guessing what the word is. The game is free, and will be available later today, after it clears Apple’s approval process.

With Draw Something, the challenge was similar, except players were required to illustrate a picture of a person, place or thing. The mobile game was literally an overnight success, and was downloaded more than 50 million times in 50 days, right when Zynga purchased the company for $180 million.

What assisted Draw Something’s rise in the charts was that players, who were so proud of their rendition of “Rihanna” or a “starfish,” posted their illustrations to Twitter and Facebook.

AOL is hoping for a similar viral effect through a partnership with Viddy, a social video service with 40 million users. Players will be able to share their videos directly on Viddy to show off how amusing or creative they are in describing a word.

One small glitch in the plan is that players are already tiring of the game Draw Something. While it’s still attracting 2.2 million gamers every day, that’s down from 14.4 million in April. Zynga also had to lower its full-year projections because of the app’s quick drop in popularity.

But AOL did come up with a solution to an issue that Draw Something drew criticism for in its earlier days. In Draw Something, nothing stopped players from spelling out the word instead of drawing it. Now, to prevent cheating, AOL will periodically listen in — using Nuance’s voice-recognition technology — to see if players are saying the word. If caught, points will be deducted from a player’s score.

Players can play against their Facebook friends or watch prerecorded clues, which might be nice if you don’t look so hot when you roll out of bed in the morning.

Sony Pictures will be the official launch sponsor of Clucks, which was created by AOL’s “mobile-first” division, which is allowed to experiment with new products for mobile.

The latest Explorence app is TorchDash for iOS, which just came out and has friends record themselves running short stints anywhere in the world, and then challenge their Facebook friends to beat the same distance on their own turf.

It’s a lot like SongPop and Draw Something — where friends play against each other, but not necessarily at the same time — but out in the world.

A somewhat similar app that’s not made by Explorence is “Zombies, Run!” for iOS, Android and Windows Phone, where users open up the app before they go on a run, put in their headphones, and then go on virtual missions to get away from approaching zombies by using their actual feet as monitored by GPS.

There are many apps and gadgets at the intersection of technology and fitness, but instead of improving sensors or syncing or coaching or devices, these apps are more about fun.

CEO Mike Suprovici says he wants Explorence to be a platform for other developers to build similar time-shifted competition apps on top of his API. TorchDash follows BullDash, a previous Explorence app that doesn’t have the social aspect but allows users to compete as if they’re at the Running of the Bulls in Pamplona, with sound effects of bulls coming up behind them.

Coming Explorence apps will include things like virtual goods. At this point the apps are more like demos than polished releases, but they give an idea of how this might work.

Suprovici is working with a team of four that came together out of the Founder Institute in San Diego, and is currently raising funding.

I went for a “run” with him in Mountain View and recorded a video explaining how this all works and where Explorence is going.

]]> http://allthingsd.com/20120926/for-explorence-all-the-worlds-a-fitness-game-video/feed/ 0 http://allthingsd.com/20120727/zyngas-john-schappert-talks-up-opportunities-after-a-shocking-quarter/ http://allthingsd.com/20120727/zyngas-john-schappert-talks-up-opportunities-after-a-shocking-quarter/#comments Fri, 27 Jul 2012 19:18:18 +0000 Tricia Duryee http://allthingsd.com/?p=234843 In an interview, Zynga’s COO John Schappert said the social games company still has many opportunities on the horizon, despite a shockingly poor earnings report on Wednesday.

Earlier this week, Zynga missed analyst estimates and slashed its 2012 guidance. The company’s excuse? It saw softness among its core games, delayed the launch of The Ville and witnessed an extreme dropoff in Draw Something players.

The bad news sent the newly public company’s stock into a tailspin. Today, it continues trading 70 percent below its offering price, at $3.12 a share.

The series of events also sent the company’s executives into a frenzy, trying to come up with the words that would reassure investors that Zynga has not lost the game — at least not yet.

In the interview Wednesday, Schappert, who left Electronic Arts to join Zynga, emphasized the opportunities lying ahead.

• On the immediate horizon, he said, the company will get a boost from big Facebook titles coming later this year, including ChefVille, FarmVille 2 and another unannounced ’Ville game. Another near-term project focuses on branching out from the company’s core female demographic, by making “mid-core” game titles.
• A bit further out, he said, the company has the opportunity to expand beyond Facebook into mobile. While its user base grew 50 percent to 33 million daily active users during the quarter, it has yet to develop games that encourage users to pay to play.
• And in the long term, he said, the company has an opportunity in real-money gaming. While the prospect of gambling tends to get investors excited, it’s still limited for now to Europe. Plans include launching internationally in the first half of 2013, subject to licensing approval. The company is also working on publishing third-party titles for the Web and mobile.

More from Schappert on those subjects and more:

Mid-core gaming: We saw some success around Empires Vs. Allies with player vs. player. It’s a category that intrigues us, absolutely. It’s a different demographic. We’ll make it social, free and accessible, just like we’ve done with Casino and Arcade. This is a category for male-oriented games, and yes, it will be equal [to Casino and Arcade]. It’s a big emphasis. We haven’t announced timing, but we are actively working on games in that genre.

Villes on mobile: Going forward, the emphasis in mobile is on creating games in higher monetizing genres, like Ville-style games. Casino monetizes well, and you see us doing slots on mobile, but there will also be more Ville-style games coming to mobile. … We do know that Ville-style works well on Web and mobile, and we are actively developing Ville-style games on mobile.

Draw Something’s Q2 dropoff: The game is incredibly successful and is close to 90 million installs. It was a very large contributor in the second quarter, and while the DAUs (daily active users) came down, there’s still a strong connection with its players. A third of the players have played in the past month, and it’s still contributing in a meaningful way, but it didn’t hit expectations and revenue projections.

]]> http://allthingsd.com/20120727/zyngas-john-schappert-talks-up-opportunities-after-a-shocking-quarter/feed/ 0 http://allthingsd.com/20120612/zyngas-stock-in-a-free-fall-can-enrique-iglesias-and-jennifer-lopez-make-it-sing/ http://allthingsd.com/20120612/zyngas-stock-in-a-free-fall-can-enrique-iglesias-and-jennifer-lopez-make-it-sing/#comments Tue, 12 Jun 2012 21:26:50 +0000 Tricia Duryee http://allthingsd.com/?p=219279 Zynga’s stock dropped like the proverbial rock today, sliding more than 12 percent at one point to close at $4.98 a share.

The social game company’s shares are now officially down 50 percent from its December public offering when it sold shares for $10 apiece to raise $1 billion.

Its troubles can be blamed on a number of factors, including Facebook’s poor public performance and persisting questions on how both companies — Facebook and Zynga — will be able to gracefully transition from the Web to mobile.

But at least this time Zynga’s steep decline doesn’t seem to be tied to Facebook, which was up 1.5 percent, or 40 cents today, to close at $27.40 a share. And, as Kara Swisher pointed out earlier today, many public tech companies continue to perform well.

Forbes reported that Cowen analyst Doug Creutz warned in a research note today that new data suggests game playing on Facebook is in an “accelerating user tailspin.” Additionally, he said that Zynga’s daily active users were down 8.2 percent in May, the second consecutive significant month-over-month drop, “with nearly all of the company’s major titles declining significantly.”

In an interview on CNBC, Creutz elaborated, saying there were two reasons he was concerned: First, over the past few months, Zynga accelerated the number of game launches, but because the games were not substantially different, players jumped from one game to the next too easily. Second, while Zynga is aggressively going after the mobile games market, it’s still uncertain if it will be successful in making the transition.

To that end, Zynga announced a partnership with Enrique Iglesias and Jennifer Lopez to help promote the company’s recently acquired Draw Something game.

Zynga was criticized for overpaying for Draw Something’s creator OMGPOP because almost immediately after paying $180 million for it, the game started to lose its appeal. The game is now Zynga’s third largest on Facebook, with 5.6 million daily active players, down from 14.4 million at the time of the sale.

Still, the game could make a comeback, especially as Zynga begins to put its full force behind the indie production.

Zynga said it was launching Draw Something in 12 new languages, including Chinese, Korean and Japanese. To assist in the international launch, players will be able to select the “JLo Enrique” feature to unlock special words that they will have to draw.

Both artists have agreed to engage players of Draw Something on Twitter during the week-long promotion in the lead-up to their North American tour, starting July 14.

]]> http://allthingsd.com/20120612/zyngas-stock-in-a-free-fall-can-enrique-iglesias-and-jennifer-lopez-make-it-sing/feed/ 0 http://allthingsd.com/20120517/mobile-gaming-is-hot-but-pocket-gems-wont-sell-out/ http://allthingsd.com/20120517/mobile-gaming-is-hot-but-pocket-gems-wont-sell-out/#comments Thu, 17 May 2012 16:26:13 +0000 Tricia Duryee http://allthingsd.com/?p=209143 Pocket Gems, which routinely hits the top of the charts with its mobile games, says it isn’t for sale, even though it must be tempting right now.

Recently, Funzio sold to Japan’s Gree for $210 million, and Zynga acquired OMGPOP for $180 million; not too long before that, Electronic Arts paid $750 million for PopCap.

In an interview, Pocket Gem’s COO Ben Liu said that mobile game companies are hot commodities right now, but to sell is shortsighted.

“We feel like it’s the early days of mobile,” Liu said. “There’s a decade-long shift occurring from PC and the Web to mobile, and games is only the first vertical to take off. There’s so much opportunity. We need all of our attention on that to be successful.”

Liu would not disclose the company’s revenue, but said that it has been growing extremely fast. Over the past year and a half, the company has moved its offices five times to accommodate the growth of its staff — from 10 to 120 employees.

And as of a few months ago, the company recorded 60 million app downloads since its founding in 2009. Its hit title Tap Zoo generated 20 million downloads alone.

Pocket Gems’ games fall into the “casual” genre, and are focused on building products that have fairly addicting play; they attract a predominantly adult female audience. The games normally have “tap” in the name — Tap Zoo, Tap Pet Hotel and Tap Jungle allow players to build, respectively, their own zoo, pet hotel and mystical rain forest.

Last week, Pocket Gems released its first game exclusively for Android, called Tap Dragon Park, which allows players to train dragons to defend their kingdoms.

Pocket Gems has been able to rise in the rankings without having to tap investors too much. (Maybe their next game will be Tap Bank?) It has raised $5 million in capital from Sequoia Capital and a handful of angel investors, and is profitable.

Here are Liu’s thoughts on some of the issues facing the mobile games industry.

On making acquisitions versus being acquired:

Liu says Pocket Gems isn’t entertaining offers at this time, but will consider making acquisitions of its own. “We’ve been completely focused on organic expansion, but I think as we continue to grow, something we’ll look at is acquisitions, as well. We are focused on building a great team organically, and are opportunistic.”

How many games can you release in a year?

“Last year, we launched 10 games total. Some of them are new IP that requires a larger team and can be franchise-sustaining, and others are seasonal titles or extensions.”

Is there an issue with copycats in the space?

“Yes, all of our games have been cloned extensively by most of our competitors. But that’s one of the prices of success. We’ve always prided ourselves on being an innovator. The thing that is difficult to clone is creativity. … We have a saying: Pocket Gems is a leader and not a follower. And many of our competitors have a fast-follower strategy.”

What are your thoughts about third-party distribution platforms, like Gree and DeNA, which are trying to create mobile social networks?

“We haven’t opened our games to third parties. It’s in our interest to develop our own platform. Their businesses are really compelling, but there’s no winning platform yet in the mobile space. We have our own loyal community, which is a powerful game engine. We don’t want to be dependent on someone else’s platform. Our own great platform is a powerful source of marketing, and it is good at letting our users know about the games. That’s the most effective.”

Is summer a good time for people to play and discover new mobile games?

“It’s a good time. People are on vacation and in transit, and it’s a natural device to use during those times. And people have more downtime and free time. We’ve found historically for it to be good. Holidays are another.”

]]> http://allthingsd.com/20120517/mobile-gaming-is-hot-but-pocket-gems-wont-sell-out/feed/ 0 http://allthingsd.com/20120516/the-era-of-appnation-has-arrived/ http://allthingsd.com/20120516/the-era-of-appnation-has-arrived/#comments Wed, 16 May 2012 23:59:49 +0000 Beth Callaghan http://allthingsd.com/?p=209097 Judging by two of the most hyped deals in recent Silicon Valley history — Facebook’s acquisition of Instagram for $1 billion and Zynga’s acquisition of Draw Something for $200 million — it seems like a foregone conclusion that the era of the app has arrived.

And some new numbers from Nielsen that chronicle the rise of “AppNation” on Android and iOS between March 2011 and March 2012 back up that notion. The study shows the average number of apps per smartphone has jumped from 32 apps to 41, and growth in time spent on app usage outpacing the growth in mobile Web usage on smartphones by a hefty margin.

And while Nielsen’s measure of the top five apps — Facebook, YouTube, Android Market, Google Search and Gmail — remained constant, the rest of the top 50 was more of an open playing field, with more than 20 percent of the remaining spots entering as new players, and plenty of maneuvering going on.

Data courtesy Nielsen

]]> http://allthingsd.com/20120516/the-era-of-appnation-has-arrived/feed/ 0 http://allthingsd.com/20120511/a-million-users-pshaw-what-are-todays-head-turning-metrics/ http://allthingsd.com/20120511/a-million-users-pshaw-what-are-todays-head-turning-metrics/#comments Fri, 11 May 2012 21:23:29 +0000 Liz Gannes http://allthingsd.com/?p=207028

Illustration via Shutterstock | Picsfive

This week Rovio said its Angry Birds games have been downloaded more than a billion times. That’s a serious milestone, and beyond that there’s no doubt about the cultural effect of the franchise’s stuffed animals, movie tie-ins and repeat success with new titles. So I think it’s fair to call Angry Birds a smashing success.

But on a daily basis, we get pitched by start-ups who want to talk about how they have a thousandth of that many users. Really, a million registered users? Does that even matter anymore?

Well, yes — maybe for a paid subscription service or a marketplace. It’s not quite as impressive for a social game or a photo- or video-sharing service.

How do you know when something hits the big time, between numbers of downloads, users, visitors, page views, subscriptions, customers, monthly actives and daily actives, engagement, growth curves, millions and billions? It all starts to run together.

And very often, these metric milestones are massaged and selectively disclosed.

While it’s been well established that the number of people who actively use an app is more interesting than the number of people who have registered for it or downloaded it since it was released, many companies still tout those all-time user counts.

In response to criticism of it referring to registered user numbers, Google now counts people who have Google+ accounts and also use any Google product within a certain time period as “active” users of Google+. It’s a puzzling substitute for real engagement stats.

But numbers do tell a story. Take Instagram’s growth: 1 million registered users in December 2010, 15 million in December 2011, 30 million in the beginning of April, an estimated 50 million by the end of that month, after it launched on Android and was bought by Facebook.

Or look at mobile gaming, where the records are eclipsed almost as soon as they are set. In the month of April, Draw Something reached 50 million downloads, 50 days after it launched – while Angry Birds Space took only 35 days.

I asked some metrics providers and investors what’s enough to turn their heads.

One public place to find up-and-coming mobile products is the top app charts that are published by Apple and Google. An iPhone app that is consistently in the top 10 of the U.S. popular app charts gets 1.5 to 2 million downloads per month, according to Oliver Lo of App Annie.

Meanwhile, Peter Farago of mobile analytics provider Flurry told me, “What makes a hit, in our view, is 1 million daily active users per platform (e.g., 1 million on iOS and 1 million on Android).”

Jack Abraham, who founded Milo and now leads local at eBay, was one of the earliest investors in Pinterest a few years ago. What got him to notice that company when so many other people couldn’t tell it was about to become a juggernaut? It was the growth chart, he recently told me.

“What I look for is 1 to 3 percent sustained growth in users per day,” Abraham said. “It could be as small as 5,000 or 10,000 users if it has that growth.”

Suhail Doshi, CEO of the widely used analytics start-up Mixpanel, said that even active user counts can hide a larger story.

“You should pay attention to what their definition of ‘active’ even means,” he said. For instance, the number of users who are active on a service within a month could be swayed by a single day’s big spike in usage. “An average rolling daily active is far more indicative,” he said.

By far the most important metric for a consumer app, Doshi argued, is retention — which is to say, the percent of users who come back the very next day after they first sign up. (Of course, measuring retention is Mixpanel’s specialty.)

“Any VC worth their salt is asking for retention numbers,” Doshi said. “You’re nothing without it.”

A reasonable retention rate is 20 to 30 percent, Doshi said. Really great retention is 50 to 60 percent.

However, it’s fair to expect lower retention rates for transactional services like TaskRabbit or Airbnb, where users might not return every day but often spend money when they do, Doshi said.

In yet another huge stride toward bolstering its app platform, the company announced plans for its own central app hub inside Facebook itself, making it easier for users to discover Facebook-integrated apps, as well as easier for developers to submit and feature their apps on Facebook itself.

Until now, users had a handful of ways of discovering apps through Facebook; the company touted “social discovery” as its strong suit, as users were encouraged to find apps through their news feed. The idea is, you’ll find the apps that are most relevant because they’re the ones your friends use. They’ll surface in your newsfeed, and you’ll pick the ones you like while ignoring the ones you don’t care about.

So this is somewhat different. To be clear, it’s not exactly a proper “App Store” competitor to take on the likes of Apple or Google’s respective hubs. It’s more of a centralized location so that everyone — users and developers alike — knows where to go to find Facebook apps. And that didn’t exist before.

But the social discovery part still plays a huge factor. The apps that show up when you visit the App Center will be those that Facebook finds most relevant to you — that is, ones your friends are using, or ones that are scoring particularly high on Facebook’s own internal ratings system that judges just what apps should show up.

“Success through the App Center is tied to the quality of an app,” wrote Facebook employee Aaron Brady in a blog post. “We use a variety of signals, such as user ratings and engagement, to determine if an app is listed in the App Center.”

This is a big deal for building out the future of the platform. Part of what will determine just how much time users spend inside Facebook is the amount of content they have to play around with, and the company relies on outside developers for that. The unveiling of the Open Graph at Facebook’s F8 developer conference last year was the first step in this direction, making it easier for third-party developers to fully integrate their applications into the Facebook ecosystem. Then came the different verbs with appropriate apps — like “Listening” with Spotify and “Watching” with Netflix — broadcasting user activities across Facebook, thereby upping the potential for others to try out those third-party apps.

But as Facebook seems to realize with Wednesday’s announcement, developers can’t rely entirely on social discovery for their apps to grow. Sure, you’ll get the occasional breakout successes like SocialCam, Viddy or Pinterest through organic growth, but users still need a home page to browse through apps.

What’s more, the new App Center will feature additional ways for developers to get paid. The only initial payment options for developers who actually wanted to earn money through Facebook apps were via in-app purchases. So for an app like Farmville — which relies on users buying virtual goods to make money — the original sort of system works well. Now Facebook will give the option for developers to offer paid apps. That makes it easier on developers’ apps for which in-app payments make little sense.

So if the App Center takes off, the impetus for an app to succeed isn’t dependent on a sudden burst of viral growth. In theory, a developer’s app can simmer inside the App Center and eventually bubble up to the forefront of users’ App Center dashboards.

It’s also another potential revenue stream insofar as splitting the cash on paid apps and in-app purchases. And more app use, of course, means more engagement within the Facebook platform. That means more ads. And with the wealth of new data Facebook will receive by looking at the apps its subscribers are using, it also means better targeted ads.

Now it’s up to developers to make apps worth downloading. And what’s good for developers is good for Facebook.

Typically at this point in the hardware cycle, he said, the cost of developing new videogames would lead to a loss. But in a conference call with investors yesterday, Riccitiello said revenue from digital content will keep EA profitable.

“In the face of, unfortunately, somewhat of a headwind relative to console, we’re getting top line growth, robust digital growth, robust margin expansion, robust EPS growth, while affording the investment in the next-gen console. I don’t think, going back to our foundation in ’82, that’s ever happened before. So what we are guiding for is entirely unprecedented, and it’s a function of everything we’ve been saying on the call so far. … It’s our hope to be able to accelerate top line through a transition and accelerate bottom line growth through a transition because we won’t be facing sort of negative console compares.”

Nintendo expects to release the Wii U later this year, which will require new games that tap into both the TV and a touchscreen device. Neither Microsoft or Sony have unveiled plans for their respective next-generation hardware systems, the Xbox and PlayStation. Riccitiello did not mention the new consoles by name, and instead referred any direct questions about hardware to Sony, Microsoft and Nintendo.

“We intend to invest $80 million in Gen4 console development in fiscal ’13. We are strong believers that console will return to strong growth, and represent a great opportunity — one that is in lockstep with our digital plans.”

In fiscal 2012, EA generated $1.2 billion in digital revenues, representing a 47 percent increase year over year. In the past six months alone, FIFA 12 — one of the company’s traditional packaged good titles — was able to break $100 million in digital revenues for the first time. This year, it’s predicting digital revenues of $1.7 billion, representing 40 percent of the company’s overall business.

Even though Riccitiello painted a positive outlook, he failed to turn to the tide.

Along with a broader market meltdown, the company’s stock fell 65 cents, or 4.3 percent, at $14.48 a share. At that price, the company’s stock is off more than 40 percent from its 52-week high of $26.13 a share.

During the call, Riccitiello also tried to stress that while Star Wars: The Old Republic is an important title for the company, it is getting an unfair amount of attention by analysts. In the quarter, he said the number of subscribers fell to 1.3 million from 1.7 million when the game launched.

“So while I understand there’s an enormous amount of interest, I don’t know that it warrants as much as what we’re seeing right now,” he said, according to a SeekingAlpha transcript.

The final highlight from the call was when Riccitiello questioned how much Zynga paid for OMGPOP and its hit title Draw Something, which was No. 1 for a short period of time. He didn’t actually name the two companies, but it was implied.

“Right now, what I’m starting to see is valuation expectations that assume that these things are all hockey stick moving up and to the right with no end in sight, and I think those are bad assumptions,” he said. “Some of them will work, some of them won’t, but they can’t all be worth the multiple that I’m seeing in the market right now.”

In an interview, co-founder and President Anil Dharni said the company was founded two and a half years ago, but it didn’t make its first mobile game until nine months ago. Since then, it has launched three titles, including Crime City, Modern War and Kingdom Age, all of which have generated more than 20 million downloads.

The quick multimillion dollar sale is reminiscent of Zynga’s recent $180 million purchase of OMGPOP, which had been around for awhile but only recently catapulted to the top of the iPhone charts with its overnight hit Draw Something.

Dharni said the two back-to-back sales are not necessarily an indication of a trend in mobile games.

“We tend to hear only about the successes,” he said. “If you look at some of the other mobile gaming companies, some have gained traction but there’s others struggling that have fallen off the charts. … I think the downward trend is also happening.”

All three of the company’s games are free to play and monetized through in-game items. Both Kingdom Age and Modern War are among the top 25 grossing apps on the iPad. Crime City is the company’s oldest title. Neither Funzio nor Gree disclosed how much the apps are grossing, but Dharni said what makes its games stand out from the rest of the pack is player retention. And generally, the longer players engage with the games, the more likely they are to make purchases.

Funzio, which previously raised $20 million in capital, is expecting to be completely integrated into Gree’s San Francisco operations, relocating all of its 125 employees to Gree’s offices, where the two will have more than 300 employees all told.

“From day one, the thing we proposed was that we didn’t want to be an independent studio. We want to be integrated as much as possible in Gree,” he said.

Gree, which is a mobile-gaming powerhouse in Japan, is aggressively trying to build a worldwide social network for games on mobile devices. Rivals include DeNA’s Mobage network, which came to market through the acquisition of San Francisco-based Ngmoco, and Apple’s Game Center.

Funzio will now begin developing games for Gree’s mobile social platform, although they will not necessarily be exclusive.

Dharni said both he and the company’s co-founder and CEO Ken Chiu started talking with Gree a few months back, and since then had discussions with a number of other suitors, whom Dharni characterized as the “usual suspects.”

What stood out about Gree was its vast experience and knowledge about the mobile gaming space, he said.

“Mobile games in Japan make a ridiculous amount of money and we are just getting started in America. They are two to three years ahead of us in terms of understanding game mechanics and monetization. We can learn so much from them,” he said. “They are super smart and hungry folks and their vision matched ours. We had excellent alternative options, but we found the perfect partner.”

In an interview with Bloomberg, CEO Mark Pincus said he’s looking for both great teams and companies that have break-out hits.

It’s not a big surprise that the social games company would go on a buying spree.

As the largest social games developer on Facebook, it has created a hits-driven business, and since it is virtually impossible to sustain a near-perfect record of hits, it must also buy them.

The San Francisco company also has the resources to pull it off. Thanks to its IPO last year, it has $1.81 million billion in cash and no debt, and in January, it hired Barry Cottle from EA to head-up acquisitions and corporate development.

OMGPOP is a case in point: It developed a game called Draw Something, which was an instant sensation on iPhones and Android devices. Zynga paid more for the 40-employee company than it did for the past 22 acquisitions combined. Over the past year, it also tried aggressively to purchase both Rovio and PopCap, which ended up selling to Electronic Arts.

And now it’s telling the world that its purse strings are loosening.

“We’re sitting in a very advantageous position,” Cottle told Bloomberg. “We have a significant amount of cash, we have no debt, and we have access to debt to be as aggressive as we need to be.”

The top ranking will go a long way in quieting the critics who believed Zynga was foolish to acquire OMGPOP for $180 million on the day of Rovio’s big launch, only to see it fall to second place the next day.

In addition to climbing its way back to the top, Zynga also disclosed that the game has now been downloaded more than 50 million times in 50 days, making it the fastest-growing mobile game ever — or so it believes.

In other words, that would be like everyone in England downloading the app in less than two months.

While it still may end up being true that Zynga overpaid for OMGPOP, there is little doubt that the game is an overnight success.

If you are one of the few people who haven’t already played it, Draw Something challenges players to use their finger to draw a picture of a person, place or thing; for example, “hoodie,” “golf cart” or “Rihanna.” The completed picture is handed off to another player, who must guess what is being drawn, sort of like Pictionary.

Inside the game, players can pay for additional features, such as new colors that can help make the illustrations easier to guess, new words if they don’t like the choices that are presented to them, or bombs that will eliminate some of the letters to make guessing an illustration easier. The free version has ads; users can pay 99 cents to get rid of them.

Zynga also said that since the game launched, more than six billion drawings have been created (that’s 120 for every resident of England), and that at the game’s peak hours, it generates 3,000 drawings per second. The most popular words are “starfish,” “pregnant,” “six-pack,” “Hangman” and “boom box.” The least popular word is “latrine.”

The mobile game also registers as the most popular game on Facebook, because it allows people to log in to the game on the phone using their credentials.

However, people do not have to register using Facebook, so the number of players using it is actually bigger than what’s being reported by AppData, which tracks application usage on Facebook.

Still, AppData reports that the game has 14.4 million daily active users, where it has plateaued for the past week. The next most popular game, also owned by Zynga, is Words With Friends, which draws about eight million daily users, slightly more than half of Draw Something’s crowd.

Games are fun. But they can be socially relevant too. Please share this. At Draw Something, by OMGPOP & Zynga, we just added the word HOODIE.

– OMGPOP CEO Dan Porter, via Twitter

I’m sorry for what I said on Twitter last night. No excuses.

– Former OMGPOP CEO Dan Porter, apologizing after describing Shay Pierce, a former OMGPOP employee who declined to work for Zynga, as “the weakest one on the whole team.” Among Porter’s many critics was Twitter CEO Dick Costolo: “Wow, what a nitwit comment that was.”

Values aren’t just for idealists — they matter. If a company’s practices make you uncomfortable, pay attention to your instincts and be true to them.

– Shay Pierce, an OMGPOP employee who says he was the only one not to join Zynga when that company acquired the Draw Something game maker last week