Interview with Zynga CEO Mark Pincus on Social Gaming in 2010

Veteran entrepreneur Mark Pincus has had a huge year. His company, Zynga, went from being one of several relatively small social gaming companies on Facebook’s developer platform to clearly take the lead in terms of users — and, from what many people hear, revenue.

With a raw total of 230 million monthly active users and nearly 60 million daily active users on Facebook alone, it is many times larger than its nearest rivals, according to AppData. These numbers do not include the company’s games on other platforms, like MySpace and the iPhone.

Based primarily on the sale of virtual goods within games like virtual farm game FarmVille, the company will likely do at least $200 million in revenues this calendar year, according to our estimates, and revenue growth is looking very strong as we enter 2010.

And, earlier this month, the company closed a $180 million round of funding, in part to let employees sell stock. The signs, more than ever, point to an initial public offering, even though the company and our sources insist this is not likely to happen any time soon.

Pincus and his company have also faced a fair amount of criticism. The company, like most others on Facebook, has aggressively used viral channels, like notifications, to reach users. Due to Facebook’s recent policy enforcement actions, the holidays, and whatever else, the company has recently seen a slight dip in traffic. Earlier this fall, Zynga was heavily criticized for running scammy advertising offers within its games; it pulled all offers, temporarily, while it ensures that it can cleanly run this revenue stream.

2009 has been a big and dramatic year for social gaming, and Pincus has been in the middle of it all. Here are his thoughts on the coming year.

Inside Social Games: Despite the massive growth that Zynga and other social games have seen this past year, the last couple of weeks have seen slower growth. What do you think is going on here?

Mark Pincus: It feels like the industry is taking a breather. Maybe users are, too. It seems like our games and the rest of the industry have more or less been flatlining quite recently. We’ve been in this position before — holidays have been down or flat every year. But I watch things on a daily and weekly basis, and this month everything is still growing.

Our goal had been to get to 12 million daily active users by the end of the year, after starting at 5 million — we’re ending with around 65 million. Obviously, we underestimated how big it would get.

ISG: So what are your plans for next year? What game mechanics do you plan to add? What sort of new game genres do you plan to get into?

MP: As we look forward to next year, we know every quarter, every year the stakes get higher. The level of quality, the level of socialness has to go up.

When we think about next year, we know we have to double down on social. We want to deliver, we know whole industry has to deliver way more on the promise. A very social experience already occurs in and around our games, but mainly outside.

I feel that social gaming today is where Friendster was at the beginning. Yes, it was popular, but people didn’t use it, they talked around it. You went to bar and talked about it. But the amount of interaction inside wasn’t that high. Facebook took it to next level, with features like pokes, the news feeds, the wall for user profiles. Communication with your network was on the network.

I think that social gaming is in a similar place. In the next year to two years, it needs to be more about real user interaction and communication inside of the gaming experience. Today, its very hard to communicate with friends in FarmVille, but people talk about it at the bar, in dorms, on Facebook, and everywhere else. In 2010, they should talk about it in FarmVille.

While there are some ways to communicate already, I’m just saying we haven’t made it low friction.

ISG: Do you plan to continue supporting your big older titles like Mafia Wars and Zynga Poker (Texas Hold’Em)?

MP: Yes. They’re still here, and bigger than they were a year go. We’ve continued to develop those and innovate those games. We’re going to keep developing what exists, as well as building new ones. We’ll keep investing in franchise games while experimenting.

ISG: What sort of game mechanics do you plan to introduce. A lot of your simulation games this year featured asynchronous game play, even though your earlier titles, like Poker, were synchronous. What’s next?

MP: I think there’s a continued trend towards greater simplicity. We learned that lesson this year. While our games are more accessible than hardcore games, nobody realized making them more simple would unlock more users. Nobody would guess that one of most popular categories would be fish swimming around in a bowl.

I would be shocked if it didn’t get even more simple. I think we’re seeing new games that are pushing the envelope more in terms of production value in flash, the level of interactivity, the juiciness….

But this is a big question for 2010. Tadgh Kelly has the best-articulated criticism from the gaming industry about the future of social gaming — and Zynga [ed. here]. His thesis is that none of these are real games. Real games, as he sees them, are more along the lines of first-person shooters or strategy games. He believes users will graduate to more complex game mechanics, more like what you see in traditional games. That’s a great question for the year — we should talk this time next year and see what has happened.

ISG: How have you already tried answering this question in terms of products?

MP: We’ve continued to bring more sophisticated mechanics into our games. In FarmVille, we created buildings that mattered: chicken coops, dairy farms, etc. and designed more of the game around them. These are somewhat popular, but not everyone in the game figures them out. It’s a trade-off.

Sophistication loses many players. But maybe someone will show us how to do it in a more sophisticated way.

All types of player groups continue to expand ever week. We’ll try and see where users are willing to go. So far, feel that 2009, where answer was that simplicity sells. We would all like to think that complexity is great, but we haven’t proven it yet. Do we want to be raising the water level an inch for everybody or a foot for 10% of the players.

We tend to stay more in our mass market games like FarmVille and try to raise them an inch. It’s very hard to introduce more complexity. You don’t know which 10% of users want which mechanic. It’s not our model to aim at 10%. We’re still at the growth stage. It might eventually be interesting to segment and try to build deeper games for smaller groups. But we want large group memes.

ISG: What do you think about the pending arrival of the Civilization series on Facebook? What about Electronic Arts/Playfish introducing a title like The Sims?

MP: I’m sure EA/Playfish will try to see if one of its big titles will cross over. This will be interesting for the whole industry to watch.

ISG: But this is not where you’re headed?

MP: I can’t predict the world more than a quarter out. It’s not obvious to me today. But they’re playing with a different hand. If I were them I’d be trying to do different things.

ISG: So what are the other big trends that you expect to continue playing out in social gaming? What about direct payments? Offers — which we’ve heard Zynga is bringing back soon? Ads?

MP: I think the big trend is that it will continue to be users paying where they see value. There’s a lot of opportunity for game developers to show value to people, things they want to spend money on. I think offers are just another kind of ads. For some users, they’re a replacement for spending money directly. I think offers and ads are always going to be an add-on on top of payments. I dont think they’ll ever come close to the power of direct user payments.

I said this to you a year ago [ed. here]. The big story is user payments, even though a lot of grown-ups find this hard to believe.

[Photo via The New York Times]