Zynga’s Intense Culture May Be Biggest Growth Challenge

December 16th, 2011 by Trefis Team
9.50
Trefis
ZNGA: Zynga logo
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Zynga

Zynga (NASDAQ:ZNGA) is the world’s largest social gaming company with an active user base of more than 200 million users. It is set to make more than a billion dollars in revenue in 2011 by selling in-game, virtual goods to its users who play games like FarmVille, CityVille and Texas HoldEm Poker. It competes primarily with other social gaming companies like Electronic Arts (NASDAQ:ERTS) and Playdom which was recently acquired by Disney (NYSE:DIS).

We currently have a $10.24 Trefis price estimate for Zynga. New games and games other than its big 5 listed below account for almost half of Zynga’s total value and drive a major portion of its user base in the coming years. Zynga will need to continue attracting new talent by way of hiring or acquisitions to continue its growth spree.

Check out our complete analysis of Zynga.

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Going forward, hiring and retaining talent may become a major issue for Zynga, as competitors like Electronic Arts and other social game studios are looking to crack the social gaming code currently dominated by Zynga. We expect these companies to try to poach Zynga’s employees after it goes public. According to a NYT article published late last month, many Zynga employees are frustrated with the long hours, stressful deadlines and culture at Zynga. [1] The report likens the different camps within Zynga to feudal states, each responsible for a different game or project.

Zynga also had a huge controversy on its hands last month when it reportedly forced some senior employees to surrender some of their unvested stock options or be fired. [2] That didn’t help its reputation much either and some executives plan to cash out immediately after the IPO and leave Zynga.

Zynga’s work culture, like most start ups, has been notorious for being stressful and hectic. It is based completely on merit and driven by hard data, which makes it very competitive. Zynga has been growing aggressively through hiring and acquisitions — now totaling close to 3,000 employees. It has acquired more than 15 social game start ups and studios this year. However, it failed to acquire PopCap, which was acquired by EA, and Rovio, which decided to walk away from a deal worth nearly $2.25 billion.

In order to grow as rapidly as it has in the past, Zynga will need to continue hiring talented employees to keep churning out new games in order to attract more users. That could turn out to be one of Zynga’s biggest challenges in the coming years.

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Notes:
  1. Zynga’s Tough Culture Risks a Talent Drain, NYTimes [↩]
  2. Zynga Leans On Some Workers to Surrender Pre-IPO Shares, WSJ [↩]