'FarmVille' gamemaker Zynga sees dollar signs
At least one company is making money off of social networking. The game developer behind 'FarmVille' and 'Mafia Wars' has seen its web-based games take off – and deliver profits.
Mark Pincus, founder and CEO of Zynga
On any given day 500,000 tractors are sold on the Internet. But don't start buying stock in John Deere or Caterpillar just yet. These are $20 "virtual" tractors that belong to the 50 million players of FarmVille, the largest and fastest-growing social game on the Internet.
Social games are free online applications accessed through sites such as MySpace and Facebook. If you've spent any time on either site you're probably familiar with titles such as FarmVille, Mafia Wars, and Caf World. All three games, which rank among the top five games played daily on Facebook, were developed by San Francisco-based Zynga, one of the tech sector's most talked-about companies these days.
Behind the buzz: Annual revenue at the two-year-old firm is likely to surpass $100 million this year, prompting speculation that the company — backed by the likes of LinkedIn cofounder Reid Hoffman and PayPal cofounder-turned-investor Peter Thiel — will soon go public. The software company also has managed to do something that other hot online brands such as Twitter and Facebook have not: Zynga has found a way to make social networking profitable.
Zynga was founded in 2007 by Mark Pincus, 43, who also started social-networking site Tribe.net and software company SupportSoft (SPRT), which eventually went public. (The name Zynga is a misspelled tribute to his deceased American bulldog, Zinga.) While many of his Web 3.0 peers rely on advertising and sponsorship for revenue, Pincus makes its money by getting gamers to buy virtual goods, like tractor fuel or land in the case of FarmVille, that enable players to build bigger farms at a faster rate.
By developing games on social networks, Zynga is able to capitalize on the viral nature of the platform. (Zynga estimates it has 70 million monthly unique visitors.) Gamers can invite friends to join them in the game, and they can send updates on their progress to their friends, stoking interest.
Once hooked, Pincus says, players spend real money on virtual goods to help them advance to higher levels — thereby enriching Zynga. And although playing requires only short spurts of time, the game never ends, as Zynga's designers keep adding levels so that players come back for more.
"For me it's just relaxing and fun. I don't have to think hard about it, and I can do it while watching TV," explains Lauren Kohn, 37, a mother of three in San Jose who has spent more than $100 on virtual goods since she started playing FarmVille four months ago.
Pincus won't reveal his margins, but he acknowledges that the company has been profitable every month since September 2007.
By contrast, Twitter doesn't even have meaningful sales, and Facebook only recently claimed to be cash-flow positive. And if online reports are to be believed, Zynga spends millions each year marketing itself on Facebook, thereby providing the social-networking site with a chunk of its revenue. Talk about the tail wagging the dog.
Profiting from an application that you have the license to is good business. My dislike is the information profiteering that one is subjected to when allowing said applications.
Farmville and Cafe World help me to de-stress for the day. Yes it can be addictive but so is chocolate. So while eating the chocolate I harvest or cook. Thanks and keep the new things coming as it adds interest to the game.
It’s fine if you wish to spend your money that way but as far as the difference in the wii's, x-box or playstation 3 you spend 60 dollars for something that’s not going to run out unless you break it. People are free to spend their money on whatever but not comparable to Sony, Microsoft or Nintendo.
I happen to love FarmVille. Although I don't spend actual money to play, why should anyone think it's stupid for others? You spend $60 or more on PS3, WI or XBox for "virtual" fun, don't you? I don't see a difference. It's all about having fun with a game you enjoy. And don't blame Zynga for making money, anymore that you blame Sony or Microsoft! It's all about the same and you don't have to buy a platform before you can play it! Geez…
And they're moving to the best neighborhood in San Francisco, Mission Bay!
http://imgs.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/10/08/BUDN1A2E7F.DTL&type=realestate
Right across from Radiance and Nektar
http://www.radiancesanfran.com
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/10/03/BURG1A0GC1.DTL
I have problem understanding even the first paragraph of this article. It says 500,000 virtual tractors are sold any given day, and such tractor is for $20? Does that mean $10 million of virtual tractors are sold everyday and that alone would give Zynga an annual revenue of $3.6 billion? That doesn't make any sense.
I understand why games like these are profitable. when you have litteraly millions of people playing, it only takes a couple thousand paying 20 bucks at a time to make easy cash. I don't understand why this is newsworthy though.
This is a fun and cute game, but I certainly would never spend real money to advance. I was hooked on this game for a while until recently when the game seems to have become over run with error messages. Plus I maxed out the size of my farm a few weeks ago and am growing very bored with it. Unlock 22 x22 and 24 x 24 Zynga before you become another flash in the pan.
Brendan: Farmville is free. Purchases are optional, not required. We're not all "jobless recluses". I am employed full-time, finishing graduate school in December, and recently got engaged. Oh, and yesterday I bought a new house.
I guess you like to clutter CNN with useless posts to relieve stress. Some of us enjoy picking crops. To each their own.
It is beyond me why anyone would actually pay real money for virtual goods when you can earn them without doing so (if you use a little patience). I am an avid FarmVille player, don't get me wrong, but I haven't spent a cent of my hard earned money on it. It's ok though, I'm glad someone is making a lot of money in this economy because it certainly isn't me!
Wait! People pay money to annoy me with useless postings of Stupid Mafia Wars and Farmville junk? I have to believe that idiots out there pay money to essentially ruin our social networking sites with clutter and junk that has no meaning to most of the Social net world? What a shame! I should bring back the pet rock to satisfy my financial needs, because nothing would be better than buying a speedboat off of human idiocy.Seems the only people who really play these games, and they do ad nauseum, are the same jobless recluses who should be investing in Vermont Teddy bears to fill thier empty void's in thier life. Eeeech!
Leslie of Austin, not to kill the high of your playing but Farmville is created by Zynga. Farm Town on the other hand is created by slashkey. And people who spend money good on them. Small web and game developers like myself can't compete on the level that major companies do. We have to make a profit as well. Spend money if you want and if you don't keep working at it the free way. Most of us really don't care as long as you play our game. It gives us another check mark for applications to larger business.
he's good to think of these things. i admit it that i'm hooked on the said games. how i wish to be included in his team that created this nice games…^_^. more power to zynga(zinga)…
LMAO at anyone that would spend real money on either of these games. Suckers! I was addicted to farmville until a night where all I got was errors every minute. At that point it wasn't worth my time anymore. I agree with the post by Anonymous, "A better use of the money would be to help real humans or even animals."
People have the right to spend their money however they see fit. That being said, it's my opinion that spending money on these games is a tremendous waste, not just of the money itself, but of time as well. I, for one, decline any and all invitations to "MafiaWars," "Farmville," or any such games. I've even gone as far as deleting friends from my Facebook who persisted in inviting me to play.
Consumers are a mystery.
Some will spend tens or hundreds of dollars on virtual goods in a single game. Others will complain about the "value" of a 99 cent application in Apple's App store.
Farmtown is not Zynga, it's SlashKey. And as an avid Farmville farmer, if you are stupid enough to buy the cash and/or coins that you can earn for free, that's your fault. I am on level 31 and have not spent any "real" money on the game. Stop crying about your stupid mistakes.
What utter shame for some people to be so brainwashed to the point where they're using real money to purchase imaginary goods. A better use of the money would be to help real humans or even animals.
Lovely to see Zynga's making money.
It would certainly be nice if they put some of this money toward providing support and fixes for their products. As one of thousands of people who have been unable to access their games for days (if not weeks) on Facebook, I'd like to take this opportunity to ask Zynga to take the time to read and respond to the thousands of complaints on their user forums.
Cheers, and thanks.
"the purchasing of imaginary fuel is a new a low and a highly controversial issue"
but when you "buy" those guitar games you actually "get" to "be" a "beatle"?
my "friend's" warthog on halo used "real" fuel
I am a Farmville player who used a $25 gift card to purchase $20 worth of additional "dollars" to buy land, buildings etc. The only problem is that Zynga charged a service fee that turned out to be permanent. So it actually cost $25 for $20 worth of goods. Their customer service department never understood what I was saying, even after 4 email exhanges, so I gave up. It's a pretty good gimmick they have.
For the record, unless this is another version of Farmville, the tractors, harvesters, and seeders do not sell for real money, only for the imaginary money(Farmville Coins) made within the game; unless someone is silly enough to spend real money for the Farmville Coins which, again, they can earn in the game.
However, after the small amount of free fuel, shared be all three 'machines' is used up, then you have to buy imaginary fuel to use the 'machines' or wait for your fuel to recharge. The purchase of this fuel is with Farmville Cash which is can be purchased using real money, earned through leveling up(5 to start plus 1 per level), or by visiting and participating(enrollments, purchases, etc.) with certain sponsors.
In the realm of micro-payments, the purchasing of imaginary fuel is a new a low and a highly controversial issue on the Zynga boards. In some cases, players have quit or moved to competitor products, such as Farm Town or Lil Farm, out of protest or necessity(carpel tunnel).
I think they have, for now, a successful business model, but I also think that a smart competitor could turn that business model against them, while making their own profit.
The real money is in the ads that pop up on the right side of the screen. Nobody I know who plays the game spends real money. You don't need to if you get enough neighbors. More neighbors means you can get to the next level faster. It's better than boring TV.