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By Howard Cole
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By Kate Conger
One of the Internet's greatest success stories in 2010 can be found in a former potato chip factory on Vermont Street in Potrero Hill. This is the original office of Zynga, the S.F.-based creator of online "social" games — FarmVille, a simple application in which participants plant and harvest crops, is the company's best-known product — that in three years has gone from scrappy startup to the toast of Silicon Valley.
Since launching its first Internet game in 2007, Zynga has grown rapidly. The company's true earnings are unknown to outsiders, but industry observers estimate that its annual revenue could now be $500 million or more. In May, social-media analyst Lou Kerner estimated Zynga's total price tag at $4 billion, based on corporate filings for a stock issuance.
In light of Zynga's phenomenal rise, one former senior employee recalls arriving at the company eager to discover what new business practices were driving its success in a market where other popular Web 2.0 ventures struggled to make money. What was Zynga's secret? Not long after starting work, he got an answer. It came directly from Zynga founder and CEO Mark Pincus at a meeting. And it wasn't what he expected.
"I don't fucking want innovation," the ex-employee recalls Pincus saying. "You're not smarter than your competitor. Just copy what they do and do it until you get their numbers."
The former employee, who requested anonymity in order to speak candidly about his experience at Zynga, said this wasn't just bluster. Indeed, interviews conducted by SF Weekly with several former Zynga workers indicate that the practice of stealing other companies' game ideas — and then using Zynga's market clout to crowd out the games' originators — was business as usual.
Criticisms and speculation about Zynga's theft of ideas have been aired before, chiefly in tech-industry blogs that have remarked on apparent design similarities between Zynga's smash hits — including FarmVille, FishVille, PetVille, Café World, and Mafia Wars — and predecessors published by other companies. But company insiders have never discussed the frankness with which Zynga, led by Pincus, based its lucrative business model on exploiting the achievements of competitors.
None allege that Zynga knowingly broke laws. Although the company has been sued for copyright infringement, stealing concepts for games is not in itself illegal. Specific game mechanics and design elements must be copied extensively before intellectual-property protections kick in.
Former employees nevertheless describe a corporate ethos based in a predatory attitude toward rival companies and gamers. Unlike innovative and socially useful business enterprises such as Twitter or Google, Zynga sought to cash in quickly by repackaging, and then furiously peddling, the ideas of others.
As the former senior employee who listened to Pincus rant against innovation recalls, workers at Zynga were fond of joking (albeit half-seriously) that their firm's unofficial motto was an inversion of Google's famous "Don't Be Evil."
"Zynga's motto is 'Do Evil,'" he says. "I would venture to say it is one of the most evil places I've run into, from a culture perspective and in its business approach. I've tried my best to make sure that friends don't let friends work at Zynga."
The derivative nature of Zynga's high-grossing games isn't just an ethical liability. While the company has recently enjoyed a spate of bullish mainstream media coverage, some industry experts say that its star could soon be on the wane. The audience for its signature application, FarmVille, has collapsed by 26 percent from its high of 84 million monthly users. As a new generation of social gamers demands more sophistication in online entertainment, some observers — including at least one of Zynga's founders — question whether the company can adapt.
"You can't make the cheap little viral games like you used to," says Tom Bollich, an early Zynga investor and former lead engineer who owned more than 400,000 shares of the company in 2008, and who has now divested completely. "These games, it's like pouring water into a bucket with holes in it. You can get a lot of people, but they don't stick around."
Officials at Zynga declined to be interviewed on the record for this story, although Dani Dudeck, the firm's general manager of corporate communications, provided contact information for several investors and former colleagues of Pincus'.
Michelle Kim, a public-relations official with Brew Media Relations, which helps handle Zynga's press inquiries, said the company is loathe to cooperate with stories, absent guarantees of mostly positive coverage.
"Unless they know everything about the article, and that there's not going to be anything negative in it, they're probably not going to give anyone up" for an interview, she told SF Weekly. "It's really hard to get them to say yes to press these days."
At a time when traditional "console" videogames — the kind bought in a store and played on a computer or entertainment system such as a Sony PlayStation — aspire to be classified as works of art, it might seem odd that such confections as FarmVille enjoy widespread attention and financial success. In 2007, for example, publisher 2K Games released a spellbinding console game, Bioshock, in which players make difficult ethical decisions in an underwater city-state founded on the libertarian ideals of Ayn Rand.
Next to such immersing products, Zynga's games look cretinous. Gameplay in FarmVille, FishVille, or Café World is based almost exclusively on what social-game designers call a "compulsion loop." Players perform basic tasks — clicking on crops to harvest them, clicking on stoves in restaurants, clicking on fish to feed them — earn fake money, enhance their farm or restaurant or aquarium, and repeat. In Zynga's hands, the art of snaring users with such gimmickry has become, quite literally, a science: Pincus told Time magazine last year that Zynga employs a behavioral psychologist.
As players advance, they are often given chances to act as unpaid advertising agents. The games repeatedly prompt users to post messages about their progress on Facebook, where friends are deluged with unwanted gifts or requests for neighborly "help." Oddly enough, these "social" games have no real social aspects beyond asking friends for virtual goods or spamming them with images of fish and eggplants.
The ham-handed marketing tactics and lack of artistry on display in Zynga's games have made the company a target for criticism from longtime game fans and designers. "We've never before seen this kind of deliberate unconcern for the aesthetics of the experience," says Ian Bogost, a professor at the Georgia Institute of Technology and founding partner of Persuasive Games. He says Zynga's market-driven approach to the development of simple but addictive applications is "like strip-mining. They don't really care about the longevity of the form or the experience. ... That sort of attitude is the sort of thing you usually hear about from oil companies or pharmaceuticals. You don't really hear about it in arts and entertainment."
Others are impatient with the old guard's complaints. Despite their lack of sophistication, social games like FarmVille have attracted entirely new demographic sets of players, such as older women. "A lot of these users don't even consider themselves gamers," says Jason Oberfest, vice president of applications at the San Francisco–based iPhone game developer Ngmoco. "Older people consider these games as an alternate means of even e-mail." He says the pat dismissal of social games as simplistic reveals "an elitist point of view." Pincus likewise defended the new genre of social applications in his Time interview, summing up the difference between console games and Zynga games: "They're making movies. What we're doing is more like weekly TV programming."
It's tough to argue with success. Zynga's Facebook applications now boast an average of 233 million monthly users, making it far and away the social network's most popular gaming company, according to the application-tracking site AppData. The second-place developer, Electronic Arts, had 55 million average monthly users.
Zynga also has that rarest of commodities in the hothouse of Silicon Valley startups: a proven business model. Cash infusions from the small but dedicated subset of players who purchase virtual goods with real money comprise the bulk of its revenues. These players, known as "whales" for the large sums they toss away online, pony up $20 or more per month.
An investors' brief compiled for financial-research sites Track.com and Second Shares estimated Zynga's revenues would be nearly $530 million this year, up from $300 million in 2009. (The company is privately held, so its true income and worth are unknown.)
"It's nothing short of remarkable," says Paul Martino, an early investor in Zynga who cofounded the failed social-networking site Tribe.net with Pincus. "Zero to $500 million, $600 million a year. I mean, how many companies have done that in human history?"
Many successful companies have their original sins — corners cut, bridges burned, allies trampled. In Zynga's case, former employees say, its towering commercial edifice was built on a particularly shaky ethical foundation: copying the products of competitors. And while in the games industry, as in the fashion industry, some degree of design similarity is expected, Zynga has earned itself a reputation as a particularly rapacious predator of ideas.
In June 2009, Zynga came out with the app that would make it a household name among social-network users. While the company had already enjoyed some success with its earlier offerings, FarmVille was a blockbuster hit. But for those with eyes to see, it bore remarkable similarities to a precursor.
That precursor, Farm Town, was developed by a little-known Florida company called Slashkey. It featured a number of clever gameplay mechanics, chief among them real-time crop growth that requires players to regularly return to the game to tend their farms. Zynga's version, launched months after Slashkey's, would likely be indistinguishable to most players.
In both games, tiny avatars with big heads plant square plots of soil with different crops, harvest them to earn virtual coins after a time, and acquire Facebook friends as "neighbors" to help out on the farm and exchange goods. The mechanics of the games — down to screen commands and layout — are more or less identical.
Officials at Slashkey did not respond to requests for comment. But some familiar with the games are incredulous that Zynga didn't get sued over FarmVille, so strong was its resemblance to Farm Town.
Zynga did get sued for copyright infringement for one of its earlier hits, Mafia Wars, which debuted on Facebook in June 2008. (Its first success, Zynga Poker, was an obvious but legal rebranding of Texas Hold 'Em, which Zynga licensed.) In February 2009, application developer David Maestri — represented by Taylor — sued Zynga, alleging that the company had illegally "cloned" his earlier gangster game, Mob Wars. Maestri's LLC, Psycho Monkey, had created Mob Wars in December 2007; the lawsuit alleged that Zynga copied the game after negotiations to buy out Maestri broke down.
The resemblance between Mob Wars and Mafia Wars is striking. Many of the games' elements, characters, and place names — "The Godfather," "The Hospital," "The Bank," and so on — were identical, as were specific amounts of money and experience points attached to crime "jobs" players performed or "properties" they owned. These similarities were no coincidence, according to an early Zynga employee, who said he was present for frank discussions about the potential consequences of copying and rebranding Mob Wars.
"I was around meetings where things like that were being discussed, and the ramifications of things like that were being discussed — the fact that they'd probably be sued by the people who designed the game," he says. "And the thought was, 'Well, that's fine, we'll settle.' Our case wasn't really defensible." Psycho Monkey's suit was ultimately settled for an undisclosed amount.
Former insiders say that theft of other people's ideas can be traced to Zynga's origins. The company's first efforts to establish an online presence began with a close study of board games, according to the early employee who was present for discussions of copying Mob Wars. These games littered Zynga's offices, where the staff studied them and thought about how they could be adapted as online applications. "All the popular board games were purchased with the intent of copying them," he says. "This was in the early days. That evolved into [copying] digital games."
One former game designer said that Zynga interns were instructed to do "recon" on competitors' games, isolating successful features that their higher-ups would then endeavor to replicate. "They would sit and look at competitive products and write down all the features and make it obvious to us," the designer says. One contractor says he was offered freelance work from Zynga, related to mimicking a competitor's application, with explicit instructions: "Copy that game."
The former senior employee who was present for Pincus' "No innovation" diatribe described Zynga's business model this way: "Steal somebody else's game, throw millions of dollars at it, and then, if it doesn't have it already, add virtual coins."
Bollich, the former Zynga employee, demurs when asked whether Zynga deliberately copied competitors. "Well, I mean, that's actually — a little bit," he sighs. "I'm sure at some point we looked at Mob Wars and took some of his ideas. As for just out-and-out copying, that tended to not actually happen."
Most former Zynga workers who spoke with SF Weekly about the company's approach to copying competitors' games did so on the condition that their names not be published, citing fears of retribution from the company. In 2009 alone, Zynga filed lawsuits against seven former employees.
Zynga sued a group of former employees who went to work for rival Playdom, for instance, claiming they imparted trade secrets to their new employer. Ex-Zynga workers who started their own iPhone app development company also found themselves targets for Pincus' lawyers, who asserted their new game concepts violated a noncompetition agreement. This trigger-happy approach to IP litigation is particularly galling, former employees say, given Zynga's own penchant for stealing concepts.
Any discussion of intellectual property in the video-games industry has to acknowledge that some level of copying among competitors is normal. Copyright law is loose when it comes to games of all kinds. The idea for a certain type of game, for example, cannot be patented, though design and brand elements can. Successful formulas inevitably spawn imitations.
Hence the dizzying number of similar games among the "Big Three" app developers on Facebook: Zynga, Electronic Arts (which in November acquired the social-game company Playfish for roughly $400 million), and Playdom (acquired by Disney in July for about $760 million). Zynga has Café World; EA has Restaurant City. Zynga has FarmVille; Playdom has (Lil) Farm Life. Playdom was also sued by Psycho Monkey, at the same time as Zynga, over its own mob-themed game, called Mobsters.
In fairness, the lineage and origin of games can also be more complicated than they first appear. The genesis of the Mafia Wars dispute, according to former Zynga employee Bollich, came after Maestri — who was wrapping up acquisition talks with Zynga — attended a lecture put on by the company on how to more successfully monetize games. "The deal was almost completely done," Bollich recalls. "Dave was there, learned everything, cancelled the deal, and then put all our suggestions in his game the next week, and started making money."
Even in this sharp-elbowed crowd, however, Zynga stands out. "The more aggressive you are, the more you're inclined to think you can copy just about anything," Taylor says. "I think Zynga's pretty aggressive. I don't think there's much question that they're probably the most aggressive." In January, The Business Insider, a business and tech blog, ran a slideshow comparing six of Zynga's hits to near-identical precursors from other developers.
"As it has grown in dominance in the game industry, Zynga has garnered a reputation for its predatory business and suspect marketing tactics," asserted a lawsuit filed in August against the company by rival developer Digital Chocolate over the trademark to the "Mafia Wars" name. (The suit claimed that Zynga was falsely trying to assert ownership of the name — the same as a 2004 title from Digital Chocolate — but did not allege that game-design elements had been copied.)
From a business standpoint, copying rivals' games makes some sense. With its marketing resources, brand recognition, and economies of scale, Zynga can quickly garner millions of additional users for apps that might have failed to go viral when managed by smaller shops. FarmVille currently has about 62 million users, according to AppData.com, while Farm Town, its virtual clone, has only 5 million. The revenue generated by this audience dwarfs the cash required to defray lawyers' fees and a settlement payment, even one that runs to millions of dollars.
Given Zynga's emphasis on user volume and revenue over product quality, efforts by its designers to create deeper, more artistic, or more original games were not always welcomed. A former high-level employee tells the story of Burning Realms, a sword-and-sorcery role-playing game that a group of Zynga designers "killed themselves to put together," only to have it placed on the back burner by Pincus, who was wary of a product outside the tried-and-true molds of apps like FarmVille, Mafia Wars, and Zynga Poker.
"It was just beautiful. It was innovation," the former employee says. "And it was like, his money is not going to go to innovating. For people who were creative and actually wanted to make something, it was really depressing."
One of the more common complaints among former Zynga employees is about Pincus' distaste for original game design and indifference to his company's products, beyond their ability to make money. "The biggest problem I had with him was that he didn't know or care about the games being good — the bottom line was the only concern," a former game designer says. "While I am all for games making money, I like to think there's some quality there."
Zynga's controversial CEO is a veteran of the first dot-com boom, having founded and sold his first company, Freeloader, for $38 million in 1995. (Other companies he created include SupportSoft and Tribe.net.) Pincus is alternately despised and admired by industry observers and his colleagues, but most people agree he is inseparable from the aggressive corporate culture that has driven Zynga — named after Pincus' late bulldog — to the top.
Critical tech bloggers had a field day with a talk Pincus gave to aspiring entrepreneurs at a UC Berkeley event last March, during which he claimed he "did every horrible thing in the book just to get revenues right away" when Zynga was founded. Yet in May, he was the subject of an admiring profile in Details magazine, which portrayed him as a plainspoken capitalist beset with sour-grapes complaints.
Pierre Wolff, who was Pincus' vice president of business development at Tribe.net, says, "Sometimes people don't understand the responsibilities that CEOs have, so sometimes they'll take that as, 'Why is he being such an asshole?'" Wolff did allow that Pincus sometimes uses language devoid of "soothing qualities," and could be challenging to work for, depending on how you adapted to his management style. "He's moving at 100 miles per hour. You've either got to get on the bus, or you're not on the bus," he says. "Most people have a buffer. ... Mark's not like that. He thinks it, and he says it."
Pincus' leadership was a subject of some concern among Zynga's early investors, according to a confidential memo obtained by SF Weekly. The document, produced by renowned Silicon Valley venture capitalist Bing Gordon for the investment group Kleiner Perkins Caufield & Byers, recommended that the firm invest heavily in Zynga.
It also warned, "Mark needs strong lieutenants to keep him from micromanaging."
The memo suggested that Gordon himself and at least one other top-level executive play strong roles in the company to offset Pincus: "Bing to temper Mark, and bring onboard a billion-dollar game industry COO when Zynga gets to about $100M."
While Zynga has long since surpassed $100 million in revenue, it's worth noting that the company has added a few heavy hitters to its management team this year, including former Electronic Arts executive Steve Chiang, now Zynga's president of studios, and Dave Wehner, the former Allen & Company director who in July was hired as Zynga's chief financial officer.
Wehner's arrival, in particular, was interpreted as a sign that Zynga is preparing for an initial public offering in the near future.
But as the company gears up for an anticipated IPO, some question whether its best days have already come and gone — whether the business model pioneered by Pincus can sustain itself over time.
At present, Zynga's fate is largely tied to that of Facebook. (This was a concern cited in the Kleiner Perkins memo, which noted that Zynga's revenues are "overly concentrated on Facebook.") But the social-networking site has recently taken steps to tamp down the marketing ploys that helped drive Zynga's rise. Players are now restricted in how much they can spam those in their social networks with advertising messages, for example.
Perhaps more significantly, Zynga's massive audience is showing signs of fatigue with the inane forms of entertainment that have earned the company so much money. FarmVille's 62 million monthly users represent a significant drop from the application's peak of popularity. FishVille now has about 9 million monthly users, down from a high of 26 million.
A consensus has formed among industry observers that Zynga needs to be on the lookout for its next blockbuster. "Zynga is now a studio, and it should be looked at in terms of its financial future as a studio," Martino says. "And if a studio can't produce hits, it will eventually suffer impairment to its financial situation."
One of those preparing for a future in which Zynga's brand of simplistic entertainment no longer holds sway is Alex St. John, president and chief technology officer at Hi5 Games, a website trying to establish itself as a hosting platform for more sophisticated social games. He predicts that "a second generation of games" will overtake the wildly popular suite of mafia-style and "Ville" applications that have so far dominated the web. "FarmVille's audience has collapsed," he says. "There's a perception that Zynga has a very large audience. Zynga itself is completely dependent on Facebook — for its audience, for its monetization. Nobody wants to play the games outside."
According to St. John, the new generation of social games will have more depth. Such apps could prove better able to hold users' attention over time, and their complexity would serve as a safeguard against the kind of profitable copycat-ism perfected by Zynga. "The only way to make games that are highly defensible" from copyright infringement and user boredom, he says, "is to make the gameplay richer and more sophisticated, or the business model richer and more sophisticated."
It may be that Zynga is starting to figure this out. The company's latest release, FrontierVille, is basically FarmVille moved to a Davy Crockett-style American outback. But it does feature a wider range of gameplay options — from simple missions, such as bringing a wife out West, to activities like clobbering snakes and scaring off bears — that distinguish it from the mind-numbing repetition that characterizes FarmVille.
One former Zynga game designer, speaking on condition of anonymity, says he has kept in touch with former colleagues who say the company has hired high-caliber designers and adopted a new emphasis on original content and more sophisticated applications to draw in, and keep, users.
"They've brought in people who know games, which is why FrontierVille is a much better game than what they've generally put out in the past," he says. "They've moved somewhat away from the startup model and seem to have much better structure, from what I've heard from people still there. Of course, the real question is whether they can actually get the company value up to the point it needs post-IPO. Pincus will undoubtedly make his money and take off, as he has before, and the company's bubble will burst." Zynga's roughly $600 million in venture-capital funding, he adds, is "a lot of investment to show value for."
Zynga has pivoted before. Its three successive hits — Zynga Poker, Mafia Wars, and FarmVille, with their various spinoffs — each involve essentially different styles of gameplay. But none of those styles originated at Zynga. FrontierVille might be a step in the right direction, but it's a small step. The game is still a variation on a well-worn theme, and to date has attracted 37 million monthly users — about 40 percent of the audience FarmVille enjoyed at its height of popularity. To continue dominating the social-gaming gold mine, Zynga might soon be forced to do something it has avoided in its short and celebrated history: innovate.