ZyngaVille: The Bad Part of Town
Taylor is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
I remember sitting at my desk when Zynga (NASDAQ: ZNGA) went public, Mark Pincus pumping his arms in the air, thoughts of promise and profits. The wee company that brought us all that funhouse called FarmVille.
I read the photo's accompanying news story and within about 30 seconds had my stalwart analysis: Yeah, no.
Let's not talk about buy or sell or bearish or bullish. Let's talk about why Zynga stinks. Then you can have your own internal conversation about whether they are worth your buck or not.
Most recently, and just days after the flight of a few more executives, Zynga said they are going to start in the U.K. a real money version of their game Zynga Poker, as was reported by Gamasutra. This would be great if online poker hadn't been around for years and years. Zynga is betting on a hunch that online gambling will once again be legal in the U.S. again. But even if it does, why wouldn't online poker enthusiasts just go with what they have? Gaming communities tend to move forward en masse, not jump ship.
Zynga has also made its own Pokemon. No, they didn't get the rights to make a mobile Pokemon game. They have made their own version called Montopia. A counterfeit Pikachu? Buy buy buy!
For some background, the Pokemon franchise is controlled by The Pokemon Company, which is a subsidiary of Nintendo. Taking on Nintendo is like picking a fight with history itself. Therefore, trying to make a new Pokemon is like trying to pick a fight with the '90s. Spoiler: Grunge rock dies. Gotta rock 'em all!
Next, Zynga has more than 10 games with the word "ville" in the title, one of the latest being ChefVille. This is evidence of a serious shtick. The phrase "If we ville it, they will play," clearly is not working out. In fact, Zynga has been sued by Electronic Arts (NASDAQ: EA) for copyright infringement following the launch of The Ville. EA just laid off a slew of employees from its mobile-gaming developer, PopCap Games, which made Bejeweled.
But in mentioning gaming giants like Nintendo and EA, we can prod at Zynga's real weak spot: inexperience. There are huge gaming companies that have been around for decades and know -- for better or for worse -- how to make games. Even board game companies are putting out mobile versions. One of my favorites is Settlers of Catan, a carbon copy of the popular board game. You can play it with friends or against the computer. I will not be buying SettlerVille.
But a better example is the role-playing game diety Square Enix, a Japanese game company. Square Enix has made games so wildly popular that they've taken almost an Elvis enigma. Superfans scour the Internet looking for evidence that one day Final Fantasy VII will be remade, or a second sequel to Chrono Trigger is under development. The website IGN.com is incrementally releasing its list of the top 100 RPGs of all time, and the names Square and Enix are all over it. Square Enix has put some of those old classics on smartphones, rekindling a subculture that a new company like Zynga could never hope to match. Heck, some of the mini-games within a Square Enix RPG would be good enough for the App Store. ChocoboVille!
Zynga might have been more successful if it was breaking new ground -- if mobile gaming was something that no company ever tried before. But unfortunately this isn't the case. Social and mobile gaming have been around for ages. And although Zynga has attracted hundreds of millions of users, it isn't innovative or diverse enough to establish itself as a stable company.
Zynga's post-IPO performance has been dreadful, and investors are beginning to wonder if it's game-over for this newly public company. Being so closely related to the world's largest social network can be a blessing and a curse at the same time. You can learn everything you need to know about this company and whether they're a buy or a sell in our new premium research report. Don't even think about picking up shares before you read what our top analysts have to say about Zynga. Click here to access your copy.
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