Zynga was an early pioneer in social media gaming. It launched games like Farmville on Facebook in 2007 and generated revenue through advertising and sales of virtual goods within the games. As Facebook demanded higher fees, Zynga ended its exclusive partnership in 2013 and expanded to multiple platforms like mobile. This diversification helped Zynga become independent and reach over $1 billion in revenue, proving the decision right. Zynga's success demonstrated the business opportunities in social media gaming using new models of free games with virtual item sales.

1. A Detailed Study to Understand the Business Model used by Zynga 1
A Study to Understand the Business Model used by Zynga, On-line Social Media Gaming
Company.
Charm Rammandala
California Intercontinental University

2. A Detailed Study to Understand the Business Model used by Zynga 2
Abstract
The purpose of this study is to understand the rise of social media gaming industry and how it
has evolved over the years. Internet became mainstream in early 2000 and since then social
media has become a popular hangout for almost half the population in the world. Social media
gaming industry has riding this wave and become a popular industry on its own right. This study
will investigate the rise of the social media games and its business models using Zynga as an
example.

3. A Detailed Study to Understand the Business Model used by Zynga 3
A Detailed Study to Understand the Business Model used by Zynga, the On-line Social Media
Gaming company.
Social media has become a way of life for majority of the people around the world with 60%
of individuals in US participating in social media platforms daily basis. Rest of the developed
world shows similar trend with over 55% of individuals accessing and participating in social
media daily basis. China, India and rest of the world also have a significant amount of people
regularly engaging in social media. Face book has 3 billion users and YouTube has 1 billion
active users every month. There are 300 million Twitter users who are twitting each month.
These statistics shows how fast number of user grew in the social media platform (Kirkpatrick
2015)
People use social media for various needs. Primarily, to stay connected with friends and
family. However, increasingly people use social media to find products, explore ideas, express
their views on various topics such as politics, products, news and so on. Further, social media has
become a platform to play video games with the option of playing with on-line friends
(Kawasaki 2014).
Zynga is one of the early spotters of the opportunity presented in social media for the on-line
gaming. In 2007 they commenced their operations using Facebook as the platform. Since then
they have grown tremendously and in 2015 Zynga posted revenue of US$750 million and
number of employees risen to 1775 (Dean 2015)
Zynga business model and methodology used to generate revenue
From the inception up until 2013, Zynga was primarily operating on Facebook platform. Its
most famous games such as Farmville, Zynga poker, Chefville were most popular games on

4. A Detailed Study to Understand the Business Model used by Zynga 4
Facebook. Games were free and players were encouraged to sign in and play. Based on the
player activities and engagement patterns, Zynga was able to modify the game to appeal to users
by analyzing the player activities and preferences. In 2013 company has expanded from
primarily been a Facebook company to multi-platform gaming company by coming to
agreements with mobile phone platform of Apple & Android, Google+, Tencent QQ and
Zynga.com (Dean 2015).
Company generate revenue through advertising and sale of virtual goods. As a result of
advance analytical capability of the company, it is able to offer unique and specific details about
its players to the advertisers. This helps advertisers to target right products to the right customers.
The second and the unique method Zynga uses to generate revenue is to sell virtual products to
the players. For an example in Farmville as part of the playing the game, players could buy
tractors and lands in order to grow crops and expand the lands by paying real money through
credit cards or partner business credit such as Facebook credit (Dean 2015).
Virtual goods are two types. Those are ‘durables’ and ‘non-durables. Durable goods can be
kept on long term basis and non-durables are for the short term. Gamers who are passionate
about the game and want to advance through the higher levels are encouraged to pay for virtual
goods. Though as a percentage virtual buyers are in the minority with 5%, it generates significant
amount of revenue for the company (Currie 2014)
Importance of diversifying business platform
Zynga was a by-product of Facebook. Due to the rise of Facebook in popularity and it
opened up the opportunity to introduce on-line gaming to the users. Who are already active in the
social media. From the inception partnership with Facebook was an important strategic decision

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and both companies’ products complimented each other as Facebook benefitted from offering
users added services and more ways to spend time on Facebook while Zynga benefitted from
already significant number of users Facebook had (Richard 2015)
Rapid growth of the company opened up new possibilities and avenues for Zynga and initial
strategy of depending on Facebook was not the best strategy for the company. Same time
Facebook was demanding higher premium for the services it offered and certain conditions such
as using Facebook credit to pay for the Zynga purchases were creating a bottleneck for the
company (Dean 2015)
In 2013, Zynga terminated the exclusive partnership it had with Facebook and started
offering its services in multiple platforms. Presently, Zynga games can be played using mobile
phones through I Phones and Android phones, Google+ and various other social media sites.
This helped company to be independent and explore other marketing options. Over the last four
years’ company has reached one billion dollars in revenue proving it was the right decision for
the company (Richard 2015)
The effect of Zynga on the video gaming industry
Video gaming industry which is also known as interactive entertainment industry is one of
the fast growing industry in the world with generating $40 billion in 2015. It’s been around for
over 40 years with the first video game introduced in 1971 called ‘computer space’. Since then
there was a rapid increase in the industry and as a result of new and improved technology and
ability to reach mass audience through internet, video gaming is continuing to make a progress
(Dean 2015)

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Early 2000 opened up the opportunity to create video games for the newly found market
segment created by the social media. The significant difference in this platform was the ability to
play multiplayers who were physically in different parts of the world. At times even tens of
thousands of players could be part of the same game and results & progress are visible to
everybody which created the excitement. This format was different to existing games and the
fact that games are free and easily accessible helped to increase the number of players within a
short period of time (Hope 2015)
It is noted that the graphics, sound effects and sophistication of social media games are far
behind the console based video games. This is however not a major concern as primary objective
of the player is to engage with the other players on-line. Game developers have to be mindful
about the speed of internet connections not only in US but in other locations as players are
joining from multiple countries. Similarly, bandwidth and graphic cards in all computers are not
same and making sure games are able to play smooth as possible is important to sustain the
medium of the social media games. Hence law quality in social media games would not have a
negative impact on overall gaming industry as those are two different platforms and played for
totally different purposes (Dean 2015).
Conclusion
Internet has opened up a whole new business model and a market place for pretty much all
industries. Video game industry also significantly benefitted from the rise of internet and it
opened up a new segment within the industry called social media gaming industry. With the huge
popularity of social media, it gave the opportunity for video games to be offered to users of
social media so they could play the games with other social media users.

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Companies who are engaging in this industry found creative ways to generate revenue and apart
from the obvious revenue generated through advertising, they started offering virtual goods for a
price. In order to advance through the different levels, players would buy virtual products. This
has proven a winning strategy for the companies. However, life cycle of each game is
significantly short hence rapid development of new games are essential to keep the changing
taste of the users.

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References
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McGraw-Hill
Hope, N. (2015). Facebook Marketing: Strategies for advertising & making money. New York,
McMillan
Kirkpatrick, D. (2015). The Facebook effect: The inside story of the company that is connecting
the world. New York, Pearson
Kawasaki, G. (2014). The art of social media. New York, McGraw-Hill
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